Category Archives: Moldovan-Russian relations

Moldova’s Foreign Policy in Disarray

In recent weeks, Moldova has been dealing with one foreign policy scandal after another. Relations with Russia, the United Kingdom, the European Union, the Council of Europe and even the International Monetary Fund (IMF) and the World Bank have all been strained to varying degrees. The contentious nature of Moldova’s domestic political competition undermines any chances for a coherent and predictable foreign policy. At the same time, the difficult geopolitical conditions in Moldova’s neighborhood, stemming from a fatigued European Union, an increasingly distant United States as well as a regionally resurgent Russia—coupled with democratic backsliding of Moldova’s own government—have been creating serious challenges for Moldovan diplomacy.

Relations with Russia in particular reached a new low after Moldova expelled five Russian diplomats on May 29, amid accusations that Moscow was recruiting fighters from Moldova’s autonomous region of Gagauzia for the Russia-backed insurgency in neighboring Ukraine (Moldova.org, June 13; Euromaidan Press, June 15). In 2014, Moldova’s Intelligence Service investigated several Gagauz officials, including the region’s former governor Mihail Formuzal, for also allegedly recruiting fighters, but no prosecutions followed as Formuzal was voted out of office and some of his purported lieutenants managed to escape to Russia (Deschide.md, July 9, 2014). Ironically, the new governor of Gagauzia, Irina Vlah, elected in March 2015, pledged even closer ties with Russia and accompanied then–newly elected Moldovan President Igor Dodon to the Kremlin on his first foreign visit (see EDM, March 31, 2015; Moldova.eu, January 20, 2017).

The spy scandal occurred during President Dodson’s attendance at the St. Petersburg International Economic Forum, where Dodon issued a blistering anti-Western tirade, criticizing Moldova’s Association Agreement with the European Union, much to the delight of Russian President Vladimir Putin. However, Putin’s gratitude was rather peculiar as he ended up ridiculing Dodon with his answer about Russian interference in foreign elections: “Ask Dodon. He knows best,” Putin quipped, and Dodon smiled (RT, June 2; Balkan Insight, June 6). Upon his return from Russia, the Moldovan head of state called a National Security Council meeting to address the spy scandal, despite two prominent members of the Council being absent. Prime Minister Pavel Filip and Parliamentary Speaker Andrian Candu—both protégés of Vlad Plahotniuc, the chairman of the ruling Democratic Party and Moldova’s de-facto leader—were abroad. This, however, did not stop Dodon from scolding the foreign minister and the intelligence chief (Publika.md, May 30; Presedinte.md, June 6). The spy scandal, though unprecedented in its scale, has not prevented business as usual in Moldovan-Russian relations: indeed, around the same time, authorities announced the renewal of Moldova’s contract with the Russian-owned and Transnistrian-based Cuciurgan Power Plant (Unimedia.info, June 7). Russia has not escalated the spy scandal and only responded in kind to the diplomatic expulsions. Hence, Dodon actually earned certain political points for his actions, with some arguing that the government’s antagonism in relations with Russia would push the EU to be more lenient regarding the ongoing democratic backsliding in Moldova.

However, Europe appears to have learned its lesson on Moldova and continues to impose strong conditionalities on Chisinau. A macro-financial assistance package of €100 million (a €60 million loan and a €40 million grant—$67 million and $45 million, respectively) is preconditioned on respect for effective democratic mechanisms, including a multi-party parliamentary system (Consilium.europa.eu, Jun 15). As such, the EU financial package is widely interpreted as political pressure for the Moldovan government to renounce its controversial plan to change the proportional electoral representation to a mixed electoral system, considered inadvisable by the Venice Commission of the Council of Europe (Reuters, June 6; Venice.coe.int, June 19). Failure to follow the advice of European experts commissioned to study the bill will likely strain relations with the Council of Europe and the European Union. Moldova’s government is engaged in a diplomatic offensive, attempting to persuade the EU of the democratic nature of the proposed electoral bill. It did not help, however, that Parliamentary Speaker Andrian Candu personally attended the plenary session of the Venice Commission that adopted a rather critical opinion of the assessed bill (Coe.int, June 16). Perhaps, feeling personally offended, Candu vented his frustration on his blog, calling the adopted opinion subjective (Candu.md, June 19).

Since Moldova’s independence from the Soviet Union, the United Kingdom has been a reliable partner. Nonetheless, bilateral relations suddenly became tense after the surprising visit by Transnistrian leader Vadim Krasnoselski to London. The Transnistrian conflict settlement process has always been a highly important and sensitive topic for Chisinau. Krasnoselski publicized his meeting at the UK Foreign Office with Nicola Pollitt, the director for Eastern Europe and Central Asia, as an official working visit (President.gospmr.org, June 16), much to the annoyance of Moldovan officials, who appeared to have been caught off guard (Newsmaker.md, June 16). The British embassy in Moldova promptly issued a statement, calling the visit a private matter, stressing that it does not set a precedent or imply any official recognition of the separatist entity (Facebook.com/BritishEmbassyChisinau, June 17). However, the damage was done and left Moldovan diplomacy scrambling for answers.

Perhaps the best reflection of the current state of Moldovan diplomacy is the compromised current condition of one of Moldova’s top diplomats—Iurie Leanca, a former minister of foreign affairs and previous prime minister, whose European People’s Party recently joined the ruling coalition. Leanca recently drew controversy by suggesting that it was the World Bank and IMF that had recommended the Moldovan government to issue its notorious guarantees for loans aimed at bailing out the three banks left bankrupt after the infamous billion dollar theft that crippled the economy in 2015 (see EDM, January 11, 2016). Both the World Bank and the IMF issued statements denying these allegations and accused Leanca of failing to follow their recommendations throughout 2014, when Leanca headed the Cabinet. The aforementioned banking fraud cut Moldova’s GDP by about 15 percent (Newmaker.md, Moldova.eu, June 16).

iurie-leanca newsmaker.md

Iurie Leanca (Photo: Newsmaker.md)

All these instances indicate a rather precarious state of Moldovan diplomacy. Apart from the structural challenges of divided foreign policy prerogatives between the government and the president, the sharp domestic political polarization and the deficient quality of the ruling political elite leave Moldovan diplomats with almost no good options to develop a coherent foreign policy. As long as Moldova’s foreign policy is guided by immediate political expediency rather than any sense of national interest, its diplomacy is doomed to operate in a constant state of disarray.

 

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

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.

Bus-Tiraspol-Chisinau-Moldova

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