The low-hanging fruit of European integration: Moldova’s election and the power play of energy dependency

Socialists and Communists protest in front of the National Agency for Energy Regulation (ANRE) in downtown of Chișinău, Moldova back in 2022. Photo: Dan Morar / Shutterstock

In a statement on the start of accession negotiations between the European Union and Moldova on June 25th 2024, the European Commission president, Ursula von der Leyen, emphasized that “together, we can forge a larger, more dynamic, and forward-looking Europe.” However, she also cautioned that the “journey [of accession] will be rigorous and demanding [and] there are no shortcuts.” This reflects the long-term vision of a European and prosperous Moldova, championed by President Maia Sandu, who has implemented significant reforms during her tenure. Yet, this pro-European vision will be tested twice on October 20th. Moldova will hold both presidential elections and a referendum on EU membership, which could enshrine European integration into its constitution.

These elections reveal a country at a crossroads. Maia Sandu’s pro-European vision faces challenges from opponents promising economic shortcuts through closer ties with Moscow. These ideas are often masked as a multivectoral foreign policy, like that of Alexandr Stoianoglo, endorsed by the former governing party, the Party of Socialists of Moldova. Sandu is also facing openly pro-Russian opponents, such as Renato Usatii, leader of the “Our Party”, and Irina Vlah, former governor of the Gagauz region, whose population voted in 2014 overwhelmingly against EU integration and threatened to secede. Below this surface of foreign policy choices is a profound choice between long-term prosperity and independence which comes with the necessary reforms, or a return to the path of corruption, lawlessness and seemingly cheap energy resources, that have cemented the country’s dependence on the Kremlin.

Figure 1: Economic and Demographic Trends in Moldova. Source: Own production based on the World Bank’s data.

Figure 2: Institutional Integrity in Moldova. Source: Own production in based on the World Justice Project and Transparency International data.

Moldova has struggled demographically and economically throughout its contemporary history, as shown in Figure 1. It has consistently had one of the highest remittance shares in GDP globally, a reflection of weak institutions that earned it the title of “Europe’s poorest nation”. Although recent improvements in institutional metrics are promising and the quality of Moldovan institutions is now closer to its EU regional peers – Poland and Romania, as shown in Figure 2 – it will take time for these changes to translate into strong economic growth. Poland’s experience illustrates this well: following significant institutional reforms in the 1990s, its GDP per capita (PPP) grew from 48 per cent of the EU average in 2000 to 79 per cent in 2022. However, Moldova’s journey has been marred by scandals, such as the 2014 bank robbery, where 1 billion US dollars – 12 per cent of its GDP – was stolen by pro-Russian oligarch Ilan Shor. Convicted in 2017, Shor fled to Israel and later Russia, where he now orchestrates, with the help of Russian security services, anti-European campaigns to destabilize Moldova. As such, his political party was described as “created out of corruption and for corruption [which] is a threat to the constitutional order and security of the state”. Unsurprisingly, Moldova’s 2023 National Security Strategy also names Russia, together with its role in systemic corruption, an existential threat.

Moldova’s breakaway region, Transnistria, is the prime example of Russia’s interference tactics through fostering systemic corruption. In this region, Moscow provides the Cuciurgan Power Plant which accounts for roughly 80 per cent of Moldova’s electricity supply with natural gas free of charge. The profits from selling this electricity to other parts of Moldova are a significant part of Transnistria’s budget. Additionally, the region benefits from dumping prices for resources which come with incentives for corruption and arbitrage. However, as the saying goes, “there is no free lunch”, the Kremlin tracks these price differences as debt and uses them as leverage for geopolitical, economic or political concessions. Gazprom claims Moldova’s debt is as high as $709 million, a figure the Moldovan government disputes.

Nowhere is the choice between Europe and Moscow more evident than in Moldova’s energy sector. By promising cheap natural gas, Moscow offers pro-Russian actors a powerful campaign tool that also undermines reforms by fuelling corruption. This quick fix appeals to both the population and oligarchs, with the former enjoying low energy prices in the short term whilst the latter continue stripping the country of its assets, with predictable socio-economic consequences in the long run. Therefore, to break free from the Kremlin’s grip and pursue a pro-European future, the stakes in these elections will have major repercussions on the energy sector, where the European Union’s role will be pivotal.

Moldova’s energy landscape: infrastructure and import routes

In 2023 Moldova’s energy consumption was approximately four million tonnes of oil equivalent (Mtoe), compared to 93 Mtoe in Ukraine and 35 Mtoe in Romania. The average for EU countries was 114 Mtoe, with a total consumption of 5,700 Mtoe across all 27 member states. Per capita, Moldova consumed 1.5 toe, compared to Ukraine’s 2.2 toe, Romania’s 1.8 toe, and the EU average of 3.1 toe per person. Moldova’s energy intensity, measuring energy consumption per unit of GDP, was 267 toe/million USD, lower than Ukraine’s 581 but higher than Romania’s 117 and the EU average of 96. Thus, despite inefficiencies, Moldova’s energy consumption is low compared to its regional peers, largely due to its small population and limited industrialization. In 2023 the only EU country with a similar level of energy consumption was Luxembourg at 4.1 Mtoe.

Natural gas has historically made up the majority of Moldova’s primary energy consumption, as shown by the Total Energy Supply (TES) in Figure 3. TES represents all energy produced or imported into a country, minus exports and storage, reflecting the energy needed to supply end users. After natural gas, petroleum products and biofuels, mostly solid biomass like wood, make up the next largest shares. Coal and renewable energy sources, such as hydropower, wind, and solar, contribute only marginally to Moldova’s energy mix. The country produces just 20 per cent of the primary energy it consumes, mostly from solid biomass, meaning most other primary energy sources are imported. Some of these primary sources are converted into fuels or electricity for final consumption, as indicated by the Total Final Consumption (TFC) in Figure 3. TFC represents the energy used by individuals and businesses for activities such as heating, lighting, and powering vehicles. Importantly, the conversion from primary to secondary energy sources involves energy losses, leading to differences between TES and TFC. In Moldova, petroleum products used in transportation account for the largest share of final energy consumption, followed by natural gas and solid biomass, used for cooking and heating.

Figure 3: Evolution of Energy Supply and Consumption in Moldova, 2000 -2022. Source: Own production in based on the International Energy Agency data.

Electricity is the fourth largest category of final energy consumption in Moldova, yet it remains crucial for any modern economy, as most industrial processes, from manufacturing to data services, depend heavily on it. Interruptions in electricity supply lead to significant economic losses, disrupting essential infrastructure like communication systems. Reliable electricity is thus the backbone of a modern industrial economy. Moldova’s electricity generation is largely undiversified, relying mostly on natural gas, with small contributions from hydropower, coal, and renewable sources like wind and solar. While reliance on natural gas for electricity generation is not inherently problematic, an analysis of Moldova’s energy infrastructure and its import routes reveals the risks this poses for its energy security, defined as the ability of a country to ensure reliable and uninterrupted access to energy at affordable prices.

As an energy system, Moldova is almost entirely reliant on imports. The only source of primary energy produced domestically is biomass, typically wood used for heating and cooking. With no refineries, Moldova imports all petroleum products mostly via its railroad network. These routes connect Romania, Ukraine and Moldova’s only maritime port, Giurgiulești, located on the Danube River with access to the Black Sea, to oil storage facilities with a total capacity of 150,000 m³, as shown in Figure 4. All of Moldova’s natural gas is also imported. Historically, it came from Russia via pipelines entering from Ukraine, one in the north and three in the east, entering Transnistria. Since 2015 Moldova has had a natural gas route from Romania through the Iasi-Ungheni interconnector although, due to technical constraints, it allows for transporting much less natural gas than the other routes. Moldova lacks liquefied natural gas (LNG) terminals, making it unable to import natural gas in this form.

Figure 4: Map of Energy Infrastructure in Moldova as of 2024. Source: Own production based on the OpenStreetMap dataset.

Moldova’s natural gas imports from Romania and Ukraine can meet most of the demand on the territory controlled by Chișinău. However, the devil lies in the details, as the separatist region of Transnistria consumes the majority of Moldova’s imported gas, primarily at the Cuciurgan Power Plant, which supplies 80 per cent of the country’s electricity. The region controlled by Chișinău generates very little electricity. Moldova also has transmission lines connecting it to Ukraine and Romania. Most of its imported electricity comes from Ukraine, whose grid operates in sync with Moldova’s. In contrast, connections to Romania face transmission limitations because Romania’s grid, part of the European Network of Transmission System Operators for Electricity (ENTSO-E), is not synchronized with Moldova’s, though efforts are underway to achieve full synchronization.

Energy security implications

Moldova represents a stark example of energy insecurity. Practically landlocked, it boasts an energy-inefficient economy which depends on imports for over 80 per cent of its energy needs, with domestic production limited to biomass. This heavy reliance on imports makes Moldova’s energy system inherently vulnerable to external shocks and price volatility. The severity of this insecurity depends on the relations with suppliers. For example, similar to Moldova, natural gas is the primary fuel for heating and power generation in the New England region of the United States, where natural gas prices, particularly at Boston’s Algonquin point, are highly volatile because the region relies entirely on imports. However, the key difference for energy security implications is that while New England can import natural gas from reliable sources, such as neighboring US states, Canada or internationally via LNG, Moldova remains reliant on natural gas from Russia, a country openly hostile to its pro-western ambitions. Compounding this issue is Moldova’s reliance on electricity from the Cuciurgan Power Plant. The plant runs on heavily subsidized Russian natural gas creating artificially low prices that make alternatives, like natural gas imports from Ukraine or Romania, uncompetitive, giving Russia significant leverage over Moldova through energy blackmail.

Indeed, Moscow did not hesitate to use it to realize its foreign policy objectives in Moldova. In October 2021, Russia engineered an energy crisis to undermine public support for the newly elected pro-European government of President Maia Sandu, which planned gas sector reforms. The crisis began when Gazprom, Russia’s state-owned gas supplier, demanded a significant price increase – from $550 to $790 per 1,000 cubic meters – and reduced gas supplies, forcing Moldova to declare a state of energy emergency. This energy blackmail succeeded, as Moldova eventually signed a five-year contract with Gazprom and postponed EU-driven gas reforms. A second crisis unfolded in October 2022, after Russia’s invasion of Ukraine, again targeting social support for Sandu and the government. This time, Gazprom cut gas supplies by 30 per cent, citing technical issues related to Ukraine’s transit, while electricity from Transnistria’s Cuciurgan plant was also reduced. Moldova had to buy electricity from Romania at much higher prices, though power flows from Transnistria were restored in December 2022.

As winter 2024/2025 approaches, the question remains whether Russia can again resort to energy blackmail. While Moldova has significantly reduced its reliance on Russian gas by importing from Romania and Ukraine, it still depends heavily on the electricity from Cuciurgan. However, Ukraine, still at war with Russia, is most likely to refuse to renew its gas transit contract with Gazprom which expires in December 2024, which would result in disruption in natural gas flows to Transnistria this winter. In recent weeks, Moldova has made bold moves to reduce Gazprom’s influence, including an audit that reduced Gazprom’s debt claim from 709 million to 8.6 million US dollars and transferring control of the Moldovan gas network to Romanian-owned Vestmoldtransgaz. If gas supplies to Transnistria are cut, Moldova may have to rely on more expensive electricity imports from Romania and Ukraine, marking a pivotal moment for the region’s energy independence. However, a supply disruption in Transnistria could also trigger an energy crisis, which can be a make it or break it moment for Moldova’s energy security and its path to reducing Russian influence.

Policy recommendations

Looking ahead, Moldova faces critical decisions, as on October 20th, 2024, the country will hold a presidential election and a referendum to enshrine EU membership in its constitution. On September 27th 2024 the Moldovan Prime Minister, Dorin Recean, said during his speech at the United Nations General Assembly: “Our European path is a matter of vital national interest and our strongest guarantee of peace, democracy and development. On October 20th Moldova will reaffirm its European choice in a referendum to enshrine EU integration into our constitution. Russia may continue its attempts to disrupt Moldova’s path … but we, the Moldovan people, are united in determination. Only we can choose our future.” Yet these words will remain aspirational without changes to Moldova’s energy infrastructure, which currently enables Russia to use energy blackmail and meddle in its affairs. Structural changes in Moldova’s energy infrastructure and market design are urgently needed to break free from Russia’s influence.

An immediate solution to address Moldova’s energy vulnerability is to expand transmission capacity from Romania. This would allow Moldova to import more electricity, reducing its dependence on Russian-controlled sources in Transnistria. However, this requires significant upgrades to transmission infrastructure and full synchronization of Moldova’s grid with ENTSO-E, processes that are already underway. The challenge is that electricity from Romania is much more expensive than from Transnistria, so external financial support from the EU will be crucial to keep prices affordable and maintain social support for the incumbent reformist government.

A long-term solution for Moldova’s energy security would be to diversify its electricity generation by building a large power plant on the right side of the Nistru River, in the territory controlled by Chișinău and increasing the share of renewables, such as wind and solar. Additionally, investing in new natural gas import routes, either through pipelines or LNG, would further enhance energy security by reducing Russia’s leverage. Another potential solution could be the reintegration of Transnistria, bringing the Cuciurgan plant back under Moldovan control, though this remains unlikely as long as Russian troops are stationed in the breakaway region.

In theory, Moldova’s energy problems are easy to solve: the country consumes little energy compared to its regional peers and only needs several infrastructural investments to become free from Russia’s energy blackmail. However, infrastructure projects like power plants, even if small in scale, require time and significant capital. Attracting private investors necessitates a stable, low-corruption environment with strong public institutions, historically lacking in Moldova. State-led initiatives have often failed due to either lack of funding or corruption, preventing the development of alternative power generation and energy import routes over the past 30 years, leaving Moldova dependent on Russian-controlled energy sources.

Since 2021 Sandu and her government has made significant strides in improving institutional quality, paving the way for potential deregulation of the energy market and attracting private investment in Moldova’s energy infrastructure.The same government has weathered two Russia-induced energy crises and now seems closer to finally breaking free from Russia’s influence; however, its success hinges not only on the outcome of the October 20th election and referendum but also on crucial decisions regarding energy security, which will shape Moldova’s long-term dependencies. As a net importer, Moldova must redirect its supply routes to reliable, friendly suppliers, an effort that requires long-term infrastructure investments, which are not possible without breaking the vicious cycle of corruption. Moldova seems to be on the right path, but the transition away from Russian energy may bring economic pressure, with rising energy costs affecting the population. This could necessitate financial support from the EU to maintain social backing for the reformist government. That said, Moldova represents a “low-hanging fruit” for European integration: given its relatively low energy consumption, the cost of helping Moldova shed Russian energy influence is modest compared to the strategic benefits of securing another pro-European country in Eastern Europe, and potentially a new EU member.

Jakub A. Bartoszewski is an energy market expert focused on the role of infrastructure in market design. He holds a Bachelor of Arts degree in Economics from New York University and a Master of International Affairs degree from the Bush School of Government & Public Service of Texas A&M University.

Dr. Michael Martin Richter is an Associated Researcher at the Research Centre for East European Studies at the University of Bremen and the Chief Research Officer of the Coopernicus.pl platform. Previously, he was a Research Fellow at the University of Surrey and Harvard University, as well as a Policy Expert at the Foreign Investors Council in Latvia. He received his PhD from the University of Bremen and his MA from the College of Europe in Natolin. His research focuses on the political economy of Eastern Europe, particularly on good governance reforms.

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Chișinău, electricity, energy security, EU-Moldovan relations, gas supply, Maia Sandu, Moldova, Russia-Moldova relations