Monthly Archives: April 2016

Are Moldovan Consumers Financing Transnistrian Separatism?

The “leader” of the separatist Moldovan region of Transnistria, Evgheni Shevchuk, met with Russian Deputy Prime Minister Dmitry Rogozin, in Moscow, on April 14. No official press statement followed, other than a few lines by Rogozin’s assistant on social media. Reportedly, Rogozin called upon the would-be candidates in Transnistria’s upcoming “presidential” race—presumably Evgheni Shevchuk and “parliamentary speaker” Vadim Krasnoselski—to avoid destabilizing the political situation and to seek mutual dialogue (Regnum, April 15). The call to order was clearly a result of the rising political infighting in Transnistria.

The two opposing political camps in Transnistria, that of incumbent “president Shevchuk and the informal opposition leader Krasnoselski, are in full combat mode, even if the presidential elections are still eight months away. Krasnoselski’s camp has gone on the offensive. In particular, the newly elected chairwoman of the opposition Obnovlenie (Renewal) party, Galina Antiufeeva (spouse of Vladimir Antiufeev, the so-called “deputy prime minister” of the Moscow-backed separatist “Donetsk People’s Republic” and a former long-time head of Transnistria’s “Ministry of State Security”), publicly accused “President” Shevchuk of embezzling $100 million via offshore companies that serve as intermediaries for Transnistrian exports (Newsmaker.md, April 12). Most accusations levied against Shevchuk refer to Energokapital, a largely unknown company that was created just over a year ago, but which has already become the second-largest taxpayer in the Transnistrian region, after Sheriff Holding, and the region’s number one exporter. Energokapital accounts for about 40 percent of Transnistrian exports and is the main source of foreign currency for the secessionist quasi-statelet, which is struggling to maintain the stability of the local ruble (Pridnestrovye, April 6). Shevchuk denies any wrongdoing. And in an apparent PR move, he ordered local law enforcement to investigate the mounting allegations (Novostipmr, April 16).

Energokapital is a premier subject of political attacks against Shevchuk because it has indeed skyrocketed to become a major economic player in the region. The company provides Transnistria’s Kuchurgan Power Plant with Russian natural gas and sells the electricity it produces to the Moldovan state-owned company Energocom, which in turn sells it to Moldovan distributors. On the one hand, Moldova’s cooperation with Energokapital was fostered by shortages on Ukraine’s internal market and the latter country’s unstable export capacity following developments in Crimea and Donbas. But additionally, it was brought about by a better price deal offered by Energokapital (News Finance, January 20). As only 20 percent of Moldova’s electricity needs are generated on the territory controlled by the government in Chisinau, the country ended up gradually covering the remaining 80 percent of its electricity needs from a single source—the Russian-owned Kuchurgan Power Plant, located in Dnestrovsc, Transnistria. The plant was privatized in 2003 for a mere $29 million. Since 2005, it has been controlled by Inter RAO, a subsidiary of the Russian monopolist Unified Energy System (RAO UES) (Investigatii.md, July 25, 2007). The privatization of this strategic asset was carried out without Moldova’s consent and, therefore, remains legally questionable.

However, if the initial deal with Kuchurgan was justified in the context of Ukrainian energy export shortfalls, the extension of the contract in March 2016 was somewhat controversial. By that time, Ukrainian producers were ready and willing to regain a share of the Moldovan electricity market (News Finance, January 20). Yet, Moldova’s Ministry of Economy, which controls Energocom, decided in favor of Energokapital, which offered a 28 percent discount, effectively dumping Ukrainian producers and raising questions about Energokapital’s previous profit margins (Infotag, March 3). Some local analysts suggested that this price was still too high, as the gas that is used to produce electricity is not paid back to Gazprom, but rather accumulates as debt for Moldovagaz (itself owned by Gazprom, Transnistrian authorities and a blocking minority share controlled by the Moldovan government). Many voices in the media have speculated about Energokapital being a cash cow for both Transnistrian and Moldovan elites: “President” Evgheni Shevchuk as well as the gray eminence of Moldova’s ruling coalition, businessman Vladimir Plahotniuc (Newsmaker.md, March 21).

As pointed out by an opposition parliamentarian in Chisinau, Socialist Bogdan Tirdea, Energokapital was granted a license by Moldovan authorities in record time, in October 2014. The lawmaker also wondered how was it possible for Energokapital’s price offer to be 10 percent lower than if Moldova were to buy directly from the producer, Kuchurgan Power Plant. During the same hearing in parliament, Moldova’s Deputy Economy Minister Valeriu Triboi assured lawmakers that everything was done in accordance with the law and that cooperation with Energokapital benefitted Moldovan consumers. In fact, according to Triboi, the Moldovan government even plans to build the infrastructure needed for the Russian-owned Kuchurgan Power Plant to be able to export electricity to the European Union (Parlament.md, July 2, 2015).

e2d9a664abbf548a31952fd04fc050d8

Several explanations exist for this fruitful partnership. A largely positive economic argument is that Energokapital simply offered Moldova the most competitive price for its electricity. A more vague humanitarian argument states that the Moldovan government is consciously helping the Transnistrian economy to stay afloat during this difficult time. Finally, a largely negative explanation argues that the intermediary Energokapital is a classic shell company, used to siphon off profits to offshore accounts belonging to Transnistrian and Moldovan elites (Protv.md, July 15, 2015; Ziarulnational.md, July 22, 2015). As the Moldovan leadership looks to reset relations with Russia, the deal could also be explained, in part, as a gesture of goodwill, if not a response to Russian pressure.

At the end of the day, Moldova’s total reliance on Russian gas and oil is further exacerbated by the country’s dependence on a single Russian-owned electricity producer located in Transnistria. Not only does it increase the country’s vulnerability, but it also needlessly damages Moldova’s partnership with neighboring Ukraine. Ironically, this “generosity” on the part of Moldova’s government does not stop Transnistrian authorities from accusing Chisinau of “unilateral pressure and strangling the Transnistrian economy” (Novostipmr, April 16). Ultimately, the deal was also politically expedient, as it allowed Moldova’s new government to boost its popularity by decreasing electricity bills for consumers by 10 percent after a 37 percent increase passed last November (Hotnews.md, April 1). This hike in energy prices prompted then–prime minister Valeriu Strelet to order the National Anti-Corruption Center to investigate the deal with Energokapital (Europa Libera, October 8, 2015). Strelet was later ousted from office. Needless to say, the investigation produced no meaningful results.

Note: The original article was written for the Jamestown Foundation and can be accessed here.

Advertisements

Transnistria Moves Toward Russia Despite Talk of Rapprochement With Moldova

Moldovan Deputy Prime Minister Andrei Galbur, who also serves as the minister of foreign affairs and European integration, paid a working visit to Moscow, on April 4–5. Just days before, the Moldovan parliament approved a controversial declaration proclaiming “the inviolability, sovereignty, independence and permanent neutrality of Moldova” (Jurnal.md, March 31). This way, the Moldovan leadership hopes to improve economic and political ties with Russia. Ironically, one day later, on April 1, Moldova’s Deputy Foreign and European Integration Minister Lilian Darii summoned the Russian ambassador to Moldova, Farit Mukhametshin, following media reports that the Russian Army had been recruiting Moldovan residents in Bender, Transnistria (Deschide.md, March 31; TASS, April 1). Furthermore, the so-called prime minister of Moldova’s breakaway Transnistrian region, Pavel Prokudin, led a delegation to Moscow on March 24, with the goal of boosting exports to Russia, which have dropped tenfold in the last decade to a mere 7.5 percent (Novosti Pridnestrovya, March 25; RIA Novosti, March 25). Transnistria continues to seek closer integration with both Russia and the Eurasian Union.

Falling remittances and exports, including a lower price for electricity that Moldova buys from Transnistria, precipitated a currency crisis in the breakaway region (Regnum, March 10; Publika, March 26; TCV, March 26). The head of the local “Central Bank,” Eduard Kosovskiy, warned of a looming 30 percent depreciation of the Transnistrian ruble (Regnum, March 22). Transnistria’s local economy has been struggling for some time. Salaries and pensions have been cut, and now real wages are going to shrink even further. These conditions have contributed to the opposition winning a constitutional majority in the separatist regions’ legislative elections on November 29, 2015. Furthermore, lack of progress makes the sitting “president,” Yevgeny Shevchuk, an easy target in the presidential race scheduled for December 11. Even though he defeated Anatoliy Kaminski, who was supported by Moscow in the 2011 election; this time around, Shevchuk’s only chance of staying in power is a strong endorsement from the Kremlin.

prezident_04-11-15

Shevchuk meets Rogozin in Moscow (Source: novostipmr.com)

Yet so far, his main competitor, Vadim Krasnoselski, elected with the backing of the opposition Obnovleniye party to become “parliament” speaker, seems to have the upper hand in courting that endorsement. On February 17, Krasnoselski led a “parliamentary” delegation on a four-day working visit to Moscow, striking a partnership agreement between Obnovleniye and the ruling United Russia party (TCV, February , 17; 20). Krasnoselski even met with Russian Deputy Prime Minister Dmitry Rogozin, an honor previously bestowed only upon Shevchuk, prompting journalists to quip about the start of the Moscow primaries (Newsmaker, March 3).

krasno - rogoz

Krasnoselskii meets Rogozin in Moscow (Source: vestipmr.info)

Meanwhile, in Chisinau, the ruling social-democrat faction (Democratic Party and 14 Communist defectors) allied itself with the Communists and Socialists from the opposition to approve a largely symbolic declaration reaffirming Moldova’s sovereignty and constitutional neutrality (Jurnal.md, March 31). The move is as much an attempt to please Moscow as it is a warning for those supporting Moldova’s reunification with Romania (see EDM, February 9). Seemingly in response, the story about the Russian Army recruiting openly in Transnistria suddenly hit the press. These allegations against Russia are not a new revelation. But the fact that the story made the news again in the past week suggests it was likely orchestrated as a response by the pro-unionist camp, particularly the Liberal Party. This member of the Moldovan government had earlier nominated the current head of the country’s Information and Security Service (SIS), Mihai Balan. And Balan, in turn, was likely the source for the leaks to the media of the photos and details pertaining to Russia’s alleged recruitment activities in Transnistria (Deschide.md, March 31). An alternative explanation posits that Moldova’s ruling majority used this opportunity in an attempt to increase in Chisinau’s leverage vis-à-vis Moscow ahead of Deputy Prime Minister Galbur’s visit to the Russian capital. Russian authorities have not presented a response so far.

As of late, attempts by the Moldovan leadership to improve relations with Russia are apparently being reciprocated by Moscow. The recent visit by the Russian State Secretary for Foreign Affairs Grigoriy Karasin to Moldova and plans for a visit by Russian Deputy Prime Minister Dmitry Rogozin indicate that Russia may be finally reconsidering its strategy in Moldova (Kommersant, March 31). Now that Russia is facing international isolation and major economic difficulties, it has been suggested that the Kremlin is looking for a way out and would support a special status for Transnistria within Moldova’s recognized borders. Such a proposal—unlike the 2003 Kozak Memorandum, which called for an asymmetric federalist arrangement—may be acceptable to Moldova. Russia’s cost of subsidizing Transnistria, including the natural gas that Tiraspol does not pay for, has been estimated at about $1 billion per year (Europalibera.md, April 4). Hence, finding a mutually acceptable solution would not only save Moscow valuable resources, but would de facto increase Russian leverage over the reintegrated Moldova, as Transnistrian voters would inevitably remain strongly pro-Russian.

Yet, any real discussion about a potential reintegration remains premature. The 5+2 negotiations format over Transnistria, likely to be renewed soon, will offer some clarity as to whether there is any promise for a way forward or if everything will remain just business as usual. On one hand, Valeriy Litskai, a former negotiator for Tiraspol and the current advisor to parliamentary “speaker” Krasnoselski, has expressed optimism about Transnistria becoming a platform for finding mutual understanding between Russia and the European Union—particularly in light of Germany’s chairmanship of the Organization for Security and Cooperation in Europe (OSCE) this year (Newsmaker, April 1). And such optimism was echoed by Moldova’s Foreign Minister Andrei Galbur when he told his Russian counterpart, Sergei Lavrov, “Moldova should not serve as a field of geopolitical confrontation, but rather can become a platform for cooperation” (Mfa.md, April 4).

However, there are plenty of reasons to be skeptical. The “presidential” race in Transnistria, which is essentially a competition about who is more pro-Russian, is not at all conducive to reintegration. Neither is the presidential election in Moldova. In fact, Moldova’s approach of avoiding the Transnistrian issue in public discourse and strictly focusing on the diplomatic route can only contribute to an already volatile political situation in the country. Little evidence exists for the painstaking work that would be needed to create fertile ground for reintegration, especially as it pertains to the public discourse on both sides of the conflict.

Note: The original article was written for the Jamestown Foundation and can be accessed here.