Moldova has experienced the biggest shock due to rising gas prices, but the country's biggest gas problem remains unsolved - IDIS Viitorul.
This opinion was expressed by Veaceslav Ionita, economic policy expert at the Institute for Development and Social Initiatives. He noted that at the end of 2021 - beginning of 2022, Moldova experienced a strong shock due to rising prices, which hit hard the population, economic agents and the national public budget. At the same time, the shock of rising prices has almost disappeared, the country's residents have accepted the new reality, but Moldova's biggest problem related to natural gas and concerning the creation of alternative possibilities of gas supply at acceptable prices has not yet been resolved. The expert notes that before 2005 Moldova used to pay Russia $76-78 per 1 thousand cu. m. of gas. In 2005, when the President of that time Vladimir Voronin expressed his intention to bring Moldova closer to the EU, which was not to Russia's liking, Gazprom asked Chisinau to pay for gas like the Europeans, introducing a formula for Moldovan gas prices with a transition period of 5 years. Until 2010, although the price of gas abroad was rising, the price paid for gas in Moldova was lower than the European average. The European gas price was $460 per thousand cubic meters on the eve of the crisis in 2008, and Moldova was paying $230. Only in 2010 the Moldovans started paying the same price as the Europeans. As Veaceslav Ionita stresses, in 2019-2020, Moldova was paying more for gas than Europeans. Moldova paid more for gas than the average European price. The European consumer paid $60 per 1,000 cubic meters in the second quarter of 2020, while the Moldovan consumer paid $167. The formula for Moldova was much tougher because it was more subject to fluctuations. In 2010-2020, the residents of Moldova paid the average European price for gas. In this regard, Veaceslav Ionita wonders why Moldova during this period, if it was paying like the Europeans, did not make efforts to diversify gas supply resources. "This is a problem in which the entire political class is to blame. During this period, everyone was in power and absolutely nothing was done," the expert said. According to him, 2021 changed the paradigm. Gas became an independent commodity, quoted on the exchange separately from oil, and Russia insisted on changing the calculation formula, and the gas price began to grow for Moldova. However, as Veacheslav Ionita notes, in 2021 the residents of Moldova paid less for gas than other countries because the new calculation formula was applied later. Moldova agreed with Russia to pay less for gas during the cold period of the year and more during the warm period of the year, when gas consumption is lower, to thus compensate for the price during the cold period of the year. "In 2022, we were paying $681 for gas in Q1, whereas the European average was $1137. In April 2022, Moldova paid $1129 per thousand cubic meters for imported gas, while at the European level the tariff was $1193. The agreement with Russia was as follows: give us gas at a lower price in winter, and in summer you give us a higher price to compensate the price in winter. Now it would be convenient for us not to take gas from Russia, and Moldova could find cheaper gas elsewhere," the analyst believes. According to him, the price of gas in Moldova has increased 7 times in 1.5 years. "We had $167 in 2020, and reached $1129 in April 2022.In Europe, there was also an increase in gas prices, but Europeans are richer and did feel so strong such a sharp increase. It was a big blow for the people of Moldova," said the expert. He also pointed out that Moldova paid $400 million annually for gas imports in 2012-2014. After that, the price dropped, and in 2020, almost $170 million was paid for it. In 2021, gas imports were $373 million, of which $218 million was paid in one quarter. "By the end of the year, unless we have negative shifts, we will be paying about $760-800 million for imported gas. We are seeing a five-fold increase in the price of imported gas in a short period of time," the economist stated. Speaking about the decrease of gas prices during all the years, the expert noted that there had been two of them in the history of the country. In 2009-2010 it was a slight decrease, and in 2015 – a significant. In 2009-2010, there was a sharp decline in gas prices on the international market. But Moldova did not feel this decline, because it was a stage of approaching the European price. In 2015, due to a favorable international environment, the tariff dropped from 7.18 to 4.3 lei. "Now the situation is the opposite. In six months, the price of gas in Moldova for the population rose from 4.3 to 14 lei excluding VAT. This is a great pressure on the citizens. We had a crisis in 2006, but then only the gas tariff increased, now the prices of gas, petroleum products and electricity have increased. We have never had an increase in prices throughout this dimension," explained Veaceslav Ionita. The economist claims that in 2020 Moldovagaz bought gas from Russians at the lowest price in the last 10 years - 2.6 lei per 1 cubic meter and sold it to the residents of the country at 4.73 lei per cubic meter. "Moldovagaz was left with 2.13 lei per 1 cubic meter. In 2021, due to an increase in the purchasing price of gas, while the selling price remained unchanged, Moldovagaz did not charge citizens anything for gas supply. At present the import tariff is 11 lei, while gas is sold to citizens at 14.06 lei per 1 cubic meter. Thus, Moldovagaz makes a profit of 3.06 lei per everything, which means maintenance of gas infrastructure in 2022", stated the economic analyst. In his opinion, the price of gas is secondary. The most important indicator is the availability of gas, or how much gas one can buy for the average net wage in the economy. Thus, the residents of Moldova could buy 800 cubic meters of gas for the average wage in the economy in 2005, and in 2012-2015 - 500 cubic meters of gas per month. After that, it was stable about 650 cubic meters of gas. Later, as gas became cheaper and wages increased, Moldovans could buy 1,400 cubic meters of gas in 2020, which was a record. This year, although wages were increasing, the gas tariff rose much more, therefore, the purchasing power of the population decreased almost 3 times. Moldovan residents could buy 560 cubic meters of gas in the first quarter of 2022 on an average net salary. As in 2012-2015, but the volume actually purchased was higher, as the government provided support to citizens during the cold season. "The gas crisis hit Moldovan citizens hard. Moldova's purchasing power fell sharply. In one year, the price of gas increased fivefold. However, the pressure that is now put on Moldovans is incomparable to the pressure of 2005. Now the government has received a huge help. Moldova will be able to overcome this crisis and forget about this problem. The biggest problem of Moldova is not the price for gas; the problem is that in 2010-2020 no alternative opportunities of gas supply were created. We were and still are dependent on one source", Veaceslav Ionita concluded. // 16.05.2022 – InfoMarket
