Category Archives: Moldova

Moldova-Ukraine Energy Deal Upsets Russia by Cutting Transnistria Out

Ukraine’s DTEK Trading, owned by Rinat Akhmetov, and Moldova’s state-owned intermediary Energocom signed a one-year contract, on April 1, for the supply of electricity to Moldovan distributors. Energocom/DTEK’s only competitor was the Kuchurgan Power Station, which is located in Transnistria and belongs to the Russian state-owned electricity giant Inter RAO. According to Moldova’s Ministry of Economy, the winning bid offered to sell power at $50.20 per megawatt/hour (MWh), compared to Kuchurgan’s offer of $54.40 per MWh (MEC.gov.md, April 1). However, questions remain as to why DTEK had to go through the Moldovan intermediary and did not submit a bid directly. Moreover, there are concerns about DTEK’s capacity to cover Moldova’s energy needs in full (Exprt-Grup.org, March 31). The arrest of the deputy minister of economy in charge of the energy portfolio on the day of the auction deadline added further intrigue, despite, so far, corruption charges not being connected to the bidding process. Speculation mounted as the auction deadline was extended repeatedly without a clear justification. Nonetheless, the fact that Moldova switched from the Russian supplier in Transnistria to a Ukrainian company is significant in ways that go far beyond market economics.

The decision took many by surprise, as the key figure in Moldovan politics—the head of the ruling Democratic Party, oligarch Vlad Plahotniuc—had a vested interest in maintaining the old contract despite accusations that importing energy from Transnistria not only legitimates, but also, in effect, sponsors separatism. Moldovan independent experts as well as politicians accused Plahotniuc of benefiting from the shell-company that had served as a middleman between Moldova and Kuchurgan Power Station since January 2015 (Adevarul.ro, April 1). The Tiraspol-based offshore-owned intermediary Energokapital (second-largest taxpayer in Transnistria) is considered the brainchild of Transnistria’s former leader Yevghenii Shevchyk and Moldovan leaders Vlad Filat and Plahotniuc (Ecfr.eu, July 7, 2016; Jurnal.md, July 24, 2016). Maintaining the existing deal was Plahotniuc’s preferred option following Filat’s arrest; but the status quo did not sit well with either Ukraine or Moldova’s Western partners.

Having lost control over its large coal mines in the east (see EDM, February 28, March 29), Ukraine is eager to compensate as much as it can by exporting power generated by its nuclear power stations. DTEK Trading bought the export rights from Energoatom—a Ukrainian state enterprise that operates the country’s four nuclear power stations. Coincidentally or not, the day before the deadline of Moldova’s energy import auction, the Washington Times featured a piece titled “Ukrainian Corruption Casts Nuclear Pall Over Europe,” stoking fears about Ukraine’s alleged inability to ensure the safe operation of its nuclear facilities (Washington Times, March 30). The article leans in favor of Russia. Of course, Ukraine had long sought to replace Russia on the Moldovan energy market, but to date, Chisinau had only used this as leverage with Moscow and Tiraspol. Moreover, the lucrative kickbacks from Energokapital (about $19 million a year) were likely difficult to pass up (Jurnal.md, July 24, 2016). Yet, several factors had been making it increasingly difficult for the Moldovan government to continue with business as usual. For one, Transnistria does not pay Russia back for the Russian natural gas it consumes to produce electricity, passing the debt onto Moldova. Second, the Russian aggression in Ukraine had alarmed the small country with a separatist region. And, last but certainly not least, the election of a pro-Russian president has compelled Moldova’s government to forgo “business as usual” in order to mollify pro-Western Moldovans and the country’s development partners.

It remains unclear why Kuchurgan decided to submit a price higher than the $49 per MWh they had been charging last year. Given that the intermediary Energokapital was no longer in the picture, the price should have been lower still. Yet, the bigger question now is what Transnistria does with its energy surplus. In 2005–2009, when Moldova had a contract with Ukraine and not Inter RAO, Transnistria was able to sell part of the electricity generated by the Kuchurgan Power Station to Romania. Currently, Romania is unlikely to help Tiraspol out and neither is Ukraine. Losing such a significant revenue stream puts incredible pressure on an already austere Transnistrian budget. Spending cuts in Russia will also make it difficult for Moscow to pick up the tab (see EDM, June 29, 2015). Therefore, Moldova’s decision has even larger geopolitical implications.

Due to increased domestic contestation by the opposition, Plahotniuc has been trying desperately to boost his legitimacy by proving himself to the West, yet without antagonizing Russia directly. The Moldovan leadership has gone to great lengths to avoid linking the Russian government to the actions of its intelligence services. This is despite accusations of Russian special services harassing Moldovan officials traveling to Russia, their sabotage of a Moldovan law enforcement investigations into a major transnational money laundering scheme, and the recruitment of a former Moldovan Democratic Party legislator as a spy for Moscow (Adevarul.ro, March 9). But following the election of a pro-Russian president in Moldova, Moscow is now focused on ensuring that pro-Russian forces secure a majority in Moldova’s next parliamentary elections, scheduled for 2018. Consequently, Russia has diminished its space for maneuver. It cannot retaliate against Moldova without undermining the chances of the pro-Russian parties in the next election. Vladimir Putin recently made President Igor Dodon several token concessions regarding Moldovan exports and labor migrants. Dodon is also creating expectations about progress in the Transnistrian conflict settlement (see EDM, January 26). If the Kremlin were to retaliate on any of these fronts, it would undermine its own political projects in Moldova.

The politically agile Plahotniuc may have hoped to persuade the European Union that cutting Transnistria out of the energy deal would be detrimental to the conflict settlement process, but Plahotniuc has lost the battle, even while saving face for now. Clearly, the deal is a major win for Ukraine. Apart from the much-needed cash inflow and a snub at Russia, Ukraine is also hoping to access the EU energy market via Moldova. The new contract may ultimately prove to be a big win for Moldova if DTEK is able to ensure supply and price stability, since Plahotniuc is likely to use any hitches as a pretext to go back to his preferred option. In light of the difficult economic conditions in Transnistria and Russia’s increasingly limited leverage over Moldova, there is some hope that pressure for a positive development in the conflict settlement may emerge at the grassroots level to the point when it can no longer be ignored or stifled by the authorities.

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

People Power in Romania Versus Moldova: Worlds Apart?

Romania is becoming the envy of the world when it comes to peaceful mass protests successfully holding the government accountable. A little over a year ago, 20,000 Romanians protested in the streets of the country’s capital against corruption and regulatory ineptitude, which had resulted in 64 people dying in a Bucharest nightclub fire. On November 4, 2015, Prime Minister Victor Ponta was forced to take responsibility for this disaster and resign. However, despite major questions of ethical integrity within his party, Ponta’s Romanian Social Democrats (PSD) were nonetheless able to win the parliamentary elections in December 2016. The landslide victory seems to have emboldened the PSD leadership to the point of, on January 31, 2017, issuing a government decree to decriminalize corruption offences when sums of less than $47,000 are involved. One immediate beneficiary would have been PSD leader Liviu Dragnea, who faces charges of defrauding the state of $26,000. After five days of ever growing protests involving up to half a million people across the country, the government conceded and withdrew the controversial decree (Mediafax.ro, February 5).

This is a major win for rule of law and democracy in Romania thanks to levels of popular mobilization unseen since the days of the 1989 revolution. However, the track record of mass protests being able to hold the government to account in Romania’s sister nation Moldova is rather mixed. The 2009 “Twitter Revolution” is credited with pushing the Party of Communists of the Republic of Moldova (PCRM) out of power. The April 2009 protests against what was perceived as a rigged parliamentary election, but even more so the crackdown pursued by the Communists, undoubtedly swayed public opinion in favor of the pro-European opposition. The PCRM was defeated in the July 2009 early elections. However soon after gaining power, infighting began to tear the coalition apart. A heavy scandal surfaced in 2015, when $1 billion (equal to 15 percent of the country’s GDP) was discovered to have been stolen from three large Moldovan banks. Leading politicians were perceived as accomplices in this massive crime, prompting mass protests that lasted for months, only to fade away in 2016, overshadowed by the presidential elections (see EDM, September 9, 2015; January 29, 2016). The investigation into the banking fraud is ongoing, but not much has been achieved so far other than the scapegoating of the former prime minister and previous leader of the Liberal Democratic Party, Vlad Filat. He has been convicted to nine years in prison on corruption charges in connection with the fraud. Filat’s main political rival, Democratic Party leader and oligarch Vlad Plahotniuc, ended up benefiting the most, as he became the sole decision maker in the country. Yet, despite Plahotniuc’s abysmally low popularity ratings of just 4 percent (Institute of Public Policy Poll, October 2016), organizing public protests against the government installed by Plahotniuc and his power consolidation has proven increasingly difficult. Nonetheless, the leader of the Dignity and Truth Platform Party (which headed the 2015–2016 demonstrations), Andrei Nastase, has already announced plans to relaunch antigovernment protests (Adevarul, February 2).

It is important to point out the three major differences that make the success of peaceful protests much more unlikely in Moldova than in its neighboring kin-state Romania:

First, the anti-corruption protests in Romania as well as Moldova’s 2009 protests were spontaneous civic outbursts, without a unified political force coordinating them from behind. On the other hand, the Moldovan protests of 2015 had a clearly identifiable political agenda. Indeed, there were several competing agendas. The Dignity and Truth Platform emerged as a civic protest movement; however, to any astute observer of Moldovan politics, the intention of transforming the movement into a new center-right political party was clear from the very beginning. At the same time, the two pro-Russia opposition center-left parties (Our Party and Party of Socialists), which also backed the protests, had their own agenda for triggering early elections. As parties hijacked the civic protest, their subsequent differences effectively destroyed the movement.

The second major factor undermining the success of a mass protests in Moldova is a lack of national unity. Unlike Romania, Moldova is a much more highly divided society. Ethnic and linguistic cleavages allow politicians to manipulate the public and maintain the status quo favorable to the regime. Moldova’s ruling Democratic Party, aided by its junior coalition partner the Liberals, has been instrumental in exploiting these cleavages and precluding a unified cross-party opposition movement from taking hold. Furthermore, the regime in Chisinau did not shy away from intimidating and pressuring the protesters in 2015 to give up (Jurnal.md, December 18, 2015).

Third, and most importantly, unlike Romanian Social Democrats in recent years and Moldovan Communists in 2009, the Democratic Party cannot afford any meaningful concessions out of fear of losing power—such a loss would pose an imminent threat to the wealth and freedom of its leader, Vlad Phahotniuc. Plahotniuc also apparently believes that unlike PCRM in 2009 and Romania’s PSD today, his party stands no chance of winning any future elections, unless it stays in power to change the election rules and oversee the electoral process.

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In conclusion, the chances of a successful peaceful protest in Moldova leading to a change in government are dim. Any civic movement is likely to be politicized by the country’s political parties. The latter will then inevitably fall prey to ethnic, linguistic and geopolitical divisions, making it easier for the pro-government media machine to advocate in favor of Plahotniuc’s agenda. Following the failed 2015–2016 protests triggered by the “billion dollar scandal,” both the opposition and the public will likely be tested next time, when the ruling coalition moves to introduce a mixed electoral system in an attempt to hold onto power. The regime is also likely to create new “spoiler” parties and ban some existing ones from running in the election, which will be difficult to protest against for reasons explained above as well as due to Plahotniuc’s powerful media empire. As the independent media struggles to compete with pro-government outlets and as long as social media lacks the penetration rate to tip the scales, Moldova’s civic drive will face an uphill battle. If anything, events in Romania will teach an already cautious Plahotniuc to avoid unforced errors, to keep closer tabs on the opposition, and to continue to invest in both traditional and social media influence. Thus, the prospect for a triumph of people power over corrupt elites in Moldova is not optimistic.

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