Russia-Ukraine-Moldova energy triangle

Jun 27, 2006 - Vasily Zubkov - Novosti

MOSCOW, Energy experts are worried over developments in the Moldova-Ukraine-Russia triangle.

Moldova needs electricity, which Russia's RAO UES and Ukraine's Ukrinterenergo are willing to supply. Moldova's electricity requirements are quite modest. It used only about 3.5 billion kWh last year, getting 0.8 billion from Ukraine, about 0.9 billion from Russia (less than 5% of Russia's electricity exports), and about 1 billion from a power plant located in the self-proclaimed Transdnestr republic, which RAO UES has owned since last year (In the past, the power plant supplied half of Moldova's electricity). About a third of the republic's electricity demand is met locally.

Ukraine and Russia view Moldova as an electricity-transit route to the Balkans. Acting on the instructions of the Russian prime minister and the decision of the Russian-Moldovan intergovernmental commission, Inter RAO UES has established a new subsidiary, Inter RAO UES Balkans.

A short while ago, 13 countries, including solvent but electricity-hungry Italy, Slovenia, Hungary and Austria, signed an agreement forming the Energy Community of South East Europe (ECSEE).

The European Union is not happy with energy deliveries from the east, mostly because Russia disregards the EU's demand that it improve safety in its nuclear power industry. Europe also called on Russia to shut down the Chernobyl-type nuclear power plant in Sosnovy Bor outside St. Petersburg. European Commission spokesman Jean-Claude Schwartz has said recently that the commission was not happy with Russian energy imports. He said Russia's share in the EU's electricity supplies was moderate and would hardly grow before 2020.

However, the energy strategies of Ukraine and Russia propose an accelerated development of exports to Europe. Russia's Minister of Industry and Energy, Viktor Khristenko, who recently said that the national energy sector should receive $100 billion over the next five years, called for devising ways to encourage electricity exports.

Russia and Ukraine, which have similar electricity export strategies for Eastern and Southern Europe, intend to fight for the market to the bitter end. When Inter RAO UES halted electricity deliveries to Moldova in early May because the company's agreement with Ukrinterenergo had expired and new transit prices had not been negotiated, Ukraine rushed to take Russia's place on the Moldovan market. A manager of the Energy Company of Ukraine has said additional electricity deliveries to Moldova were much more profitable than the transit of Russian electricity.

Angry over Russia's decision to ban the import of its wines and brandies, Moldova has offered Ukraine a five-year energy agreement. The republic's government also announced in May its intention to speed up the feasibility study for a high-voltage transmission line from Moldova's Beltsy (Belcy) to Novodnestrovsk in Ukraine. It also started talks with Romania on the construction of a similar line from Beltsy to Suceava.

Moldova expects the European Commission to finance the construction of the two lines, which could subsequently be used to deliver electricity via Moldova to the Balkans. It is not clear who will provide the electricity, but Moldova hopes the Russian-Ukrainian conflict will be settled by that time and large volumes of electricity will flow across it to the west.

In addition, the Moldovan Thermal Power Plant, the region's biggest, is to restart operation after an overhaul soon, and Moldova might have an excess of electricity.

Russian officials refuse to comment on the situation, the ongoing talks, or the possibility of returning to Moldova. But unofficial sources say that the parties are looking for a compromise on the issue of electricity exports to Moldova. Although the talks are proceeding in a businesslike atmosphere, they are very complicated, with each side fighting tooth and nail for its demands, the source said.

The situation should be clarified by midsummer: either the status quo will be restored, or Russia will leave the Moldovan market for some time. Nobody wants the winter gas conflict between Ukraine and Russia to turn into a summer electricity war.