VZCZCXRO0723
RR RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR
DE RUEHCH #0427/01 1081332
ZNY CCCCC ZZH
R 171332Z APR 08
FM AMEMBASSY CHISINAU
TO RUEHC/SECSTATE WASHDC 6577
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 02 CHISINAU 000427 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/UMB 
 
E.O. 12958: DECL: 04/17/2018 
TAGS: ECON PGOV PBTS ENRG MD
SUBJECT: MOLDOVA: GAZPROM INCREASES GAS PRICES 
 
 
¶1. (C) SUMMARY: On April 15, the Moldovan national energy 
regulator (ANRE) confirmed that Gazprom had increased the 
price of natural gas supplied to Moldova from USD 191 per 
thousand cubic meters (tcm) to USD 213 per tcm, an 11% 
increase.  ANRE also noted that consumer tariffs would not 
increase until the third quarter of 2008.  According to 
MoldovaGaz, the new price was calculated according to the 
agreement signed with Gazprom in December 2006, which 
gradually increases prices to European levels with quarterly 
adjustments based on the price of oil.  For 2008, Moldova 
will pay 75% of Gazprom's price for European customers, 
increasing to 80% in 2009, 90% in 2010, and reaching parity 
in 2011.  MoldovaGaz and Gazprom continue to struggle with 
Transnistria's debts and non-payment of "taken" gas.  END 
SUMMARY. 
 
PRICE INCREASES ACCORDING TO THE GAZPROM FORMULA 
--------------------------------------------- --- 
 
¶2. (C) On April 10, MoldovaGaz president Ghenadie Abashkin 
(protect) told econoff privately that gas prices would 
increase per the formula in the MoldovaGaz-Gazprom agreement. 
 Asked about the impact on consumers, Abashkin said their 
would be no immediate adjustment and predicted a minimal 
price increase in the third quarter of 2008 for consumers. 
On April 15, ANRE's General Director confirmed that the 
agency would not increase consumer tariffs, noting that 
MoldovaGaz could cover the additional costs for supplies of 
gas from its financial reserves accrued from the appreciation 
of the Moldovan Lei (MDL).  ANRE noted that current tariffs 
were calculated at an exchange rate of MDL 12.22 per USD; 
however, the average official exchange rate for the first 
quarter of 2008 was MDL 11.11 per USD.  Abashkin had also 
mentioned the issue of currency appreciation, but noted that 
ANRE, per its usual practice, would also use MoldovaGaz's 
2007 profits to limit future consumer tariff increases. 
(NOTE: ANRE subsidizes tariffs by limiting the profit 
component for MoldovaGaz recognized in the consumer tariff. 
END NOTE.) 
 
RELATIONS WITH TRANSNISTRIA 
--------------------------- 
 
¶3. (C) On Gazprom's negotiations with Transnistria, Abashkin 
noted that discussions continued on the evaluation of 
MoldovaGaz assets, including those in Transnistria.  However, 
access to Transnistria remained a problem.  On the 
Transnistrian gas debt issue, he said there had been several 
visits by Gazprom officials to Tiraspol, but no movement on a 
resolution.  Transnistria's debts to Gazprom are estimated at 
USD 1.677 billion, including USD 200 million accumulated in 
¶2007.  Abashkin noted that Gazprom believes the Transnistrian 
Supreme Soviet (parliament) should adopt legislation assuming 
Transnistria's debts to Gazprom as Transnistrian "state" 
debt; however, the Supreme Soviet has refused to act. 
Abashkin said debts continued to mount because Transnistria 
was not paying the increased (January 1) price for gas and 
refused to transfer payments to MoldovaGaz even though it 
collected consumer tariffs in Transnistria. 
 
RE-VALUING MOLDOVAGAZ ASSETS 
---------------------------- 
 
¶4. (SBU) On April 15, local think-tank IDIS Viitorul 
presented a study of MoldovaGaz's assets, concluding that 
Gazprom's share of the company is unjustifiably high because 
of the improper asset valuation made when establishing the 
company in October 1998.  In a politically-motivated move, 
Gazprom acquired shares of MoldovaGaz as a swap for debt owed 
by Moldova for supplies of natural gas.  IDIS experts also 
claimed that since its founding, Gazprom failed to fulfill 
investment commitments to develop Moldova's gas distribution 
network, forcing the Government of Moldova (GOM) and donors 
to fund the expansion of the network.  If MoldovaGaz can be 
re-valued by conducting a financial assessment and field 
inventory of assets, the GOM could take a controlling 
interest in the company based on the GOM's contribution to 
these new assets.  Currently, MoldovaGaz is divided between 
Gazprom (51%), the GOM (34%), Transnistrian authorities 
(13%), and individual investors (1%).  New Prime Minister 
Greceanii has expressed an interest in re-valuing MoldovaGaz. 
 
COMMENT 
------- 
 
¶5. (C) Gazprom and Russia appear to be honoring the 2006 
agreement on gradual price increases for natural gas supplied 
to Moldova.  We can expect quarterly and annual price 
adjustments according to the formula.  MoldovaGaz and Gazprom 
continue to struggle with Transnistria, unable to reach an 
agreement on the debt or payment issues.  Abashkin was 
 
CHISINAU 00000427  002 OF 002 
 
 
concerned about the changes in the Moldovan government, and 
worried that populist pre-election moves by the ruling 
Communist Party of Moldova could harm the economy.  He also 
spoke about certain personality conflicts, alluding (we 
suspect) to local media reports that former Prime Minister 
Tarlev might be named President of MoldovaGaz.  Abashkin has 
been a trusted source in the energy sector, giving us rare 
insight into Gazprom's dealings in Moldova. 
KIRBY