Russian pressure is maintained at a high level – military against Ukraine and energy against Moldova. In both cases, Russia is counting on the strengthening of the socio-economic and humanitarian consequences of the winter, which will weaken the government in Kyiv militarily and the government in Chisinau politically. Russia’s goal in relation to Ukraine is to start negotiations on a cease-fire, which would facilitate Russian territorial occupations formalized by the illegal annexation of Ukrainian regions – Kherson, Zaporizhzhya, Donetsk and Luhansk (September 30). Russia’s calculations regarding Moldova would be to provoke the fall of the government and weaken the credibility of the ruling party. The latter may be put in a position to choose between the risk of mass protests if energy poverty is not kept under control, and, accordingly, the request for gas negotiations with Russia, with the loss of support from pro-European segments of society.

As a result of the deliberate destruction of energy infrastructure by the Russian military, the Ukrainian population risks facing a large-scale humanitarian crisis if the infrastructure is not repaired, restarted and put under missile defense. Some voices compare Russia’s actions with the “Holodomor” organized by the Soviet authorities in 1932-33, but this time in the energy sector. Air, missile and drone attacks (to a lesser extent) continue to target critical Ukrainian infrastructure on which energy and vital utilities (drinking water, hot water, sewage) depend. Since October 10, when Russia focused its military efforts on destroying Ukraine’s energy sector, about 40% of the nation’s energy infrastructure has been attacked from the air and is in need of major repairs. The Russian army is leaving destruction, even leaving the occupied territories, where Ukrainian forces are gradually returning as a result of an effective counteroffensive. Thus, during the recent retreat from the right bank of the Kherson region, Russian troops destroyed and replaced most of the elements of the critical infrastructure of the city of Kherson (AlJazeera, November 2022).

On the other hand, the restriction of natural gas supply to Moldova increases inflationary trends, as Moldova is forced to massively increase spending on the energy sector. A reduction in gas volumes to 50% of what was set in the contract signed in October is causing the ramifications of the energy crisis (IPN, November 2022). The government is in debt due to external loans to cover the cost of energy resources, and the population is in debt due to the inability to pay current bills. An outbreak of social tension can be prevented if the authorities ensure a sufficient level of social protection for vulnerable sections of the population and effective crisis communication. In addition to investigating illegal funding linked to kleptocratic groups and pro-Russian political forces and punishing those responsible according to the law, the authorities must provide political guarantees that they will remain firmly committed to the reform process. In this sense, the recent scandal involving serious allegations against Minister of Justice Serhiy Lytvynenko regarding political interference in the decision-making process in the justice sector should be subjected to an impartial investigation (BalkanInsight, November 2022). In addition, Moldova should prepare for negative scenarios, according to which certain parts of the population of the Transnistrian region (in total – 350,859 inhabitants), who faced a humanitarian crisis, may need the help of constitutional bodies, including as internally displaced persons.

Multilateral aid to Ukraine – resources for winter survival and post-war recovery

Before launching targeted airstrikes against Ukraine’s energy infrastructure, Russian military aggression destroyed the physical infrastructure based on the military presence and movement of Ukrainian forces on the ground. Thus, during the first 6 months of the war, the largest material losses recorded by the Ukrainian side concerned five sectors: housing and communal services (47.8%), transport infrastructure (35.1%), industry (9.7%), education (4. 3%), rural areas sector (4.3%) and others. (Statista, September 2022). Damages amounted to about 97-114 billion dollars. At the time, international financial institutions estimated that Ukraine needed at least €349 billion for post-war reconstruction. The recent destruction of the energy infrastructure means that the necessary financial needs for the functioning of the Ukrainian state are constantly increasing.

A stable flow of financial aid for military purposes is provided by the United States, which on November 10 announced a new tranche of $400 million. Thus, American military aid provided to Ukraine since the beginning of Russian military aggression has reached $19.3 billion. The EU has announced that the budget of the European Instrument for Peace (IEP) of around €5.1 billion is about 85% exhausted. Of these, 3.1 billion euros, or about 55% of the total budget, were transferred to Ukraine. In the process of creating the International Fund for Ukraine, the Dutch authorities expressed their readiness to pay 100 million euros for military purposes. Bilaterally, Germany wants to allocate €1 billion from its national budget in 2023 to support Ukraine’s cyber defenses and document war crimes committed by Russia (Euronews, November 2022).

In addition to financial support for the military component, there is a great need for money to support the viability of Ukraine’s economy and basic budget expenditures. In order to mitigate the negative consequences for the population from the Russian side’s destruction of critical infrastructure facilities, the United States Agency for International Development (USAID) will allocate $55 million to repair the heating network in Kyiv and another $216 million as humanitarian aid. for the winter period (total – $271 million). In this sense, the EU is trying to reach unanimity for the creation of a financial mechanism that provides financial resources in the amount of 18 billion euros (1.5 billion euros monthly) for the needs of the monthly budget of the Ukrainian side in 2023. Hungary is very likely to favor the launch of this mechanism, although it tried to condition its vote on unblocking access to EU funds for post-pandemic recovery (€13 billion). In addition, there is another €3 billion of the amount pledged by the EU in May (€9 billion) that can only be released at the beginning of 2023.

According to estimates by the International Monetary Fund (IMF), in 2023 Ukraine will need monthly infusions of $3-4 billion to stay afloat. If the EU provided half of this amount, the US and international financial organizations could cover the rest. The decision of the EU to create a special financial mechanism for Ukraine was made at a time when Washington called for the distribution of the burden of supporting Ukraine among Western allies. According to October data, the USA provided about 55% or €52.3 billion of total state aid (of which €26.9 billion was military aid) directed to Ukraine (€93.8 billion in the first 7 months of the war), and the EU and the countries -members – 31% or 29.2 billion euros (IfWKiel, October 2022). In addition to current spending, Ukrainian authorities are engaged in active diplomacy to prepare the ground for a post-war “Marshall Plan” worth at least 750 billion euros. This amount was already announced during the conference on Ukraine in Berlin (October 25, 2022). This amount could be repeated in Paris, where the next conference on the mobilization of aid to Ukraine is expected (December 13, 2022). Without financial assistance from the West, Ukraine will not be able to restore its territories, and, first of all, to ensure protection against new Russian attacks and keep the state in a working condition. In this regard, in addition to conventional weapons, Russia will use the harsh climatic conditions of winter in combination with the repeated destruction of critical infrastructure in the energy sector.

Financial assistance for Moldova to meet energy costs

Moldova is seeking financial resources to address the energy crisis, which further exposes it to unexpected costs due to the loss of access to cheap electricity in the Transnistrian region. Inflation affects the purchasing power of Moldovans. The highest price increase was recorded for communal services – by almost 52%. As of mid-November, more than 500,000 people have registered for the opportunity to receive compensation for natural gas consumption during the cold period of the year (November 2022-March 2023). The authorities are ready to cover almost half of the natural gas tariff or 15 lei per m3. Thus, compensation for 500,000 inhabitants for just one m3 will amount to 7.5 million Moldovan lei or about 389,000 euros. On average, gas consumption per apartment in the cold season can exceed 100 m3, and the state wants to cover half of this volume for those citizens who apply for social assistance. Based on rough estimates, we can conclude that social compensation may cost the government tens of millions of euros this winter.

Government officials said that the country will need about €1.1 billion to cover energy costs. In addition to the money needed to support the compensation mechanism, the government must buy more expensive electricity from Romania. This replaces about 90% of electricity flows imported from Ukraine and the Transnistrian region in the period May-September 2022 (80% of domestic consumption), interrupted by Russia’s actions. Prime Minister Nataliya Havrylitsa announced that the government wants to request up to €450 million to prepare for a possible cutoff of natural gas supplies from Russia (Politico, November 2022). This money will be needed to replenish oil and gas reserves. The government allocated 10 million euros (200 million lei) for the purchase of new batches of fuel oil and amended the budget to allocate 202 million euros (4 billion lei) to the purchase of natural gas and electricity. Strategic gas reserves are stored in Romania and Ukraine – about 160 million m3. However, this volume is enough for about a month (5.7 million m3 daily). Theoretically, for consumption during three months (December, January and February – the coldest months of the year), more than 320 million m3, stored in gas fields of neighboring countries, will be needed.

Only in November, Moldova was promised 40 million euros of budget aid from Germany for social compensation. A new tranche of the EBRD loan in the amount of EUR 200 million for a total amount of EUR 300 million will arrive soon. In addition, it was decided to borrow €60 million from the French Development Agency. During her visit to Chisinau, the President of the European Commission, Ursula von der Leyen, announced financial assistance in the amount of 250 million euros, of which 200 million euros are intended for resolving the energy crisis (half is budgetary assistance). This gesture is a sign of solidarity with Moldova, as well as political support for President Maia Sandu (both politicians are members of the European People’s Party family). It is unclear whether the EU will apply any conditions to the new bailout. However, the political situation in Moldova and the recent scandals related to the justice reform require an urgent review of the EU’s soft approach to the use of the conditionality mechanism in Moldova.

The financial aid announced in October-November will amount to 550 million euros, which is only half of the minimum amount of 1.1 billion euros needed by Moldova to survive the winter without socio-political explosions. It is likely that the Moldovan authorities will try to use the third meeting of the Moldova Support Platform in Paris (November 21) to get additional funds. Read the full article and comment on Contributors.ro