A London-based bank has pledged a financial safety net worth $50 million (£38m) to help Moldova secure gas supplies for the winter in case of an emergency.
The European Bank for Reconstruction and Development (EBRD) says Moldova, which relies on gas from Russia and has no storage for the fuel, faces the risk of disrupted supply should Russia and Ukraine fail to extend a gas transit agreement that expires on 31st December 2019.
Under an agreement signed this week, the EBRD will issue an on-demand, standby letter of credit of up to $50 million to guarantee payment obligations of the Moldovan state energy importer Energocom.
It will enable the company to buy one month of natural gas supply from Ukraine’s oil and gas company Naftogaz to avoid any supply risk.
The Ukrainian firm will procure up to 0.4 billion cubic metres of gas through open tenders with EU suppliers, which will be delivered to the Moldovan energy firm.
The EBRD letter of credit will facilitate a 180-day delay in Naftogaz payment, which will give Energocom time to collect receivables from customers and pay the invoices. If Energocom is not paid on time and has insufficient funds to pay Naftogaz, the Ukrainian company can claim the EBRD’s letter of credit and any funds used under the letter of credit will be repaid by the Moldovan state.
Moldovan Prime Minister Ion Chicu said: “The financial arrangement we have signed today is evidence of a very good relationship between Moldova and the EBRD. The financial mechanism will complete the set of options Moldova has at its disposal for supplying gas to consumers, in case of an emergency beyond the government’s control.
“We are grateful to the EBRD for giving us a hand and I am certain the Bank will increase the number of projects in Moldova in the near future.”