Moldova experienced biggest shock of gas price rises, analysis

The Republic of Moldova at the end of last year and the start of this year experienced the biggest shock of price rises. This fact harshly hit the population, business entities and the national public budget. Economist Veaceslav Ioniță said the shock of price increases almost passed and the Moldovans accepted the new reality. But Moldova’s biggest problem - the supply of natural gas - remained unsolved, IPN reports.

The expert of the Institute for Development and Social Initiatives “Viitorul” noted that until 2005 the Republic of Moldova, as it formed part of the USSR, paid $76-78 per 1,000 cubic meters of gas a month to the Russians. In 2005, when the then President Vladimir Voronin made public the plans to bring Moldova closer to the EU, Gazprom introduced the ‘gas calculation formula’ for Moldova for a five-year transition period, making Chisinau pay for gas in the same way as the Europeans pay.

Until 2010, even if the price of gas outside was growing, Moldova paid a price that was lower than the European average. Ahead of the crisis of 2008, the European price of gas was $460 per 1,000 cubic meters of gas a month, while Moldova paid €230. Only in 2010, the Moldovans started to pay for gas as the Europeans paid. In 2019 - 2020, Moldova paid a gas price higher than the European average price. The European consumer in the second quarter of 2020 paid $60 per 1,000 cubic meters of gas, while a Moldovan consumer - $167. The formula agreed by Moldova with Russia was much more rigid owing to its exposure to fluctuations.

Since 2010 until 2020, the Moldovans paid the average European price for gas, but the Moldovan authorities in the period didn’t make effort to diversify the gas supply sources. The paradigm changed in 2021. The gas became an independent product sold on the stock exchange separately from oil and Russia insisted on the modification of the calculation formula. This way the price of gas for Moldova started to rise. However, in 2021 the Moldovans paid less for gas than other countries as the new calculation formula started to be applied later. Moldova agreed with Russia to pay less for gas in the cold period of the year and to pay more in the warm period of the year, when consumption is lower, so as to offset the price paid in the cold period.

The price of gas for Moldova rose seven times during a year and a half, from $167 in 2020 to $1,129 in April 2022. Europe also witnessed increases in the prices of gas, but the Europeans are richer and didn’t feel the increase so sharply. For the Moldovans, this was a serious blow.

“The gas crisis hit suddenly the Moldovan citizens. The purchasing power of the Moldovans decreased abruptly. During a year the price of gas grew five times, but the pressure faced now by the Moldovans cannot be compared with that of 2005. Now the Government offered enormous support. The Republic of Moldova will be able to overcome this crisis and will forget this problem. The biggest problem of the Republic of Moldova is not the price of gas. The problem is that no alternative gas supply opportunities were created in 2010-2020. We have been dependent on one source,” stated the expert.

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