Caspian Energy (CE): Your Excellency, what are the major objectives and tasks of the formed government?
Marcel Ciolacu, Prime Minister of Romania: Our objectives are essential for the balanced and sustainable development of Romania, as we proposed through the Governance Program.
Obviously, we have in mind the reduction of the effects that are felt both socially and economically, against the backdrop of the difficult context generated, not only for us, by the conflict in the immediate proximity of the borders and which, let’s not forget, superimposed on post-pandemic crises.
However, we have focused our goals on immediate development needs and perspective projects, and they converge towards economic and social modernization. We have to make reforms and investments that the Romanian society and economy need at this moment, and our success depends on an efficient and transparent management of the financial resources at our disposal, regardless of whether we are talking about the money from the national budget or external financing.
From this point of view, we have substantial support through the National Recovery and Resilience Plan, especially since many of the reforms we undertook to carry out with the support of this European mechanism overlap with those necessary for the preparation of Romania’s accession to the OECD.
Whether we are talking about infrastructure, education, health, digital transformation, sustainable development, social reforms or good governance, I can say without a doubt that it involves absolutely necessary measures to provide people with quality public services and infrastructure and to support the economy at the same time.
As Prime Minister, my social-democratic political orientation does not prevent me from being aware of the importance of the good running of the economy for society, on the contrary. As I said before, the mandate of the government I lead is about reforms and the economy, more concretely, about how we make the economy produce more value and jobs, and the results to be seen concretely in the standard of Romanians’ living.
And as the current geo-strategic context inevitably implies a rethinking of energy policies by ensuring independence from Russian imports, both in the case of Romania and the other European countries, it is natural that at governmental level we grant this sector the importance it deserves, through concrete projects that we support in the direction of promoting alternative sources of energy and, equally, in the direction of the development of joint regional projects in the field of energy, a topic that, moreover, we addressed in August, in Athens, at the high-level meeting of the heads of state and government of South-Eastern Europe, and in the discussions that I and members of the Government had with European officials. This line also includes the steps we have taken since the beginning of the mandate, through which we managed to bring the new REPowerEU plan, focused on programs dedicated directly to consumers for the energy efficiency of homes and households, to the analysis of Brussels officials. It is about accessing more than 1.1 billion euros, which will make approximately 60,000 households able to be equipped with solar panels and batteries for energy storage. We also have projects started in partnership at the Doicesti Energy Complex, where we will implement new technologies in the non-conventional energy sector. All this will ensure our transition to more efficient and cleaner energy sources and, thus, the achievement of the assumed objectives of decarbonisation.
Whether we are talking about the energy sector, the transport infrastructure or the potential of digitalisation, we rely on investments, and this is the signal we send every time in discussions with the business environment.
The Business Forum of the Three Seas Initiative, an event that the Government hosted on the sidelines of the Three Seas Summit, held in early September in Bucharest, enjoyed a large participation of business people from the region and beyond, which outlines Romania’s profile as an option for investors.
CE: Romania joined the EU 16 years ago. How has Romania’s economy changed throughout this period? Do you support further enlargement of the EU?
Marcel Ciolacu: Romania has fully enjoyed the benefits of EU accession. My country has come a long way in terms of economic convergence, registering a significant increase in per capita GDP as a share of the euro area average (based on PPS), from 31.3% in 2005 to 77% in 2022. According to an analysis based on Statista data, Romania had the highest economic growth between 2000 and 2022 among EU states, of almost 800%.
Access to the single market was a facilitator for opening up the economy, an important economic engine and a determining factor in building a stronger, more balanced and fairer economy.
Our country has managed to build a regional profile of trust and political and economic stability, despite the complex geo-political evolutions in the region. All major international rating agencies - Standard & Poor’s, Moody’s and Fitch Ratings - have assigned investment-grade sovereign ratings to the Romanian economy.
Also, Romania is fully taking its part of the in-depth transformation process, guided by the green and digital transition, as driving forces for economic growth. The current economic model that helped our country meet its development objectives so far, will focus on high-value-added activities, through the adoption of innovative technologies and production processes.
Romania’s medium-term macroeconomic perspectives are still marked by the persistence of uncertainty regarding the evolution in EU, the conflict in Ukraine and the necessary internal structural adjustments after a difficult period, in which multiple shocks affected the economy. Romania’s direct trade and financial links to Russia and Ukraine are limited, but the spillovers from the war have led to a lost momentum in growth.
On the longer term, much of Romania’s economic performance will be determined by the progress of projects financed under EU’s Recovery and Resilience Facility (RRF), which could provide an extra boost to domestic demand. Romania’s total allocation under RRF is € 29.2 billion. The funding is used to carry out reforms and investments which will support the green and digital transitions, smart growth, health and resilience, and policies for the next generation, in line with EU’s vision to build a greener, more sustainable future.
Romania strongly believes in the transformative power of the EU enlargement, a strategic objective that implies a shared responsibility, both for our partners and for the EU. Moreover, Russia’s aggression against Ukraine reconfirmed how important it is to advance enlargement, building a space of security, development and common European values.
My country wholeheartedly supported the historic steps taken last year in the framework of this process - granting candidate status to Ukraine, Republic of Moldova and Bosnia-Herzegovina, as well as recognising a clear European perspective to Georgia.
The significant progress made by the Republic of Moldova and Ukraine on the road to European accession is all the more impressive in the current particularly challenging geopolitical context. We do hope that a decision to open accession negotiations with both candidate countries will be taken by the end of this year and we remain fully committed to support their efforts at political and technical level.
CE: A new energy market is being developed in the EU today. From what risks will it protect its members? Which countries are the main suppliers of energy to Romania?
Marcel Ciolacu: In the framework of the very high prices and volatility in electricity markets observed since September 2021 and of the escalation of the Russian military aggression against Ukraine, the Commission presented in October 2021 a toolbox of measures that the European Union and its Member States were able to use to address the immediate impact of high energy prices on households and businesses (including income support, tax breaks, gas savings and storage measures) and to strengthen resilience against future price shocks.
A new market design was proposed by European Commission and negotiated at the European Council level, aiming to set new fundamental principles for well-functioning, integrated electricity markets, which allow all resource providers and electricity customers non-discriminatory market access, enable the development of forward electricity markets to allow suppliers and consumers to hedge or protect themselves against the risk of future volatility in electricity prices, increase consumers’ empowerment, ensure competitiveness on the global market, enhance flexibility through demand response, energy storage and other non-fossil flexibility solutions, ensure energy efficiency, facilitate aggregation of distributed demand and supply, and, very important, support long-term investments in renewable energy generation and enable consumers’ to make their energy bills less dependent from fluctuations of short-term electricity market prices, in particular fossil fuel prices, in the medium to long-term.
We all agreed at EU level that a faster deployment of renewable energy and clean flexible technologies is the most sustainable and cost-effective way of structurally reducing the demand for fossil fuels for electricity generation and for direct consumption through electrification and energy system integration. Thanks to their low operational costs, renewable sources can positively impact electricity prices across the Union and reduce direct consumption of fossil fuels.
The reform of the electricity market design should also increase the competitiveness of the Union’s industries by facilitating their possibilities to make the clean tech investments they require to meet their net zero transition paths. The energy transition in the Union needs to be supported by a strong clean technology manufacturing basis.
In terms of energy suppliers for Romania, our country imports only 10-11% its total annual electricity consumption, with spikes that may reach 20-25% during peak hours or during periods of time when electricity from renewables is not available.
I want to mention that during periods with good wind, Romania is a net electricity exporter. Given the important investments that are foreseen to be developed in the renewable and gas sector, we believe that in a few years our country will regain its position as an electricity exporter in the region and in EU.
CE: What does “green transition” mean for Romania and its citizens?
Marcel Ciolacu: It means an immense challenge and unprecedented opportunities at the same time. It means changing the paradigm of economic growth in a way which our generation has not experienced until now. More growth and cleaner lungs. It means green funds, innovative technologies and a new design of our job market.
Romania has chosen the hardest and most ambitious path, i.e. climate neutrality. This means that by 2050, we will have cut our greenhouse gas emissions by 99%, compared to 1990. It is an objective to which we have committed at the beginning of this year, when we presented to the European Commission the first draft of our Long Term Strategy for Reducing Greenhouse Gas Emissions.
Climate neutrality means profound structural transformations in crucial sectors, such as energy, economy, industry, transport, agriculture, buildings, heating and cooling. Our private sector is therefore key to achieving our goals and the Romanian Government is aiming for a more structured dialogue with the private sector, which could develop into solid partnerships for climate.
In 2022, the Romanian Government established an Interministerial Committee for Climate Change which brings to the table all major players who can drive forward the climate change agenda. In my team, I have appointed a state adviser for climate change and energy transition who also contributes to ensuring that the green transition happens in an integrated and just manner.
We have one of the lowest rates of emissions/capita in the EU. In 2021, Romania’s greenhouse gas emissions already decreased by 71% (the EU goal for 2030 is 55%).
We are privileged to have a pretty balanced energy mix. Romania ranks number 11 in the EU in terms of the renewable energy share in total consumption. In Central and Eastern Europe, Romania ranks 3rd after Croatia and Slovenia. This year, almost 60% of our electricity has been generated by renewable sources of energy. Until 2030, RO has committed to increase the share of renewables to 30,7%. It is focused mainly on wind, hydro, solar and fuels from biomass.
Romania is the second largest natural gas producer in the EU. Our onshore gas reserves are cca 100 billion cubic meters. The reserves in the Black Sea are estimated up to 84 billion cubic meters. The nuclear dimension of our energy mix is of equal importance (20%) with major projects for the future, including implementing the SMR technology.
Very important, the money is there to achieve the green transition. The level of EU funds towards green project is unprecedented. Until 2023, we have calculated up to 48 billion euro to be channelled via the Recovery and Resilience Plan, the Modernisation Fund, REPowerEU, the Just Transition Fund, the Social Fund for Climate, to name only a few.
The Government is making available public funding (EU and national) both to ensure energy efficiency in public and residential buildings as well as to create new capacities for the production of clean, green energy from solar, wind, geothermal and so on. Financial support in the form of grants for green energy production capacities are being offered both to private companies as well as, in some cases, to public authorities. Also, public funding is provided for electricity and gas infrastructure, for heating systems, for producing green hydrogen. In Romania, the general population receives national subsidies through the Environment Fund to purchase solar panels and produce their own green electric supply and even resell it into the grid. Additionally, through the RePowerEU, which is a new component under the NRRP, in the final steps of approval with the European Commission, households exposed to energy poverty, will receive subsidies to be able to produce solar energy through solar panels and batteries that allow for the energy to be stocked.
Our public funding tools, most of it fuelled through EU policies, such as the Cohesion Policy, allow us to give a green, environmentally - friendly direction to private and public investments and to public services. The money is conditional upon Romanian businesses and administrations complying with green standards in their processes and products.
The green transition is also about new alliances and partnerships such as the first submarine electricity cable in the Black Sea which will connect the electricity systems of the Caucasus and continental Europe (Azerbaijan, Georgia, Romania and Hungary).
CE: What should be Romania’s focus in the post-pandemic period?
Marcel Ciolacu: The Covid pandemic has been a huge, disruptive, and painful challenge for all humanity, especially for vulnerable population and vulnerable economies. Romania was no exception.
However, at this point, I would point out that this crisis has provided the stimulus and means to adapt and reshape our economies, to invest in greener, smarter, more resilient businesses and public services. Also, in terms of focus, I will highlight that one of Romania’s major current country targets is to join the Organisation for Economic Cooperation and Development and to fully align to economic, social, environmental, living and quality of life standards shared by the most developed economies of the world.
In the post pandemic context, as a member of the European Union, Romania benefits from significantly larger financial assistance package than what would have been envisaged before 2020. These are funds that we must spend wisely, targeted, in order to improve our economic competitiveness, our regional security profile and the living standards of our population.
Let’s talk numbers. The 29 billion Euro allocation for Romania under the Recovery and Resilience Mechanism (including the new RePowerEU component) adds up to the classic European funds available to Romania under the Cohesion Policy (31.5 Billion Euro) and under the Common Agricultural Policy (almost 16 Billion Euro).
We focus our investments on building transport infrastructure that connects our regions and is highly multimodal but also connects us with major European corridors (highways, railway, ports, roads), on green mobility and public transportation that is efficient, on a more robust, greener and digital economy (with a focus on agriculture, IT, production facilities), on more digital and effective public services (with a clear focus on our public education and public health systems).
Having said that, European funding is programmed to address some of our own systemic vulnerabilities such as a bureaucratic, overburdened, and slow public administration or high rates of poverty, a high rate of school leave, an aging population, as well as a growing deficit of skilled labour force. My own belief, my principle is that money cannot solve all problems nor generate the development Romania deserves. Ambitious, sometimes difficult reforms are necessary and are under preparation to allow all these tens of billions of Euros being injected into our economy to actually deliver that desired quality of doing business and of living in Romania.
CE: What changes does digitalization bring into the economic system?
Marcel Ciolacu: Firstly, digitalization creates a much more efficient relation between citizens and state institutions.
We are talking about fewer bureaucratic processes, less staying in line for obtaining different official papers, improved citizen communication and a better level of tax collection that will only increase by making applications available to them and eliminating the time spent queuing, filling in forms and going through procedures that slow them down.
Secondly, new digital technologies increase productivity. This contributes greatly to the development of new firms, offering opportunities and new and more varied workforce categories, with a strong economic impact. In addition, developing new firms increase competitiveness. Our mission is to support new firms to grow and to help them reach economic stability.
Thirdly, digitalization removes geographical barriers, leading to expanded market opportunities and new business models that create innovative ways to bring capital to the market, as well as value.
In conclusion, the impact of digitalization represents an era of transformation of the economic system, far-reaching, touching every aspect of business, commerce and consumer behavior. From increasing efficiency to developing new business models, digitalization brings tremendous opportunities for the national and global economic system.
CE: What importance is attached to the cooperation with the Caspian region states, especially with Azerbaijan?
Marcel Ciolacu: The war in Ukraine and the sanctions imposed by the EU and its partners on Russia had and will undoubtedly continue to have a lasting impact on the energy prices, thus inducing new dynamics to energy security worldwide.
In this context we would like to reaffirm Romania’s engagement in the development of the “Green Energy Corridor”, which will connect the Caspian Sea region with the Black Sea and the European Union, an initiative that was formalized in December 2022 in Bucharest where the Governments of the Republic of Azerbaijan, Georgia, Romania and Hungary signed the “Agreement on a strategic partnership in the field of green energy development and transmission”.
The latest meeting related to this initiative took place on July 26, also in Bucharest, where a Memorandum of Understanding on the establishment of a joint venture between the four countries was signed. On this occasion, the sides noted that the feasibility study of the initial stage of the project on the Black Sea would have been completed by the end 2023.
Romania is also interested in the Caspian natural gas volumes that could reach the Romanian market and, subsequently, the markets of Central and South-East Europe. The completion and the commercial operationalization of IGB could facilitate Romania’s access to the volumes of Azeri natural gas in the near future which could also be distributed further on to balance the energy security of our Eastern partners - Moldova and Ukraine.
We are ready to work with involved MS, and our Caspian partners to use the transport infrastructure offered by RO-BG Interconnector, BRUA gas pipeline and RO-HU Interconnector as an important viable link with the Central Europe in the possible future extension of the Southern Gas Corridor.
I conclude by mentioning that in the current extremely worrying and volatile security context, Azerbaijan has demonstrated that it is a reliable partner in the plan of ensuring stability in the region and strengthening European energy security.
I want to reconfirm Romania’s position regarding the solution of the problems in the South Caucasus region based on strict compliance with the principles of international law, including the sovereignty and territorial integrity of states, as stipulated in the United Nations Charter. Thankyou.
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