Joint press conference of Prime Minister Edi Rama and the Minister of Infrastructure and Energy Belinda Balluku:
PM Edi Rama: Good morning! Thank you for your presence, not at a usual time of the day, but we deemed it appropriate to start the day with this communication to inform the public about the establishment of a Special Inter-Ministerial Committee to manage the economic and security consequences of Russia’s war against Ukraine.
We don’t face an imminent military threat. However, Albania faces daily economic threats like all other NATO member states and any other countries in a wider region, as the prices of consumer goods are going completely off the rails.
Today we would like to specifically talk about energy, which is the backbone of the country’s entire economic system amid the increasingly growing threat of a deepening energy crisis.
I believe you remember very well the fact that I warned about what was to come just a few months ago, but of course, without thinking even for a single second that Russia’s straightforward geopolitical move to influence energy and hydrocarbon prices in those moments was the prelude to a military aggression.
The brand price skyrocketed again today and it keeps increasing each hour, while, just to put it in perspective, not too long ago the oil price was $40 per barrel and it has jumped to $127 today, right at this moment, before we were to enter this hall. It was a day ago when a high-level Russian government official warned that the oil price could hit as high as $300 per barrel, something that has not happened in the history of the oil trade, nor has it happened in the worst of crises.
This is a result of the internal discussion among the Alliance members to boycott Russian oil, as well as a result of the discussion about the Russian gas dependence, which accounts for about 40% of Europe’s natural gas supplies. The biggest Alliance members face a growing criticism for allegedly funding the war by purchasing Russian gas, but boycott of oil and gas marks a tectonic change and the consequences will lead to predictable difficulties in the short term. Albania is no exception in this context. On the contrary, Albania is directly and equally affected like any other country. On this occasion, I want to clarify, again, that the discussion on the oil price in Albania, which as in any other country is directly influenced by the market and not by government decisions, is partial because it does not take into account the fact that the price structure includes contributions or tariffs that are paid separately in other countries. So the sum of the costs of those who consume oil is the same. It suffices to calculate the tax rates in other countries, which do not include the oil price, turnover tax or carbon tax and it turns out the same thing, with a difference in this case, in favour of those who consume less, who pay less.
Meanwhile, a fixed rate is applied in other countries, regardless of how much you consume oil, and you pay taxes, carbon and turnover tax. This is the only alteration.
Again, I would like to point it out clearly. It is not the government but the free market to set the oil price and free market economy is what was chosen 32 years ago by this country and it is the market economy that lowers and increases the consumer prices and the market is sensitive to crises, let alone a war.
Europe is at war. Militarily the war is taking place between an aggressor and a country under aggression, while in all other aspects, with the economic aspect being the most fundamental one, the war takes place between all countries that categorically reject aggression and the aggressor.
This means we should be aware that it is impossible to demand the same things we demanded before the start of the war and that we must prepare for every scenario. Nobody knows how long this war would last, and this means we will be facing the unknown and we are in the same conditions as with the pandemic when we did not know the duration, developments and dynamics and we had to prepare for some scenarios.
The same is happening today. We are preparing for several scenarios and to this end we have decided to set up the Special Committee that will be tasked with assessing and mitigating the impact of the war on Albania. This is the reason why we have been working on the possible scenarios, ranging from the simplest to the worst case scenarios. The worst case scenario means we need to prepare psychologically even for dramatic cuts of all energy or oil supplies. We have to prepare for that as well. Let’s be clear that this too can happen, even though this is the most dramatic scenario, because replacing the resources that have been provided by Russia for so many years would be extremely complicated. But, in the meantime, the obligation to protect people’s lives, the obligation to stand with Ukraine, and the obligation to do whatever it takes to prevent the war from spreading militarily is inevitable.
All these tribulations and hardship, which I hope and we will do utmost to prevent them from becoming real sacrifices of economic nature, aim at protecting lives and health, and, most importantly, protect Albania from escalating aggression militarily. The goal is to protect ourselves. And by protecting Albania I mean Albania as part of these countries jointly making the same efforts. So, the goal is to protect ourselves now.
As far as we are concerned, despite our modest size, we and the government will do our best to protect our people. What we watch on TV channels now is absolutely not a movie. It is a real war like the one we have seen in the World War II films, as we saw during the infamous year of the brutal ethnic cleansing in Kosovo, but it also includes the dimension of a non-negligible military power that can blindly escalate the aggression, both outside and within the NATO borders.
This is an overall picture of the situation. I did not tell you anything new, but I insist on the fact that we should all be aware that the world we live in has changed in the last 10 days or 12 days and everything has turned upside down. We are in a state of war.
The war, fortunately, does not take place physically here, the bombs are not flying over our heads and our families, thank God, are not threatened by violent separation, as hundreds of thousands of families are being separated in Ukraine, but the impact of what is happening there is clearly tangible on the country’s economy and our obligation is to guarantee continuity painlessly, but there could be no painless war.
It is neither our will, nor can we avoid it and therefore we need to deal with it and we should be confident that just like we succeeded in coping with the two previous confrontations, we will succeed again. We did not choose the earthquake, we did not choose the pandemic, we did not choose this at all – and this is the worst of the three – but we must demonstrate determination and confidence.
We will definitely succeed.
I will give the floor to the Minister of Energy and Infrastructure, because as everyone rightly is worried about the oil prices and call on the government to act and do something, and not only that, but there are also absurd proposals to scrap oil taxes. This government is doing what it has not done so far and has no way to do so far no other government in the neighbouring countries and in a wider region, as it is keeping the electricity prices for households and small businesses unchanged although the energy prices have soared even higher than the oil prices.
Such cost can be covered precisely thanks to the contributions. It could be easy for someone to call on the government to remove this and that tax, although we have cut every possible tax and tariff and there is no more room for further tax cuts. Zero income tax and zero VAT rate are applied on small businesses. We have increased monthly salaries and all the tax cut decisions will enter into force soon, with no personal income tax due to be applied on monthly salaries up to 40,000 lek; halved personal income tax on monthly salaries over 50.000 lek, and this is all we can do in terms of tax reductions. Meanwhile, the Minister will explain what is happening with the energy price structure in other countries, what has happened with household electricity bills, and what is predicted to happen in other countries now experiencing an upward trend in the energy supply.
Suffice to consider what is happening in the neighbouring countries, Kosovo, North Macedonia or Montenegro. We are not asking for praise for this, but just to keep in mind the fact that we are not simply taking notice of what is going on, but we are making continued efforts and struggling to keep the electricity price unchanged, as, unlike oil prices and the prices of other goods that are totally private business operations, it is about the price of a commodity that allows us to intervene and regulate it.
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– Mr. Prime Minister, you branded such a question an absurd one, but I would dare ask a question that every Albanian is asking. Why does Albania have the highest oil price? You explained it by saying that the oil price includes taxes too. Meanwhile, you warned that we should be prepared for supply shortages. Isn’t it possible for both the government and the consumer to share this cost? Of course, the state operates through taxes, but nothing has in the meantime changed in terms of the income and monthly salaries for the citizens and it is impossible for them to cope with such higher costs. Isn’t the Special Committee considering a decision to cut taxes on oil at least during this transitional period, namely during this crisis? I am not suggesting that you remove taxes, but reduce them. Kosovo and North Macedonia collect taxes, but the oil prices in both countries are lower.
-The second question is about the political situation…
PM Edi Rama: I think it would be better not to talk about the political situation. I would ask you a question: Since you cited the examples of Kosovo and North Macedonia, would you agree that the government intrudes or intervenes, although no government in other countries would ever do, because we have chosen a free market economy since 1990, but my question is a hypothetical one. Would you accept that we intervene on something that, I repeat, is artificial? Kosovo, North Macedonia and other countries collect the taxes included in the oil price separately. I repeat, taxes on oil are paid separately in those countries and it is not that they have removed these taxes. Second, Kosovo and North Macedonia, which you are citing, have increased the electricity price for the households significantly. Would you accept this in Albania too? It may happen in the future, but as of today, as the Minister also said, we provide regularly $45 million each ear in subsidies for the needy families by applying a seven lek price per kilowatt, while the rest pay 9.5 lek per kilowatt, whereas the relevant state institutions purchase one kilowatt of electricity at a price of 61 lek. In other words, the state budget pays 61 lek per kilowatt, whereas the electricity price for households is 9.5 lek.
Would you deem it right for the government to act and increase the energy price and affect everyone without any exception just to cut the oil prices just for the sake of those who own cars? Would you deem it fair? I don’t think so. This government is only stubbornly resisting and keeping the electricity price unchanged. I repeat, it is the only government doing so. You can ask your relatives living in Greece or Italy about the electricity prices. Ask them how they are coping with the electricity and gas bills today. Ask them how much they pay. I am underlining this, because a discussion on monthly salaries relative to the prices is going on here. The point is that the price is determined by the market and this is the case with the free market economy and it doesn’t take into account your monthly salary. The price is the same. I repeat, the situation may worsen further. A Russian government representative, the Deputy Prime Minister – if I’m not mistaken – warned that Europe should prepare for the oil price to jump as high as $300 per barrel or twice as much as today’s price, which is already a staggering one. Oil price has soared to $127 from $45 per barrel previously and it might have risen further as we speak at this press conference.
I repeat, everyone should clearly know that what matters most is not the price, but oil shortages. The economic war with Russia could lead to dramatic oil shortages. I don’t know whether you remember what we predicted a few months ago exactly in this very room that based on the international projections that the looming energy crisis – although we were mocked by many who claimed this crisis was inexistent – could last until June. But the war had yet to break out and the energy prices have now jumped to 550 euros from 52 euros just a year ago. And the energy prices may rise further to 1000 euros. However, what matters most is that we may face energy shortages. The market may lack such a commodity and you won’t be able to purchase it, even though you may afford it. And such a problem is being felt as we speak. The market doesn’t offer such a commodity. And I mean the European market and the energy shortage issue is the main problem and when we talk about a saving plan, we are realistic about it. We are neither pessimistic nor alarmists. We are realistic and a saving plan is indispensable. It is a war going on. I don’t think this is the start of World War III, but the fact that this is acknowledged also by influential people in the global politics arena means we are in a much more impactful war on the present and the future than anything else we have been through during our lifetime.
Oil is a market commodity, a commodity that is sold and purchased by private companies. Albania hasn’t the highest oil price structure and you need to take a look at it carefully. Take a look at what is going on in the United States, an oil producing nation. It is the market conjuncture which is out of the governments control and this is not about whether we are doing this or not. Let’s suppose we decide to cut the oil prices. For how long we will decide to do so? At what cost would we be doing so? We need to prepare for an extremely difficult period. Fortunately enough, it is almost the end of winter and we will certainly need less electricity in the coming months. However, what is going to happen next winter? What will happen next winter should the war go on and things deteriorate? What will happen with us? Will we surrender and say we run out everything as we wanted to mitigate the increase of retail oil price? Because there is no other solution and no country in the world is doing so. This is what we have already chosen. We could have done so if we were still living under the communist regime, with the state purchasing oil and distributing it at a fixed price. But this is not the case. The government now cannot dictate anything on prices. Are there speculations? Of course there are speculations. And I mean prices on other commodities too. Speculation is one of the most common phenomena during the war.
We are way too more worried than we used to be 10 days ago, although the crisis was already in place with prices soaring constantly, but the idea was that things would stabilize by the end of spring. But the military aggression disrupted everything and this is a new box within which we have to adopt.
–(Opposition leader) Lulzim Basha accuses you of electoral massacres, but my question is only the following: Why the alleged electoral massacre committed by the Socialist Party never work in the Shkodra region?
PM Edi Rama: I don’t want to engage in such a debate as we cannot afford dwelling upon such issues and I believe this is the time when we should see each other in the eye, listen each other more, show respect for each other and refrain from levelling unfounded accusations, because, I repeat, we could plunge into a situation where lives could be under threat. Therefore, it is time to leave politics aside. Whoever can afford dealing with politics let them do so. I am not interested at all. There is just one thing going on in my mind now: how to best protect Albanian citizens, households and consumers, and how to best protect Albanian people from this situation. This is all. It doesn’t matter which municipalities we won.
– Mr. Prime Minister, by providing figures, the Energy Minister showed that the government has spent around 320 million euros in subsidies to date. Do you think that the 320 million euros subsidies would hinder the government plans to increase salaries and keep up with its public investment plan and, most importantly, would the country’s economy slowdown?
PM Edi Rama: It is still too early to talk about this now, but we do not intend to cut planned investment projects on what we have already set as priorities. We will definitely increase the minimum wage, eliminate personal income tax on salaries up to 40,000 lek and halve the personal income tax rate on salaries up to 50, 000 lek. We will maintain the zero profit tax policy on small businesses with annual turnover of 14 million lek and zero VAT rate on small businesses with annual turnover up to 10 million lek. We will definitely increase the salaries of teachers, doctors, servicemen and all other categories and subcategories of employees. We will definitely support public investment projects should things do not worsen further. We want to keep the electricity price unchanged. I repeat, we want to keep it unchanged, but there will be a limit regarding this. And it is not us to set such a limit, but the limit will be set by upcoming further events and I want to reiterate without wanting to disappoint anyone – as I might reiterate it constantly from now on – we have decided to side with a front of nations, states and people, where we have to make sacrifices endure the difficult times. We haven’t decided to be a neutral state, a neutral country and rightly enough we have positioned ourselves right where we need to be for the sake of our strategic interests as people, as a country and as a nation and this certainly comes at a price. We are today part of a war front, not an armed one –God forbid it. The solidarity with Ukraine is not solidarity with people and a nation in hardship and troubles. Solidarity with Ukraine is purely a self-defence move to prevent what happened there from happening here or prevent it from infecting our world. These are the war sacrifices, this is a war we cannot avoid, because it has reached our homes, it is affecting our consumer goods; it affects oil prices and the electricity bill. The war’s impact is not being shown on the electricity bills of the households and the small business, because it is the government to cover the cost and I think no governing majority has done more for the Albanian people than this ruling majority since 2013. This is the greatest of all and this is for all those who claim we do not care about people. On the contrary, the opposite is true. I hope we will be able to hold it until the end, but it depends on when the end will be.
-You announced that the international energy markets are facing dramatic shortages of supplies and that you plan to impose restrictions. Do you really have another plan to boost the energy generation capacities in the country as Albania is dependent and relies on the same sources of energy production for decades now? Back to the oil price issue, one can clearly notice that the oil price is being increased almost simultaneously and equally at every filling station across the country. Should the government and relevant inspection offices enhance control to prevent the widespread speculations recently?
Minister of Infrastructure and Energy Belinda Balluku: I would start by clarifying that I didn’t warn that restriction measures will be imposed. I am clarifying this as the sense will be lost and our statements will be misreported and news stories would suggest that restrictions will be put in place. No restrictions will be applied, but everyone should bear in mind the fact that the rising energy prices are quite disturbing, but such a price is currently being paid by the Albanian government and the effects are not being experienced by the households and this is probably the reason why we are exploring ways how to cut the oil price today.
There is another option when it comes to oil consumption and prices. We should consume less and walk instead of driving to the nearest shop to buy cigarettes or bread. This is what happens when prices go up, given that this is a commodity traded by private operators and the government can do nothing, since even though the oil taxes are removed, you will still be yet paying the carbon tax at the General Directorate of Road Transport Services. The oil price includes two taxes, namely the carbon and circulation taxes, which cannot be removed as they are taxes applied throughout Europe.
If this is about removing it and imposing it as part of the annual taxes or is included in the oil price, which makes sense. When we talk about the oil price, there is something else to be done, to save oil.
As for the alleged restrictions, I can confirm there will be no restrictions as long as we will be able to secure energy. Should the markets hit an extreme, as I already explained, we resort to oil imports and we find it very difficult to meet market demand, in addition to the domestic oil production. There will be no restrictions until the day when we will be able to provide energy to the market despite the current high price.
Whole Europe is experiencing such a tough situation as we access the same market already accessed by Italy, Germany and every other country. As far as capacity enhancement is concerned, I can say that a strategy is now in place after having worked on it for years now.
The country’s energy sector faces two main issues, namely the so-called Capital Intensive, meaning that every energy project needs significant capital to be built and, second, for an energy project to be built, be it a photovoltaic park, a hydropower plant or an eolic park, it takes time from the start to the day it becomes operational.
All the government projects in the energy sector have already entered an advanced stage. The same goes for the private sector projects.
Preparation work is now underway for construction of the photovoltaic park in Karavasta. I and the Prime Minister have both inspected the site and construction work is about to begin soon.
March will mark the start of construction of Karavasta park and it is set to be one of the largest photovoltaic parks in Europe with installed capacity of 140 mega, with the state to benefit 70 mega, and the project will complete in the next 12 months.
While the electricity price has soared to 550 euros per megawatt/hours, the Republic of Albania has secured 70 mega for 24,86 euros per megawatt/hours. These are all works and projects implemented by this government.
Meanwhile, the same goes for the Spitalle Park, which will take more time to develop and is set to complete in two years’ time.
It is worth noting that the Vlora thermal power plant project is progressing very fast and the project will undergo four construction phases and, as you know, the project is being implemented by an American consortium, led by Accelerate Power. In the meantime, work is also underway for construction of the Skavica hydropower plant. The widely disputed and politically used project – and the opposition is disappointed as the project has been in the drawer for many years – Skavica HPP is now a reality, with Bechtel already on the ground and with the geological study underway to build the lake, given that Skavica won’t merely be a hydropower plant, but a regulator of the cascade.
As soon as the geological and feasibility study completes, we will launch the negotiation phase in terms of financial terms and immediately a detailed project will be launched to be on the ground and start construction by January 2023.
These are all the measures taken by the Albanian government to boost the capacity starting from 2023 onwards, increasing our capacity and multiplying them.
It should also be noted that a new EBRD-supported project on wind power is also underway, and not only wind plants, about which efforts have been made by the private sector to date, but also the offshore wind power plants. We are currently drawing the blueprint since we are confident that the offshore wind power parks represent a significant potential to boost Albania’s energy generation capacities.
However, I will go over a very important fact, which I wish to share with you. Three hydropower plants were initially designed to be built over the Drin River cascade, but three more hydropower plants have been already built and have been flagrantly privatized by the previous government.
The cascade today also suffers due to the privatization of Shkopet, Ulza and Bistrica. So, we also pay the cost of irresponsible actions over the years. Today, we must minimize the problem we have, we must definitely solve the independence electricity of the Republic of Albania, which we can achieve, but we must not forget the fact that we coped with the earthquake, the pandemic and we often had to suspend or better control precisely to subsidize energy, but also other requirements. Thank you!
PM Edi Rama: I will conclude by answering the next question about immediate reflection of the rising oil prices in the international stock markets. This is because as soon as the price changes in the stock market, customs clearance procedures are carried out based on that price. Despite the previously amassed and stored reserves, as soon as these reserves are sent to the market, the customs clearance procedures immediately refer to the stock market prices. This is the reason why the rising prices are reflected at pumps at any filling stations.
