ECO-BUS WEEKLY DIGEST November 1-7. Most important Economy & Business news by IPN
● MONDAY, November 1
Deputy Premier Spînu about contract with Gazprom, prices and Third Energy Package
The contract with Gazprom was signed for a five-year period. Amounts of gas were reserved for the period between November 2021 – October 2022 and more quantities will be reserved two months before October 2022. Under the new contract, the purchase price of gas for November will be about US$450 per 1,000 cubic meters of gas, while for December – under US$400, Deputy Prime Minister Andrei Spînu, Minister of Infrastructure and Regional Development, told a news conference. As to the tariffs for end users, he said Moldovagaz does calculations and will present them to the National Agency for Energy Regulation. No matter how much the tariffs are raised, the authorities will come with support for the citizens. The official said that the governments of Moldova and the Russian Federation by the end of 2022 will sign an energy agreement. This will envision the keeping of the status of Moldovagaz SA, including the non-imposition of penalties and avoidance forced reorganizations until the debt owed to Gazprom for the gas supplied to the consumers on the right side of the Nistru is settled. The protocol signed recently in St. Petersburg does not make reference to the exact size of the debt. This will be specified as a result of an independent audit that will be conducted by a company selected at a contest.
●TUESDAY, November 2
“Generation I” financial education project launched in Chisinau too
The National Bank of Moldova (NBM) and CFA Society Romania on November 2 signed a partnership agreement to implement in Moldova the “Generation I” financial education project during an international event entitled “Financial education, a personal, social and economic benefit”. This is aimed at encouraging individual financial responsibility, providing the general public with educational resources. NBM governor Octavian Armașu said the project that is intended for a number of generations was successfully implemented in Romania, being initiated and promoted by CFA (Chartered Financial Analyst) Society Romania for all those who want to create a long-term view for achieving financial independence. “Time teaches us that we must be open to change and make decisions to move forward. Life is full of challenges and the financial challenge puts us in front of the need to be informed, to know more in order to hold our fate in our hands and to be financially independent. Regardless of our professional activity, we embrace the usefulness and innovation we constantly see in the financial world. It is a path to financial independence, which is so necessary for a secure future,” stated Octavian Armașu.
●WEDNESDAY, November 3
Vadim Ceban about talks with Gazprom: They were strictly commercial in character
The head of the Administration Board of Moldovagaz Vadim Ceban denies the idea that Moldova and Russia during the talks on the extension of the gas supply contract agreed political conditions. He said the talks were strictly commercial in character and the contract had to be prolonged for a five-year period as Moldova needs to clear its historical debts. The chief of Moldovagaz said the contract signed with Gazprom is advantageous and is based on the old gas price calculation formula. “The negotiations were purely commercial. There are debts that accumulated since 1994 and haven’t been cleared yet. We spoke about the evolution of prices, markets. We held talks in a rather volatile period when the price fluctuated between US$1,900 and US$1,300 and this aspect influenced the negotiations. The contract signed back in 2006 was extended. But next year, if we have more time available, we can negotiate a new contract,” Vadim Ceban state din the program “The Fourth Estate” on N4 TV channel.
Moldova to sign US$3.8 m agreement on promotion of exports to EU
The Republic of Moldova and the International Finance Corporation are to sign an agreement of cooperation to the value of US$3.8 million for implementing the Moldova Investment Climate Reform Project (stage II). The Parliament’s commission on economy, budget and finance on November 3 approved the report on the bill to ratify the agreement. According to the legislature’s press service, the goal is to enhance the private sector’s competitiveness in the export of products of animal origin, including poultry, eggs, milk and dairy products, to the European Union and to strengthen the horticultural sector’s export capacities. Of the total value of the project, IFC will contribute US$2.8 million, while the Government of Moldova – US$1 million by financing state institutions, including by making payments for goods and services needed for implementing the project. Direct contributions from the state budget are not envisioned.
EU4Business Country Report presented
Information technology has become a branch of the Moldovan industry that sells not only domestically but also internationally, contributing to the state budget more than wine exports, said Economy Minister Sergiu Gaibu during the presentation of the Country Report 2021 “EU4business - together for business recovery”, developed under the auspices of the European Union Delegation in cooperation with the Brussels-based Secretariat of this business support arrangement for the Eastern Partnership countries. The digitization of the economy can become a pillar for growth, the minister noted, citing the example of Ireland and Estonia, which have managed to turn challenges into opportunities and added value. At the same time, he emphasized that if we want to keep up with the world, the economy must emerge from the ossified paradigms that are several decades old, it must be oriented towards modern products that didn’t exist in the past, but are relevant today. Last but not least, this approach also involves training. Young people need to be provided with the knowledge that will help them access well-paying jobs. Another message of the event was to show the opportunities of support that small and medium-sized enterprises (SMEs) can receive from the European community. In 2020, the EU4business portfolio included 30 active projects, with a total budget of 172.7 million euros, up by about 19 percent compared to the previous year. The program has had a significant impact especially considering the pandemic, which has required resilience and flexibility. The turnover of the EU-backed companies fell by 1.9 percent, but the situation is twice as good as the national average. At the same time, the number of jobs in the EU-supported groups increased by more than 25 percent, while almost 4 percent of jobs in the country were lost.
Moratorium proposed on construction of filling stations
P Radu Marian is proposing a six-month moratorium on the construction of new filling stations until stricter rules for building them are developed. Another proposal from the PAS lawmaker is to remove the fixed licensing fee on the importation and wholesale of fuels, while banning resale in bulk. At the same time, harsher fines are proposed. During a press conference, Marian said consumers are “rightly upset” by the sharp rise in fuel prices after they skyrocketed on international markets. “While we cannot influence global prices, what we can do is boost competition and efficiency in our market. Unfortunately, several petroleum companies, especially the largest ones, refuse to compete below the price caps set by ANRE. This happens even if there are smaller companies that set prices 0.3-0.4 lei below the maximums”, said the PAS lawmaker. According to him, the excessive number of filling stations leads to increasing costs and greater pressure on prices at the pump. “In cities, especially in Chisinau, there are filling stations at every turn, and that makes no economic sense”. The moratorium will be applied for six months, and in the meantime the authorities will establish much stricter standards for the construction of such stations.
EBRD increases funding for Moldova’s rail infrastructure
The European Bank for Reconstruction and Development will increase the funding allocated for rehabilitating Moldova’s rail infrastructure, from 27.5 million euros to 51 million euros. The Government today approved a draft amendment in this respect to the loan agreement between EBRD and Moldova. Of the total amount, 49.7 million euros will go for infrastructure rehabilitation and 1.25 million euros for technical supervision of the work on the Bender-Causeni-Basarabeasca-Etulia-Giurgiulesti railway section. The loan repayment period is 15 years, with the agreement covering the period 2017-2032. The amount initially borrowed was 55 million euros, of which the EBRD allocated 27.5 million euros, and the European Investment Bank 30 million euros. After evaluating the costs based on feasibility studies, the two entities agreed that the amounts allocated are insufficient and an increase is needed.
● THURSDAY, November 4
Natalia Gavrilița: We expect gas tariff will be higher than 6.20 lei
Prime Minister Natalia Gavrilița made less optimistic forecasts about the gas tariff, saying this will be higher than 6.20 lei. She noted a final decision to this effect will be taken by the National Agency for Energy Regulation after Moldovagaz presents the calculations done based on the new purchase price and asks to adjust the tariff. The official said the Government will not yet leave the citizens to cope with the higher bills alone in winter and will help those with modest incomes and those who consume small amounts of gas. Premier Gavrilița said the gas tariff will rise because the purchase price of gas paid by Moldova is higher and particular financial deviations may be included in the tariff. “Moldovagaz does calculations and will ask NAER to approve the tariff based on the paid price. There are financial deviations and these can be recouped during a longer or a shorter period of time. It’s clear that we have an exceptional situation on the international natural gas market. We have a good price, but it is anyway higher than Moldova paid so far. We expect the tariff will be higher than 6.20 lei, which was the highest tariff paid so far, in 2012-2014. I don’t know if it will rise to 10 lei or not. We will find out after Moldovagaz and NAER do calculations,” Natalia Gavrilița stated in the talk show “Secrets of the Power” on JurnalTV channel.
ANRE to set provisional gas supply rates by Nov.10
Following a formal request from Moldovagaz, until November 10 the National Energy Regulatory Agency ANRE is to set provisional gas supply rates applicable as of November 1, according to instructions by the Emergencies Commission. Meanwhile, the Ministry of Labor and Social Protection has been ordered to prepare a set of measures to subsidize gas bills for some groups of consumers. The Commission has also decided that the heat and hot water supplier Termoelectrica will stop burning fuel oil from the national reserves and revert to natural gas.
●FRIDAY, November 5
Andrei Spînu: We will store natural gas in Romania or Ukraine
Deputy Prime Minister Andrei Spînu shifts the responsibility for the energy crisis on the former governments that left the sector fully unprotected and didn’t identity alternative sources. The official said the government is looking for safety nets so as to avoid situations similar to that witnessed in October and will create natural gas reserves that will be stored in Romania or Ukraine for money. Andrei Spînu said they have to cope with the burden of the inactivity of the previous governments that fully ignored the energy sector. An energy security strategy is now being designed to strengthen the sector in times of crisis and to ensure the diversification of sources. “I found this sector completely vulnerable. We will do our best to avoid similar situations. We will strengthen Energocom and will make natural gas reserves. The state reserves should be enough for at least two winter months. Two months are enough for finding good offers for the subsequent periods so that we do not buy gas at spot prices. We must ensure the energy interconnection with Romania is completed,” Andrei Spînu stated in the talk show “Black Box” on TV8 channel.
● SATURDAY, November 6
PPA to challenge bidding for Moldovan quarry in Ukraine
The Public Property Agency (PPA) on November 8 will dispute in court the results of the tender contest held in Ukraine on November 5 as a result of which an Ukrainian company was authorized to use the lot on which the crushed granite quarry in Pervomaisc is situated. “Even if effort has been made and actions have been taken to cancel the bidding for the lot on which the crushed granite quarry in Pervomaisc is located, the Ukrainian side responsible for geology and geodesy held the tender contest,” the Agency noted in a press release. So far the lot was owned by the State Enterprise of the Republic of Moldova. Earlier, PPP made multiple approaches to the responsible bodies of Ukraine (Prosecutor General’s Office, Security Service, Ministry of Ecology and Mineral Resources of Ukraine and State Service of Geology and Mineral Resources of Ukraine) and even delegated a representative to monitor and remedy the situation in Kiev. The Public Property Agency noted that only one legal entity took part in the November 5 tender contest and this was authorized to exploit the quarry. The Agency will challenge in court the results of the tender contest through its representative who is at the scene and will take all the necessary measures not to allow the state interests to be infringed.
Moldovagaz submits proposals for higher natural gas rates to NAER
SA Moldovagaz requested the National Agency for Energy Regulation (NAER) to increase the natural gas rates for end users for 2021, from 4,128 to 9,396 lei per 1,000 cubic meters of gas. This way, the rate for the natural gas supplied at the exit points of low-pressure distribution pipelines was proposed to be raised from 4,298 to 10,260 lei per 1,000 cubic meters of gas, in medium-pressure pipelines – from 4,018 to 8,649 lei, in high-pressure pipelines - from 3,910 to 8,331 lei. In the case of gas transportation networks, the rate could be raised from 2,613 to 7,834 lei per 1,000 cubic meters of gas at entry points and from 2,895 to 8,115 lei at exit points. According to Moldovagaz, the gas rates need to be reviewed as the purchase price of gas increased significantly. The final new rates for natural gas at regulated price are to be approved by NAER in an open meeting.
Moldova’s gas deal with Russia: “David tries to draw with Goliath”
“Moldova’s new government skillfully diversified its gas supply options. The country appears to have avoided political concessions to Russia on broader relations with the EU. It will continue implementing general reforms to its energy market under the Third Energy Package, but will avoid restructuring Moldovagas, whose monopoly is the basis of the competition issue, senior policy fellow Andrew Wilson, who specializes in Ukraine and comparative politics of democratization in post-Soviet sates, writes on the website of the European Council on Foreign Relations. The expert considers it would be a mistake to link Russian concessions on energy prices to talks in areas such as trade policy. Moldova sourced emergency ‘technical gas’ to maintain pressure in pipelines from Romania, Poland, and Ukraine. Arguably, however, the country had more time to sign a deal – once its partners had shown solidarity – and did so too quickly. “So, who blinked first?” asked the expert rhetorically, anticipating that a new row between the sides could erupt in 2022. As to the “Moldovan lesson” for the EU, Andrew Wilson said nonetheless, Europe’s reliance on Russian energy supplies still poses a broader challenge. Nord Stream 2 might not concern Moldova, but it is seen as a huge strategic setback by other energy transit and bypass states – particularly Ukraine and Poland. And the EU is not really addressing Russia’s role in driving up energy prices.
Official reserve assets rose to US$4.048,30bn
Official reserve assets totaled 4.048,30 billion at the end of October, US$86.48 million up compared with the end of September, when they came to US$3.961,82 billion. According to the National Bank of Moldova, the increase was due to the transfer of the budget support in favor of the Ministry of Finance by the European Commission in the name of the EU – US$99.49 million, US$57.4 million of which came in the form of macro-financial assistance (last tranche of the loan). The rise also stemmed from the loans and grants registered in favor of the Ministry of Finance for investment projects, amounting to US$5.26 million, and the net inflows related to the required foreign currency reserves of the licensed banks, amounting to US$4.69 million.
Without compensations, we can witness massive nonpayment of bills, Moldovagaz chief
The president of the Administration Board of Moldovagaz Vadim Ceban said the request to the National Agency for Energy Regulation to increase the natural gas rates 2.5 times is based on the purchase price of gas. Even if they haven’t been yet approved, the new rates will start to be applied on November 1. He noted that now the Government should provide compensations to the citizens or massive nonpayment of bills can be witnessed. The enterprise asked the Agency to increase the rate for end users from 4.29 lei to 10.26 lei. The figure does not include VAT, which would push the rate up to 11 lei. The rate was calculated 90% based on the purchase price of gas. “This rate covers our forecasts for a period of 14 months. If the dynamics of the oil market and of the spot natural gas prices are positive, Moldovagaz can ask NAER to review the rates. We asked to apply the new rates as from November 1, as the Commission for Emergencies decreed,” Vadim Ceban stated in the talk show “Friday with Anatolie Golea” on RTR Moldova channel.
About 90% of bank assets in Moldova are owned by European investors
“The banking system in the Republic of Moldova went through a set of profound reforms. These reforms were done as part of a program with the International Monetary Fund that was completed in the spring of 2020. This program centered on the ensuring of transparency in the banking sector and on bank governance. As a result of these efforts, within the program with the International Monetary Fund, bank ownership was made transparent, with the inappropriate shareholders being eliminated from the system and with new investors being attracted. Currently, about 90% of the bank assets in Moldova are owned by European investors. We also improved bank governance, the regulatory framework in commercial banks and we now have a much higher quality of management,” National Bank governor Octavian Armașu stated in an interview for Agerpress. The governor said the whole regulatory framework of the National Bank of Moldova was significantly improved with the assistance of IMF experts and the baking system is now stable, well-capitalized and with sufficient liquidity. It is well-supervised and is resilient. The banking system coped with all the challenges witnessed last year during the pandemic crisis and the economic crisis created by this pandemic. The banking sector was practically the only sector that supported the post-pandemic economic recovery when we didn’t have a Government and there was an insufficient fiscal impetus. Octavian Armașu noted Moldova’s GDP per capita is lower than in the countries of the region owing to the low labor productivity, lack of investment, yet unfavorable investment climate, lack of new technologies, the problems experienced in the justice sector and others. The investment climate is influenced by the problems related to labor productivity, the availability of resources, the risks of shocks, like the energy crisis, and the access to foreign markets, besides the way in which the authorities interact with businesses.
