VZCZCXYZ0000
RR RUEHWEB

DE RUEHCH #0005/01 0051322
ZNY CCCCC ZZH
R 051322Z JAN 10
FM AMEMBASSY CHISINAU
TO RUEHC/SECSTATE WASHDC 8733
INFO RUEHKV/AMEMBASSY KYIV 0658
RUEHBM/AMEMBASSY BUCHAREST 4356
RUEHMO/AMEMBASSY MOSCOW 3288

C O N F I D E N T I A L CHISINAU 000005 
 
SIPDIS 
 
STATE FOR EUR/UMB 
 
E.O. 12958: DECL: (##) 
TAGS: ECON ENRG ETRD PGOV MD
SUBJECT: MOLDOVAGAZ PRESIDENT GUSEV TALKS BUSINESS 
 
Classified by: Charge d'Affaires Marcus Micheli 
for reasons 1.4(b) and (d) 
 
¶1. (C) SUMMARY:  In a December 22 meeting, 
Moldovagaz President Alexander Gusuv told Pol/Econ 
Officer that the new Government of Moldova (GOM) 
no longer interfered in his company's business as 
the previous GOM had done.  Gusev said recent 
meetings with Ukrainian representatives -- on the 
eve of a trip to Moscow to sign the annual gas 
supply agreement with Gazprom -- had indicated 
that there would be no interruption in gas 
supplies in 2010.  He also explained that 
Moldovagaz and the National Agency for Energy 
Regulation (ANRE) had recently instituted a 
simplified methodology for calculating domestic 
prices of Russian gas.  Gusev also expressed 
growing concern about the poor maintenance of gas 
pipelines in Transnistria and said he saw no 
foreseeable alternative to Russia for Moldova as a 
source for gas.  END SUMMARY 
 
WORKING WITH THE NEW GOM 
------------------------ 
 
¶2.  (C) In a December 22 meeting, Moldovagaz 
President Alexandr Gusev said that working with 
the new Alliance for European Integration (AIE) 
GOM was easier than with the previous Party of 
Communists (PCRM)-led government because the 
authorities no longer intervened in his company's 
internal affairs.  Gusev explained that the new 
GOM did not give instructions on whose gas supply 
needed to be disconnected or reconnected or who 
must pay bills and who might be allowed to be 
delinquent in making payments (Note: all of which 
happened under the previous government).  Gusev 
also noted a recent problem in the city of Balti 
in which Moldovagaz and the local gas company 
disputed the ownership of land and a pipeline on 
the property.  The two companies eventually 
resolved the issue, leaving the assets with 
Moldovagaz.  (Note: The mayor of Balti is pro-PCRM 
and the dispute may have been an effort by the 
local gas company to claim assets with local 
political support. End note). 
 
GAS FROM RUSSIA AND UKRAINIAN TRANSIT THIS WINTER 
--------------------------------------------- ---- 
 
¶3.  (C) Recently, Gusev said, he had visited 
Ukraine where he had discussed the natural gas 
supply situation for the winter with his Ukrainian 
counterparts.  Gusev indicated that he was 
optimistic that there would be no interruption in 
gas supplies in 2010 because Russia and Ukraine 
had taken steps to prevent a repeat of the crisis 
of January 2009.  On December 23, Gusev traveled 
to Moscow to sign the annual agreement with 
Gazprom for natural gas deliveries to Moldova, 
including Transnistria, and gas transit through 
Moldovan territory to Turkey, Romania, Bulgaria, 
and Greece.  In the December 22 meeting, Gusev 
said that one goal of the meeting in Moscow would 
be to determine the projected annual volumes of 
the gas Gazprom would supply.  According to Gusev, 
in the first quarter of 2010 the gas acquisition 
price for Moldova was expected to be USD 233 per 
1,000 cubic meters.  This would be 21 percent 
higher than the current price of USD 192 for the 
fourth quarter of 2009.  The final price would be 
calculated sometime around January 15, 2010, Gusev 
added. 
 
CHANGES IN GAS PRICE METHODOLOGY 
-------------------------------- 
 
¶4. (C) Gusev said that Moldovagaz had asked the 
National Agency for Energy Regulation (ANRE) to 
approve a new natural gas tariff and was pleased 
the regulator had agreed to amend the methodology 
for calculating domestic tariffs following 
recommendations from the gas company.  According 
to Gusev, the revised methodology now completely 
separates the calculations for the domestic gas 
tariff and the transit charges for gas passing 
trough Moldovan territory.  This new methodology 
was an important improvement and simplification, 
Gusev said.  The previous methodology intertwined 
 
the two actions.  Gusev welcomed a second 
adjustment that provided Moldovagaz with cost 
recovery for previous investments, noting that the 
company will be able to adjust tariffs from 5 to 
14 percent to recover the costs of investments. 
 
TRANSNISTRIA NOT MAINTAINING PIPELINES 
-------------------------------------- 
 
¶5.  (C) Referring to relations with Transnistria 
and Moldovagaz's inability to access its 
infrastructure, Gusev mentioned the two gas 
pipeline explosions that occurred in 2009, one on 
the right-bank of the Nistru River and another one 
on the left-bank in Transnistria.  Moldovagaz had 
no access to its facilities on the left-bank of 
the Nistru River and therefore it could not 
inspect and conduct maintenance on the entire 
pipeline in order to keep it in good working 
order, Gusev explained.  According to Gusev, there 
are three branches of the pipeline passing through 
Transnistria that were built in 1974 and might 
have deteriorated substantially.  Clearly 
frustrated with the Transnistrians, Gusev noted 
that Gazprom and Moldovagaz might face a situation 
in future when the pipeline could not be used or 
transit could be severely reduced.  (Note: In 
addition to blocking access for Moldovagaz to its 
infrastructure in Transnistria, the regime in 
Tiraspol has accumulated a debt of almost USD 2 
billion to Gazprom which is legally a Moldovagaz 
debt. End note.) 
 
NO ALTERNATIVE ENERGY SOURCE 
---------------------------- 
 
¶6. (C) There was no alternate to Russian gas for 
Moldova, Gusev said, when asked about alternatives 
to Gazprom.  In theory, he noted, if the Nabucco 
pipeline went through Romania the closest point 
would be in Timisoara which is about 500 km from 
the Moldovan border.  However, it was very 
unlikely that any company would consider it 
feasible to build a pipeline through Romania, he 
said.  He added that it was questionable as to how 
Moldovagaz would finance the required construction 
in Moldova for a connection to Nabucco.  South 
Stream, he added, was even further from Moldova 
and offered no viable alternative.  Moldovagaz had 
looked at gas storage opportunities in southern 
Moldova, according to Gusev, and there were some 
locations and soils that would allow construction 
of such a facility.  However, the prohibitive cost 
of between USD 100 to USD 150 million to build a 
two- to three-week gas storage facility for 
Moldova made this option unrealistic.  He noted an 
alternative would be for Moldova to lease gas 
storage facilities in Ukraine.  However, this 
option was unacceptable since there would be no 
means of guaranteeing access to such a supply in a 
force majeure situation. 
 
COMMENT 
------- 
 
¶7. (C) The lead-up to presidential elections in 
Ukraine -- which have forced Prime Minister and 
presidential candidate Tymoshenko to take 
proactive measures with Moscow -- likely 
guarantees that gas deliveries from Russia through 
Ukraine to Moldova will flow freely in the near 
future.  This is good news for Moldovan gas 
consumers.  Nevertheless, the continued 
deterioration of Soviet-built infrastructure and 
the lack of alternative sources of energy mean 
that little has changed.  Moldova remains 
completely dependent on Russian gas and transit 
disputes are possible in future. 
 
MICHELI