Estimated time of reading: ~ 6 minutes

The geopolitical landscape in Eastern Europe has shifted dramatically in recent years, particularly following Russia’s invasion of Ukraine. Moldova and Slovakia are now grappling with significant economic challenges stemming from the cessation of Russian gas deliveries, with especially severe effects on Moldova’s breakaway region of Transnistria. This article explores the economic ramifications of this supply shock, analyzing how both regions are responding to the crisis and its implications for their financial futures. The end of Russian gas transit through Ukraine on January 1, 2025, has plunged Moldova into an acute energy crisis. Previously reliant on Russian pipelines for approximately 40% of its gas supply, Moldova must now seek alternative sources at significantly higher prices. The situation is particularly dire in Transnistria, a pro-Russian enclave that has historically depended on subsidized Russian gas for its energy needs. With the cessation of these supplies, Transnistria has declared a state of emergency, resulting in rolling blackouts and the shutdown of non-agricultural industries. Slovakia, similarly reliant on Russian gas, faces its own set of challenges. The country’s economy, intricately linked to global value chains, especially in the automotive sector, is now navigating rising energy costs and disruptions in manufacturing output. Previous supply shocks have already hindered industrial production and driven inflation rates to significant levels. The economic consequences for Moldova are severe. The government has implemented energy-saving measures and declared a state of emergency to address skyrocketing energy prices and dwindling supplies. Moldova’s dependence on Russian-owned Moldovagaz leaves it vulnerable to increased tariffs and limited alternatives. Transnistria, in particular, faces deindustrialization, with its local industries struggling to remain competitive without access to cheap energy. This economic contraction threatens widespread unemployment, social unrest, and a political crisis for Moldova, especially with parliamentary elections scheduled for mid-2025. Transnistria’s refusal to accept aid from Moldova or the European Union further exacerbates its plight. While Moldova is securing higher-priced gas from European markets, Transnistria continues to depend on Moscow’s support, despite the ongoing energy crisis. This allegiance underscores its political alignment with Russia but heightens its economic vulnerability. The region’s economy, heavily reliant on approximately 2 billion cubic meters of free Russian gas annually, is under immense strain. Local industries are shutting down, and the population faces a potential humanitarian crisis during the harsh winter months. Slovakia is also contending with severe repercussions. Its automotive sector, a key pillar of the economy, requires consistent energy and raw material supplies. Rising costs and ongoing supply chain disruptions are driving inflation and threatening economic growth. The Slovak government must act swiftly to diversify energy sources and invest in renewable alternatives. However, such a transition requires time and significant resources, which are in limited supply given the current economic climate. Slovakia’s integration into global value chains further amplifies the cascading effects of these disruptions, pushing consumer prices higher and straining businesses across various sectors. The long-term implications for both Moldova and Slovakia are profound. For Moldova, reducing energy dependency on Russia will require comprehensive reforms, including diversification of suppliers and investment in European energy infrastructure. Without these changes, Moldova risks ongoing vulnerability to external shocks. Slovakia, meanwhile, must focus on enhancing domestic energy resilience and deepening its integration with EU energy markets. Investing in renewable energy sources and strengthening partnerships within the EU will be critical to ensuring long-term energy security. As these regions navigate the turbulence caused by supply shocks and geopolitical tensions, their responses will shape their economic futures. The cessation of Russian gas deliveries serves as a stark reminder of the vulnerabilities inherent in reliance on a single energy source. Moldova and Slovakia must seize this moment to forge more resilient and diversified energy policies in a rapidly changing geopolitical landscape.

Written by: Nenad Stekić