Clare Nuttall in Bucharest -

A pipeline that will allow Romania to export gas to Moldova opened on August 27. The Iasi-Ungheni pipeline will ease Moldovan dependence on gas imports from Russia - currently its sole supplier. 

The 42 km pipeline was formally opened by Moldovan Prime Minister Iurie Leanca, accompanied by Romanian counterpart Victor Ponta and EU Energy Commissioner Guenther Oettinger. "This is a historic day," Oettinger said at the opening ceremony in Ungheni. "We are celebrating that Moldova is directly integrated into the EU gas market. This will enhance its energy security and reduce its dependence from the only supplier it has now." 

The pipeline running from Iasi in northeast Romania to Ungheni took around one year to build, at a cost of €26m. Part of Brussels push for more links between countries - especially those in the east end of the bloc - the European Commission supported the project with a €7m contribution. Initially, the pipeline will make only a small dent in the country’s gas consumption, serving parts of the south. 

However, a second phase to link it to the capital Chisinau is planned to be ready within two years. According to a European Commission statement: “Once completed, the entire infrastructure project can cover more than half of Moldavian gas demand.”

Negotiations on supply contracts for the gas that will flow along the route are due to be wrapped up in the next few days, allowing exports through the pipeline to start by September. Romanian companies OMV Petrom and Transgaz are in competition for the tender, Ponta told journalists. Pricing is expected to be lower than that paid by Moldova to Gazprom, the two PMs claimed. Chisnau is reported to pay around $400 per 1,000 cubic metres (cm) to the Russian gas giant.

“I think that by the today’s inauguration, we convey a message for everyone - and I want to be friends with everybody - and the message should be clear; Moldova and Romania need energy to be really independent,” Ponta said. “I'm convinced that gas will not only be cheaper, but will also be safer, and that Moldova will not stand in fear of running out of energy."

Leanca also stressed the importance of the pipeline’s contribution - and that of planned electricity interconnections - to Moldova’s energy security. "These projects are ... in the interest of the Republic of Moldova," he proclaimed, according to Romania’s Mediafax. "This means that we will be assured that nobody will be able to create problems to threaten us, we will have a perfectly normal, civilized relationship."  

Energy island

Reflecting the nosedive in Russia's relations with the West and the Ukraine crisis ongoing next door, Moldova’s relationship with Russia has deteriorated rapidly in recent months. That makes heavy dependence on Russia for energy a growing problem. 

Alongside Georgia and Ukraine, Chisinau became the third former Soviet state to sign an Association Agreement with the EU this year. That was despite pressure from Russia, which wields significant economic power in Moldova and also, through its backing for the separatist republic of Transnistria, no little political clout.

Russia has already used its position as a major consumer of Moldovan produce to exert pressure on Chisinau. Last year, as the government prepared to initial its EU agreement, Russia reimposed a block on Moldova wine exports - a major hard currency earner. After the pact was finalised on June 27, Moscow banned imports of a range of Moldovan food. Shortly after it introduced an embargo of similar products from western countries. 

EU member state Romania says it is committed to supporting Moldova with energy exports, although at present Romania also relies on gas imports from Russia during the winter. In 2012, Romania produced 10.9bn cm of gas, but consumption stood at 13.5bn cm. Bucharest is looking to reduce its own dependence on Russian exports, with plans to substantially boost production through the development of its offshore Black Sea resources.

Gas is the primary source of power in Moldova, accounting for almost 65% of total energy consumption. The country consumes around 3-3.5bn cm annually, but only 1bn cm goes to Chisinau-administered territory, with the rest taken by Transnistria, according to Anita Sobjak, analyst at the Polish Institute of International Affairs (PISM). 

Moldova has little in the way of its own energy resources, and potential for renewable energy generation is limited, forcing it to rely on imports. “In general, the Moldovan energy sector on the mainland [left bank] is overwhelmed with difficulties,” Energy Community, an energy policy organisation set up by the European Union and eight countries from Southeast Europe, reported last year. “High dependence on imported gas and electricity, historical debts, outdated electricity generation and district heat production systems … together with tariffs set well below economic levels in the past, all contribute to the poor performance of the sector,” it summed up.

Meanwhile, there are also plans to build connections between Romania’s and Moldova’s electricity grids, which would integrate the Moldovan grid to the European transmission system. Like the Baltic states - which are often referred to as an energy island - Moldova's history as part of the USSR means it has little infrastructure linking westwards to Europe. 

“Today, in Romania, the energy is cheaper by about 40%. I am confident that in two years, we will have an electricity interconnection. These projects are in the interest of Moldova and consumers. Today’s event is fitted into our goal of European integration,” Leanca said according to Moldpres.

Philip Lam, a senior banker in the European Bank for Reconstruction and Development (EBRD) power and energy team, says that Moldovan interest in diversifying its electricity sources by accessing imports from Romania has increased. “Moldova is a very willing buyer of electricity, and Romania has for the moment excess generation capacity, so it’s interesting on a number of levels,” he said in a recent interview with bne. 

Currently, around 80% of electricity consumed in Moldova comes from the NGRES plant in Transnistria, which is owned by Russia’s Inter RAO. Moldova also imports electricity from Ukraine.