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Breaking News:

Oil Stabilizes On Small Crude Draw

Romania to Build Gas Pipeline to Moldova with Major Political Implications

Bottom Line: Romania announces that construction will begin soon on a natural gas pipeline to neighboring Moldova, in a project that will underbid Gazprom prices and challenge Russia’s control in Moldova and with respect to the frozen conflict over Transnistria.

Analysis: On 17 July, Romanian President Traian Basescu visited Moldova, promising that construction on the natural gas pipeline connecting the two countries would begin on 27 August. The pipeline will have a capacity of 1.5 billion cubic meters per year. For Moldova, it would be a major energy coup, even though it’s just a small pipeline. Moldova consumes about 3-3.5 bcm of gas per year overall. But Transnistria, which accounts for only about 20% of Moldova’s total territory, uses a disproportionate amount of this gas—between 2 and 2.5 bcm per year. That means that the 80% of the territory controlled by the Moldovan capital Chisinau uses only one-third of the gas piped in from Gazprom.

Recommendation: Look for a proxy response here from Gazprom, which will do whatever it can to make this project disappear. The most likely way for this to go down is for Russia to use Transnistria to disrupt this project without leaving an official trace of its involvement. So this pipeline is a double-edged sword for Moldova (for Chisinau): Simultaneously, it can remove Russia’s power over the country, and its energy monopoly, but it could also start a new phase in the conflict over Transnistria. Gazprom usually wins these battles, so watch what happens in Transnistria carefully, where the authorities are likely to physically disrupt supplies if the new pipeline actually gets off the ground. If they do, it will be on orders from Moscow, to which it owes about $4 billion in debt (all to Gazprom).





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