Category Archives: State capture

High-Level Corruption Threatens Moldova’s European Aspirations

Every April 7, Moldovans take stock of the progress the country has made since the youth protests of April 2009, which popularly became known as the “Twitter Revolution.” Nine years ago, this civil unrest led to the demise of Communist Party rule and ushered in a coalition of pro-European parties into power. However, hopes for a more democratic and accountable government not only failed to materialize, and many perpetrators of the brutal police crackdown in April 2009 have since been promoted to key state positions by the now ruling Democratic Party (Anticoruptie.md, April 7, 2017). This sense of impunity, coupled with poor economic conditions domestically, discourages young Moldovans from investing any hope in their country’s future. According to the latest poll by the International Republican Institute, 76 percent of respondents do not think that young people have a “good future in Moldova,” while 96 percent said “corruption is a big or very big issue” in the country (Iri.org, March 29, 2018). A recent joint report by the European External Action Service and the European Commission stated that “corruption still remains widespread, and independence of justice, law enforcement as well as national anti-corruption authorities need substantial improvement” (Europa.eu, April 5). Thus, endemic corruption and democratic backsliding not only undermine Moldova’s European aspirations, but also create fertile ground for political instability and civil unrest, this time against a nominally pro-European government.

The same European Union report on Moldova’s record of implementing the Association Agreement with the EU recalls that the change of the electoral system in July 2017 went against the recommendation of the Council of Europe’s Venice Commission and the Office for Democratic Institutions and Human Rights of the Organization for Security and Cooperation in Europe (OSCE). European democracy watchdogs have repeatedly warned Moldova not to introduce the mixed electoral system, because it is likely to exacerbate the country’s corruption problem by allowing wealthy businesspeople to influence elections in single-member districts (Venice.coe.int, March 19; see EDM, January 10). This concern is a major reason why the EU is withholding 100 million euros ($124 million) in macro-financial assistance, earmarked for Moldova last year. According to Vice Chair of the European Parliament Committee on Budgets Siegfried Muresan, EU funds would have arrived already had it not been for the controversial change to the electoral system (Europalibera.org, February 1). On a recent visit to Moldova, Muresan emphasized that at least three or four of the ten EU conditions for the first tranche (30 million euros) have not been met (Adevarul.roCotidianul.md, April 6). Indeed the EU-Moldova Memorandum of Understanding sets clear deliverables in terms of public-sector governance, the fight against corruption and money laundering, energy-sector reforms, etc., but it also demands respect for effective democratic mechanisms, including a multi-party parliamentary system and the rule of law (Europa.eu, November 23, 2017). The latter is much more difficult to achieve, and given how the investigation into the billion dollar bank fraud is going (see below), the government appears to be barely trying.

One billion dollars (12 percent of GDP) was siphoned off from three Moldovan banks prior to the 2014 parliamentary elections. “The theft of the century,” as it has come to be known, is a litmus test for the Moldovan justice system. Moldova’s National Bank hired the New York City–based investigative consultancy Kroll to conduct a financial forensic investigation. Already in its first report, presented in April 2015, Kroll identified controversial businessman Ilan Shor, who controlled the three embattled banks, as the main figure behind the fraud. The consultancy firm’s second report, from December 2017, pointed to 77 companies linked to Shor, who is identified as one of, “if not the only beneficiary” of this highly coordinated fraud (Candu.md, May 4, 2015; Bnm.md, December 21, 2017). Yet, despite being convicted by a lower court to seven and a half years in prison in June 2017, Shor appealed the ruling, and the case has been stalled (Deschide.md, April 2, 2018). Shor remains at large, and in the meantime, he became mayor of a large town, took over the leadership of a political party and is gearing up to enter the parliament. Keen observers of Moldovan politics know that this would be impossible without the protection from the head of Moldova’s ruling Democratic Party, oligarch Vlad Plahotniuc, who used Shor’s depositions to imprison Plahotniuc’s political and business rivals (former prime minister Vlad Filat, oligarch Veaceslav Platon and mogul Chiril Lucinschi) in swift closed trials. The symbiotic relationship between Vlad Plahotniuc and Ilan Shor is the embodiment of high-level corruption that makes the EU increasingly frustrated with Moldova.

Endemic corruption, exacerbated by changes to the electoral system, led to Moldova’s demotion from flawed democracy to a hybrid regime, according to the Economist Intelligence Unit’s Democracy Index (The Economist, February 4). The risks of Moldova becoming synonymous with corruption are manifold, yet two main threats stand out. First, if it continues to only pay lip service to fighting corruption, Moldova will fail to advance its European integration efforts. Second, if the highly disputed mixed electoral system indeed produces a rather unrepresentative outcome in the parliamentary elections scheduled for the end of 2018, the country could plunge into another cycle of political instability, which could be exploited by foreign actors such as Russia. With all that in mind, it is nonetheless becoming apparent that the main fault-line in the Moldovan political debate is less of an East-West divide, but rather rivalry between those defending democracy and good governance and those content with clientelism and corruption. Both the nominally pro-EU oligarch Vlad Plahotniuc and the drudgingly pro-Russian President Igor Dodon are, in fact, progenies of Communist Party leader Vladimir Voronin’s regime, which Moldova’s millennial generation rose up against in April 2009, only to grow disheartened a decade later.

 

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

Advertisements

Deconstructing Vlad Plahotniuc’s article in the Wall Street Journal

An article published in the WSJ opinion section on 27 December, 2017, signed by the head of Moldova’s ruling Democratic Party Vlad Plahotniuc proclaimed that Moldova needs the West’s help against an aggressive Russia, but a closer scrutiny of Plahotniuc’s record reveals that his anti-Russian rhetoric is nothing more than a political strategy aimed at gaining domestic legitimacy and foreign support for his increasingly anti-democratic regime. This becomes all the more clear once we put Mr. P’s WSJ statements into actual context.

Mr. P: “Moldova is dependent on Russian energy. We are seeking to diversify and hope to integrate with the European gas and electricity markets via Romania by end of next year.”

–    On 1 April 2017, following an internationally monitored procurement procedure,  Moldova’s state owned Energocom (controlled by Plahotniuc’s government) signed a one-year contract to import electricity from Ukraine. Two months later, Moldovan side (read Plahotniuc)surprised its western partners by deciding to modify the contract in favor of the Russian state owned power plant in the separatist region of Transnistria, which fails to pay for the Russian gas it uses to produce the electricity it sells to Moldova, having accrued an over 6 billion USD debt, officially accumulating on the books of the Moldovan state owned gas company. Thus, Plahotniuc is increasing Moldova’s strategic dependence on Russia, instead of reducing it by acquiring electricity from Ukraine.

–       Moreover, after the Annexation of Crimea and during the War in Donbas, in November 2014 then Deputy Prime Minister, Minister of Economy Andrian Candu, now Parliament Speaker and Plahotniuc’s closest protégé was eager to offer Russian investors concessions or have them privatize strategic Moldovan infrastructure assets such as the energy grid, national railway, state  telecom company, which only proves that, when it comes to making money, the Democratic Party and Plahotniuc totally disregard the Russian threat to Moldova and the region.                      

Mr. P: “Between 2011 and 2014, Russian-backed interest groups manipulated Moldova’s banking system to launder more than $20 billion.”

–          Plahotniuc has held enormous sway over the Moldovan justice system and banking sector. During that timeframe, he controlled a large stake in one of the banks involved in money laundering. He also controlled the prosecutor general. Needless to say, such a large scale laundering operation would not have been possible without his blessing. Similarly, Plahotniuc fails to mention the billion dollars stolen from Moldovan banks under his watch and the failure to prosecute the main fraudster – Ilan Shor, as identified in an independent Western financial forensic investigation.

–          Moreover, it was none other than the current Justice Minister Alexandru Tanase who back in 2010, as a legislator, promoted the amendment that created the necessary conditions for the $20 billion Laundromat by eliminating the 3% state tax in cases of property disputes, replacing it with a ceiling of about 1500 EUR for physical  persons and 3000 EUR for legal persons. Without this crucial amendment, the launderings of $20 billion would have cost 0.6 billion, making it a much less attractive undertaking, even without adding all the presumed bribes offered to the judges and other accomplices in this vast criminal enterprise.       

Mr. P: “Given that a significant percentage of Moldova’s population is exposed to Russian-controlled media, propaganda and the anxiety it stirs are among the biggest threats we face.”

–          Plahotniuc owns the rebroadcasting rights to the first Russian federal TV channel – Perviy Kanal – the most influential Kremlin propaganda tool. Moldova’s Broadcasting Regulator controlled by Plahotniuc offered an associate of pro-Russian president Igor Dodon a license to rebroadcast the second Russian federal channel – the nefarious NTV. For a decade now, Plahotniuc has been making a fortune off Russian TV propaganda in Moldova.

Mr. P: “We need the West to invest in an independent media market.”

–        Plahotniuc’s political and administrative machine has been harassing and obstructing independent media, including those funded by Western donors. The six months delay in issuing TV8 a license is a case in point. It is largely because of Plahotniuc’s actions that Moldova dropped four positions in the Reporters without Borders 2017 Press Freedom Index.        

Mr. P: “Unfortunately, powerful political forces, including our pro-Russia president, Igor Dodon, are sympathetic to Moscow’s narrative.”

–        Plahotniuc’s media empire played a major role in the election of pro-Russian president Igor Dodon. Dodon’s fellow Socialists, in turn, offered Plahotniuc a life vest by supporting the highly controversial introduction of the mixed electoral system that gives Plahotniuc a chance to hold onto power after the next election, as his party risked not passing the 6% threshold under the previous proportional party list system.  

Mr. P: “Moldova is a proud multiethnic state, devoted to reform and democracy.”

–         In the last two years, Moldova has been suffering from clear democratic backsliding, as reflected in the worsening of the country’s Freedom House Democracy Score. Similarly, Moldova has fallen in the Economist Intelligence Unit’s Democracy Index. Democratic Party’s ongoing attack on local public administration and intimation on mayors, aimed at forcing them to join the ruling party is particularly damaging to local democracy. After orchestrating a hostile takeover against the democratically elected Chisinau municipal administration, now the second largest city Balti is undergoing a similar scenario.  

 

Shevcuk_Tank

Former Transnistrian Separatist Leader Finds Refuge in Moldova Thanks to Plahotniuc.