Since my own family’s well-being is on the line here, I started doing some more research on what, exactly, is happening with the supply of natural gas to Moldova (and by extension, PMR).
After yesterday’s post, I started digging through trade journals and industry news sites because all the “mainstream” news sources are pretty just reporting fluffy propaganda. As it turns out, things are a bit complicated in the technical sense, so I’m here to share with you what I’ve discovered.
In the days before the Russia-Ukraine war, Moldova was positioned at the receiving end of three Soviet built pipelines that started in Russia and transited through Ukraine.
Originally, these all terminated in Moldova (since it was at the frontier of the Soviet Union), but in 1988, the Soviets built the Trans-Balkan pipeline.
Starting in southern Moldova and continuing onward to Romania, Bulgaria, and then Turkey, this allowed Russia to sell gas to its Communist neighbors (and Turkey) for some nice foreign income. Later, a branch line was added that connects to Greece.
This Trans-Balkan pipeline was originally of major importance, but a new pipeline called TurkStream largely supplanted it once it began operations in 2020. Instead of going overland, the TurkStream pipeline runs under the water and goes directly to Turkey (and then onto Serbia with plans to add an extension to Hungary), more or less putting the old (lower-capacity) Trans-Balkan pipeline out of business.
From Moldova’s perspective, the opening of the TurkStream pipeline meant that Moldova was no longer going to earn much money in transit fees, and Moldova is a very poor country.
One critically important factor of gas pipelines is the direction of flow.
Most natural gas pipelines, including the three that feed Moldova, are designed to flow in one direction only: i.e. east (Russia) to west (Ukraine). The pipeline itself is just a circular tube, but all of the pumps and compressors in the system mean that the gas can only flow in one direction.
After the 2014 coup (generally known in English as “Maidan”) in Ukraine when relations with Russia began to break down, the government in Kiev decided that it no longer wanted to buy gas from Russia. It did, however, agree to take money from Russia in the form of transit fees, so gas continued to flow through Ukraine and onto other countries.
Interestingly, although Ukraine has the potential to produce a lot of natural gas itself thanks to its proven reserves, the post-Maidan Ukrainian government was too inept to ever do much of anything to develop that resource. So, without buying any Russian gas, where could Ukraine get enough to heat its homes and power its industry?
The (partial) answer lies in something the natural gas industry calls a “virtual reverse flow” or “backhauling.” For an excellent explanation of what this is, click here.
Essentially, this allows a country that is upstream in the pipeline (like Ukraine) to import gas from a country that is downstream in the pipeline (like Slovakia) without needing to actually reverse the direction of the gas’s flow.
The way it works is that Slovakia will buy, say, 100 million cubic meters of gas from Russia. Ukraine wants to buy, say, 43 million cubic meters from Slovakia. Then all Ukraine has to do is take the 43 million cubic meters for itself instead of sending it onto Slovakia.
Ukraine then pays Slovakia for the 43 million cubic meters, and Slovakia pays Russia for the full 100 million cubic meters, and this bizarro arrangements prevents Ukraine from having to pay Russia (directly) even though, of course, it’s still Russian gas, and the money is still going to Russia.
Originally, this backhauling (or “virtual reverse flow”) system was only used sparingly and mostly just to smooth out imbalances in the different flow rates in pipelines because natural gas is fungible in the sense that one cubic meter of gas is the same as any other cubic meter of gas.
Legally, the company in Ukraine that operates the gas in transit (known as GTSOU for Gas Transmission System Operator of Ukraine) was prohibited from from doing any backhauling until the end of 2019 due to its agreements with Gazprom. But in 2020, Ukraine and Gazprom signed a five-year contract that allowed Ukraine to do backhauling.
That contract is pretty important on a number of other levels because, amongst other things, it requires Ukraine to pay a fixed level of money for transit flows through its territory even if no gas is actually sent. Another key clause requires Ukraine to deliver the gas to all of the purchasers of Russian gas on its borders, including Moldova.
Funnily enough, this contract expires in 2024 because the thinking at the time it was signed was that TurkStream would be operational by then (which it is) to supplement customers in Bulgaria and Hungary and Nordstream 2 would be operational (which it isn’t) to handle customers in Germany and northern Europe.
At the end of 2020 as the TurkStream pipeline became operational, Moldova (in the form of Moldovatransgaz, the company that handles gas sent through the Trans-Balkan pipeline) realized that its profits were going to be severely reduced. Therefore, steps were taken to approve the necessary legislation to allow Moldova to get into the backhauling (or “virtual reverse flow”) game.
Now, what exactly is required to for a gas network to start “backhauling” is a bit difficult to understand. It’s not really much of an engineering challenge since all you really need to do is measure how much gas you are actually sending versus how much you are theoretically sending onward, but it turns out that there’s a lot of complicated legal frameworks involved.
As such, it took Moldova three long years to get all the paperwork and certifications in order to allow it to get into the backhauling game at some point in September 2022.
Originally, the idea had been to backhaul via the Trans-Balkan pipeline so Moldova could divert gas that was flowing onward to countries like Romania and Bulgaria.
Note: There’s also been a plan in the works to reverse the flow of this pipeline so that seaborne LNG (liquified natural gas) arriving at ports in Greece and/or Turkey could be sent north all the way up to Ukraine.
To help Moldova get the know-how to start doing backhauling, this happened:
[Moldova] has established a state-owned electricity and gas wholesaler, Energocom, which is now led and advised by Western experts with extensive trading experience and whose ultimate task is to guarantee the country’s security of supply.
A-ha! As soon as you hear that “Western experts” are involved, there’s something sinister going on.
Founded in 2004, Energocom was originally only involved in providing electricity for Moldova. But in 2014, when the first “pro-EU” government came to power, it passed the necessary legislation so Energocom could become legally certified as a natural gas purchaser (and seller).
From 2008 to October 2021, Energocom was run by a guy named Andrian Pritula. He was then summarily fired by Maia Sandu’s government, but no reason for his dismissal (🇲🇩) was ever given. Furthermore, the government used its special powers (due to Covid) to fire him even though the company was quite profitable.
Some business journals at the time speculated that it had something to do with the government wanting to move away from buying electricity from Pridnestrovie (which sells at super low prices) and switching to Ukraine as a supplier (which ultimately is what happened in May 2022) and that Pritula opposed this (because the company would lose money, which is now happening).
A man named Vladimir Sadovoi was then named as the interim CEO until he was replaced in July 2022 by Victor Binzari, who is also working in an “interim” capacity even today. Pretty much Sadovoi’s last move as CEO was to sign the contract to buy electricity from Ukraine, the details of which were kept secret from the public because the contract with Ukraine required it.
Interestingly, it doesn’t appear that Sadovoi was fired or forced out of the position, merely replaced. I do note that Sadovoi is a member of an evangelical Christian church in Chisinau rather than the more common Orthodox faith, so it’s likely that he’s a man with strong religious convictions (i.e. less interested in corrupt dealings).
The person who hand-picked Binzari as the new CEO of Energocom was Eugen Cozonac, now an advisor to the Prime Minister of Moldova. Cozonac is Moldovan, but he studied at Vanderbilt and used to work in America, so he’s Maia Sandu’s point man in bringing in all those “Western advisors” to transition Moldova into becoming helplessly dependent on foreign handouts to pay for its energy needs.
The Game is Afoot
With the necessary legislation in place and a safe pair of hands at Energocom, Moldova made its backhauling move with Ukraine on September 28 of this year.
However, the press releases at the time only mentioned that this was related to gearing up to (virtually) import gas being delivered through the Trans-Balkan pipeline, and absolutely nothing was said about a virtual reverse flow of Moldova’s gas from Russia into Ukraine.
In other words, not a single news article or government statement about the backhauling commencement mentioned anything whatsoever about Moldova suddenly decide to start “storing” its gas in Ukraine even though it was secretly going on behind the scenes.
Curiously enough, just two weeks earlier, on September 16, Ukraine fired the head of GTSOU, the company that handles these “virtual reverse flows” for the country. Apparently, Makogon was completely caught off-guard by this:
I don’t understand why I was fired. I just don’t know. I mean, what is this? Some kind of sabotage to paralyze the work of a strategic company? Is this some last-resort gesture to block the reforms of GTSOU’s board members and replace them with their own people? It is a very irresponsible decision that will jeopardize Ukraine’s energy security.
Just a month earlier, the World Bank (which has given 11.4 billion dollars to Ukraine this year) was pressuring the GTSOU to implement reforms in its governing board and bring in outside specialists to ensure that everything was legitimate.
The summary firing of Makogon raised a few eyebrows, but since the West has agreed to “ride or die” with Ukraine until the bitter end, ultimately, nothing was done.
Connecting the Dots
As Moldova’s government under lunatic Maia Sandu’s reign became increasingly hostile to Russia, Gazprom announced in September 2022 that it would require Moldova to pay its past month’s usage in full as well as pay a 50% deposit on its next month’s anticipated usage or else it would cut off the gas supply.
As such, Moldova had to cough up over 60 million dollars in October, money the government of Moldova didn’t really have to spare. Therefore, it passed a special emergency ordinance to borrow (🇲🇩) that money from Energocom, some 1 billion lei (roughly 55 million dollars) at a 21 percent interest rate.
This is a real robbing Peter to pay Paul type situation, not just because of the extortionate interest rate but because Energocom itself is now losing money hand over fist because it is buying overpriced electricity from Ukraine and (after October 12) on the open European market. Furthermore, that loan was just for a single month of gas, and the Gazprom bill for October’s usage (and December’s pre-payment) is going to come due any day now.
So, this is where the recently discovered issue of Moldova’s missing gas comes into play.
If Moldova really is storing its gas in Ukraine, it could be because it is necessary to satisfy Moldova’s western backers (who are now paying all of Moldova’s energy bills) as a way to ensure supply this winter in case Gazprom cuts Moldova off.
Or it could be part of some sneaky backdoor deal by which Ukraine uses Western money to pay Moldova for its relatively cheap gas in order to sell it at high prices on the open European market with the profits going to whatever shady cabal is now running GTSOU.
Most likely, it’s a bit of both. But we’ll have to wait to see how this plays out to find out.
What is certain, however, is that Moldova enjoyed a plentiful and reliable supply of cheap electricity and natural gas last year, and this year, we’re on the verge of freezing to death in the dark all thanks to Maia Sandu’s wholehearted embracing of the West’s suicidal policies.