Gazprom sets ultimatum for Moldova gas pricing

Gazprom sets ultimatum for Moldova gas pricing
In the latest winter gas-price wrangle, Moldova is courting Gazprom for a discount on its gas supplies. A new deal for 2012-2016 must be signed before the year is out.

“I know for sure that Moldova will get a discount. It remains to see how substantial it will be. That will be announced in the coming days by the Premier, who has been holding talks. We have fulfilled our obligations and agreed certain concessions,” says Valery Lazar, Vice-Premier and Economy Minister of Moldova.

Following a meeting with Moldovan Prime Minister Vladimir Filat, Gazprom CEO Alexei Miller said Gazprom will make concessions, if the government of Moldova offers access to strategically important sectors for Russian investors.

“The discussion of a new contract for Russian gas deliveries to Moldova will be based on proposals submitted by the Moldovan government on Gazprom’s participation in investment projects in Moldova.”

Gazprom owns 50% of the Moldovan-Russian company Moldovagaz, with 35.3% of the company owned by the Moldovan government and 13.44% owned by Transdniestra, the main bank of the Trans-Dniester Republic.

The agreement signed in 2006 between Moldovagas and Gazprom expires at the end of 2011, and the new contract must be signed before the year-end.

For 2008-2011, the price was calculated using market principles with a lowering coefficient. The sides agreed gradually to raise the price of energy resources up to the average European level in Q4 2011, with Moldova to finally import gas at $400.47 per 1.000 cubic meters.

The Moldovan authorities consider such prices overly "burdensome for the economy and the population of the republic", and are asking for a discount.

As compensation for price hikes, the government is seeking to raise tariffs for the transit of gas across Moldovan territory.

Vitaliy Krukov, analyst at IFD-Kapital, says all Gazprom contractors in Europe ask for price reductions, “arguing against the additional oil component in price calculations, and insist on contract reviews with the spot price component.”