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UPDATE 1-Russia urges Moldova to renounce EU energy deal
September 12, 2012 / 3:20 PM / 5 years ago

UPDATE 1-Russia urges Moldova to renounce EU energy deal

* Moscow says choose cheaper gas or adopting EU plan

* Relations between Russia, EU already strained over gas

* Russia’s Gazprom under investigation by EU

* Conflict likely to stir anxiety over gas supplies (Adds Putin, Novak quotes, background on gas transit)

SOCHI, Russia, Sept 12 (Reuters) - Russia told impoverished ex-Soviet Moldova on Wednesday to choose between low-priced gas from Russia and its pledge to adopt European energy liberalisation measures opposed by Moscow, which is girding for a conflict with Europe over gas.

“First of all, we propose that Moldova denounce the protocol on entering the Europe energy community agreement. This is a precondition for us to discuss the issue of gas price cuts and the relief of debt, which at the moment amounts to $4.1 billion,” Russian Energy Minister Alexander Novak told reporters.

He was speaking before Russian President Vladimir Putin met Moldavian Prime Minister Vlad Filat in the Russian resort of Sochi.

Novak made no reference to the 20 billion cubic metres (bcm)of gas transiting each year through Moldova to Europe, which imports about 150 bcm from Russia annually.

But an ultimatum issued to a transit country is likely to raise alarm in Europe.

Supplies to Europe via Moldova were briefly interrupted in January 2006 in a pricing dispute - a minor disruption compared with the loss of European gas supplies that resulted from pricing conflicts with neighbouring Ukraine, which handles a much larger volume.

Last year, Moldova - a poor country of 3.5 million people - paid $1 billion for 3.1 billion cubic metres of Russian gas, far less than European customers.

Novak said that the country is asking for a 30 percent discount in current talks. Moldova has in the past accumulated obligations on gas supplied to the ethnic Russian enclave of Transdniestr, which receives heavy support from Moscow.

Putin suggested Russia could help the struggling economy, heavily dependent on agricultural exports, with investment cash from companies such as gas export monopoly Gazprom and a bigger Russian market for Moldova’s wine.

Gazprom already owns half of Moldova’s gas transit pipelines, which carry Russian gas to the Baltic states.

Relations between Russia and the European Union took a downturn when the European Commission launched a probe into Gazprom’s pricing and supply practices in Europe.

The EU has said Gazprom is suspected of abusing its dominant market position in key markets, imposing unfair prices on consumers in its oil-linked long term contracts and hindering the free flow of gas.

The Kremlin has thrown its weight behind Gazprom, and issued a decree which could effectively block European regulators from obtaining necessary information from the company during the probe.

Novak, a former finance ministry official who took the energy brief in the Russian government after Putin’s return to Kremlin in May, said Russia was not satisfied with Moldova’s decision to join Europe’s energy pact.

Moldova is due in 2015 to adopt the EU’s so-called Third Energy Package, which imposes limits on the ownership of EU pipeline infrastructure by gas suppliers and calls for the “unbundling” of over-concentrated ownership.

“Of course, it won’t do for us,” Novak said of Moldova’s participation in the pact, under which Russia could be forced to sell off parts of its pipeline network in the EU, which has sought to liberalise the gas and power markets in recent years.

In Lithuania, seen by Gazprom as a test case for the rest of Europe, the Russian gas company has protested that a requirement to divest pipeline assets is a forced sale that is tantamount to expropriation.

Lithuania is among the countries where Gazprom is under investigation, European officials have said. (Reporting by Denis Dyomkin and Gleb Bryanski; Writing by Vladimir Soldatkin; Editing by Melissa Akin and David Cowell)

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