Moldova is usually assigned the title of the poorest country in Europe mired in financial and corruption scandals. The ’frozen’ Transnistrian conflict is said to further divide the country between chimeric pro-Russian and pro-Western camps. Oligarchs are blamed for having captured the state and preventing democracy to flourish; and so goes on the litany of reputational prejudices about Moldova.
Although these clichés hold some water, they have generated mind traps and have prevented any alternative reading of Moldova. Caught in a thug of war between Brussels and Moscow, Europe has three options on how to approach Moldova: oppose Moscow on Moldovan territory; scale back its engagement; or honour its commitment to strengthen the rule of law and deepen economic cooperation with Chisinau. The last option requires the political maturity to accept that Chisinau can be a partner of both Brussels and Moscow.
The Bright Side of Scandals
Moldova made headlines in 2014 when the banking sector was defrauded of one billion dollars. Courtesy of the testimony of one oligarch, Ilan Shor, who himself has been convicted of involvement in the fraud, the former Prime Minister Vlad Filat was convicted and sentenced to nine years imprisonment. Despite his own conviction, Ilan Shoris now the mayor of the small town of Orhei, heads the Shor party and recently won a seat in the parliament. For many, this was a typical “à la moldave” scenario where most of the thieves got off scot-free whilst only one sits behind bars. Taken from another angle, even though Ilan Shor has been granted some form of witness protection and has escaped punishment himself, at least some part of the truth has been divulged and justice has been partly served. Following Shor’s revelations about the scandal, people took the streets and a citizen movement emerged under the name of Dignity and Truth, now a political party headed by politician Andrei Nastase.
The one-billion theft has understandably attracted a lot of public attention, as did the role of Moldova in the Russian Laundromat, a scheme that laundered tens of USD billions from Russia between 2010 and 2014, involving over one hundred countries. Following these two scandals, Moldova launched a large package of reforms of its banking and judiciary systems, and put in place a National Integrity and Anti-Corruption Strategy for 2017-2020. These improvements have not gone unnoticed: the World Bank extolled the efforts of the National Bank of Moldova and the country’s economic progress, which should boost investors’ trust. Furthermore, criminal activities, such as smuggling, have been curtailed thanks to international cooperation, but the grey zone of Transnistria remains a thorn in Moldovan development.
Transnistria – A Peaceful Frozen Conflict
The active phase of the short 1992conflict lasted four months and left a thousand people dead. Due to the prolonged absence of military engagement, the situation was branded as a frozen conflict – thisvague concept was coined to qualify the blurry simmering situations of violence that followedthe several wars in various post soviet republics. As time passed, the term conflict has become redundant in the context of Transnistria; not much is frozen: population travels freely, students from Transnistria study in Chisinau and Transnistrians voted for the first time in the most recent February elections. There is a need to rethink our reading of this so called frozen conflict in Transnistria – violence is unlikely to resume between Tiraspol and Chisinau as long as escalating tensions between Moscow and Brussels do not boil over.
Former Vice-Minister of Foreign Affairs, Professor Osmochescu, asserts that the settlement was on right track with the 1992 Settlement Agreement, although he questions the decision to include Transnistrian representatives in the joint commission as it eventually gave Russia – allied with Tiraspol – the upper hand. The former diplomat is convinced that settlement dialogue should only include Russia, Ukraine, Romania and Moldova, excluding Tiraspol authorities that continue to insist on international recognition as a state. It is highly unlikely that European countries will recognize Transnistria owing to the fact that the EU Council has adopted restriction measures against the leadership of Transnistria for stalling progress of the political settlement.
Thecurrent process is a 5+2 settlement format, named after its composition including 5 negotiators (Russia, Ukraine, OSCE, Moldova and Transnistria) + 2 observers (EU and US). Unfortunately it has not yielded any meaningful results with the tensions between Russia and the West increasingly running counter-productive to the intent of the mechanism. During the recent conference on Transnistria, Russian academic Natalia Kharitonova underlined the unprecedented situation whereby relations between the external participants to the settlement process are far worse than between the parties to the conflict.
Today, some observers claim that a new conflict is poised because of Russian troops’ presence in Transnistria and in 2018 the UN General Assembly adopted a resolution introduced by Moldova on the withdrawal of foreign troops, specifically targeting Russian troop and armament presence. These elements demonstrate that Transnistria is being utilised by both the West and Russia in pursuit of their own strategic objectives and, arguably, Transnistria is more an international affair than an internal one.
An Unhelpful International Involvement
For decades the presence of Russian troops in Transnistria has been a major concern for NATO, which has been amplified by the situation in Ukraine; and in its efforts to counter Russia, NATO opened an Information Office in Chisinau in December 2017. In view of the militarisation of the region and the recent collapse of the Intermediate-Range Nuclear Forces (INF),the NATO-Russia confrontation directly affects Moldovan sovereignty and security. The Foreign Policy Advisor to the President, Mr Ciocoi, acknowledged that his country is trapped between a rock and a hard place:‘as a constitutionally neutral country, we are not pleased with the presence of Russian troops or NATO on our soil. It is a legacy of the past and a consequence of today’s geopolitical realities. We have to deal with it.’
With most international efforts focusing on security issues and more recently on the fight against so-called Russian propaganda, little effort has been comparatively made to promote sustainable economic development and the rule of law in Moldova. Moldovans’ daily concern is about making ends meet and employment, whilst Brussels and Moscow use the carrot and stick approach to promote their policies. Using economic incentives and sanctions, Brussels and Moscow are forcing Chisinau to choose between the West and the East. This dilemma is leading nowhere as Moldova is both West and East with the country depending on Russia for its energy and the EU market to export its goods. No reasonable politician or businessman in Moldova today embraces a west or east approach, but all favour a mixed approach. It is thus misleading to label President Dodon as a pro-Russian or the tycoon Plahotniuc as a pro-Western.
Blame it on the Rich
An oligarch turned politician, Vlad Plahotniuc presides over the Democratic Party, which won 30 seats at the recent parliamentary elections. Often described as the puppet-master who captured the state, most people blame him for all wrongs in the country and believe that he pulls the strings of the country including the judiciary system.
In a recent discussion with Vitali Garmurari, the Spokesperson for the Democratic Party said that the accusations against Vlad Plahotniuc need to be substantiated. Only a court can rule over the guilt of a person and so far, Mr Plahotniuc has not been sentenced, he added. Recently, Interpol rejected the request of Russia to place Mr Plahotniuc on their wanted list for alleged involvement in the attempt on the life of German Goruntsov, a Russian banker. For Vlad Plahotniuc’s detractors, the absence of condemnation is not a proof of his innocence but evidence of his control over the judiciary.
In Moldova and abroad, rumours flourish about this man who has unquestionable power thanks to his key role in the energy sector. As a veteran in the oil and gas business, he has forged strong connections in the US, who are obsessed with replacing Russia as the leading gas exporter to Europe. The situation though is not as straightforward as it seems. Moldova relies completely on Transnistria for its energy and the region acts as a small hub for Russian gas to the Balkans. Moldovagaz – a joint venture between the Ministry of Industry of Transnistria, the Moldova Government and the Russian giant Gazprom – has the monopoly over gas transactions. One of the issues is that Moldova has committed to the European Third Energy Package that calls for the unbundling and opening of the energy market. As part of its commitment Moldova must strip Moldovagaz of its privileged position and, given the complexities at play, Chisinau was granted an exceptional delay until 1 January 2020. This European requirement corners Moldova as the country is totally dependent on Russian gas and Gazprom holds 50% of Moldovagaz shares and, de facto, the 13% nominally held by Transnistria. The situation gets even more complicated as the contract between Gazprom and Moldovgaz are valid until the end of 2019and Moldova does not have a meaningful gas alternative in place. Mr Plahotniuc understands perfectly the gains to be by playing Russian, the US and European against each other in the energy sector. In 2017,his close ally Vasile Botnari was appointed as the new head of Moldovagaz.
The ruthless energy competition between Russia and the United States for the European market is driving their political and security agendas. The year 2019 will be pivotal in the Moldovan energy market and, as this deadline approaches, the manoeuvrings of those invested parties both within Moldova and externally will be a riveting game to observe.
An Oligarchy on the Way to Democracy?
In the meantime, the Moldovan constitutional court has validated the result of the 24 February elections and Plahotniuc’s Democratic Party has emerged as the party with second largest number of seats. Alongside the Democratic Party with 30 out of 101 seats, the Socialists gained 35 seats, the ACUM group gained 26 and the remaining 10 seats were shared between the Shor party and independents.
One of the features of the Moldovan political landscape is the fact that oligarchs head several parties: Vlad Plahotniuc heads the Democrats, Ilan Shor has his eponymous party and Renato Usatii is the president of Our Party. According to popular narratives, oligarchs are involved in politics to further their own profit and wealth; however their involvement does not necessarily pose a barrier to democracy. Commenting on the recent elections and the political landscape, Professor Osmochescu sees the emergence of these parties as a genuine mirror of the diverse opinions held by the population. Looking back at the political developments over the past thirty years, Professor Osmochescu recalls the evolution from an early enthusiasm with plethora of parties, the uncertainties around the future and the disillusion with both Russia and Europe. Today, he is hopeful that the leading parties will observe democratic principles and contribute to a new political paradigm.
The OSCE statement on the recent elections echoes the same opinion: although violations were recorded, fundamental rights have been generally respected, says the preliminary report. Taken as a whole, Moldova is transitioning and some are definitely looking at the cup half full rather than focusing on shortcomings.
It’s All About the Money
Conflict specialist Iulia Cozenco has worked on various projects in Transnistria over the past decade and today she has one message: efforts should be directed towards social inclusion, and not only in Transnistria. Due to all the challenges Moldova has gone through over the past three decades, the population has become increasingly vulnerable and the country lacks a social protection system capable of responding to all the problems. She concludes that international assistance should be directed at broader social inclusion and protection initiatives rather than narrow Tiraspol-Chisinau confidence-building projects.
Commenting on the situation in Transnistria, Dumitru Budianschi, an economist at the Moldovan ExpertGrup,has observed that, the lack of a political settlement between Tiraspol and Chisinau does not prevent economics agreements from forging on. These agreements cover energy and mobile communications, however Mr Budianschi has raised the concern that these agreements lack transparency and have been extremely profitable to a select few people on both sides of the river. Unsurprisingly, the lack of settlement is perversely convenient for such shady deals. According to Mr Budianschi, the international policy of small steps in Transnistria will not pay off and a crackdown on the criminal activities in the region is needed in order to give any settlement a chance of succeeding. The growing trade with Europe, Moldova’s first export partner, is a positive development that can no longer accommodate the black holes around Transnistria.
International involvement in Moldova is both a part of the problem and the solution. Should involvement take the shape of interference advancing eastern or western interests, it will only serve to polarise and destabilise Moldova and will ultimately backlash on European security. Disengagement would be equally damaging as Moldova today relies on both Brussels and Moscow and wishes to maintain relations with both partners. At this point in time, Chisinau needs international cooperation with Moscow and Brussels to assert itself as a solid partner to both the West and the East.
Quality of Life in Latvia is not a priority
Four presidents, 14 governments and eight Seimas have changed in Latvia over the past 20 years. The country joined the European Union and NATO, and then switched to the euro. But have Latvians become better off? Has their quality of life improved? Statistics shows that the general well-being of population remains very low. Political turbulence only worsens the situation.
Thus, according to Numbeo.com portal, one of the largest databases on the cost of living and quality of life worldwide, Lithuania and Latvia are the worst Nordic countries for quality of life.
Quality of Life Index by Country 2019
The leaders of the rating are Denmark, Finland and Iceland. Latvia
showed the lowest result, the quality of life index here is 149.15 points. In
Lithuania, the result is slightly higher – 156.36 points.
Numbeo experts took into account the purchasing power of the population, safety, health care, the cost of living and some other factors.
It is noted that the world ranking of countries for the quality of life is led by Denmark, Switzerland and Finland. Estonia took 11th place, Lithuania – 29th, and Latvia – 34th.
The more so, experts said that the proportion of shadow economy in Latvia rose by 2.2 percentage point last year to 24.2 percent.
The shadow economy proportion in Latvia has risen for the past two years in a row.
EU-SILC survey gives another frightening indicator. According to eurostat.ec.europa.eu, Latvia, as well as Estonia and Lithuania are top three EU countries in terms of poverty risk among pensioners.
Political and economic short-sightedness has lead to the state when the Baltic States have become the first battlefield in case of war between NATO and Russia.
The United States is preparing for the use of nuclear weapons in Europe along with non-nuclear countries, said Vladimir Ermakov, director of the Department for Non-Proliferation and Arms Control of the Russian Foreign Ministry. Experts point out that military airfields in the Baltic States and Poland have already been prepared to receive NATO aircraft that can carry tactical nuclear weapons. If take his words seriously, this means the end of the Baltic States’ existence.
The behavior of the authorities guaranteed Latvia, Lithuania and Estonia the status of the first battlefield, despite the fact that in the event of war, economy would be completely destroyed and population would disappear.
How the Caspian Sea joins the Black Sea
In the development of international cooperation and the deepening of industrial cooperation, the leading role belongs to the formation of a network of international transport corridors. It has a special place in solving transport problems associated with the expansion of interstate transportation, economic, cultural and other ties, with the creation of an international transport infrastructure that has common technical parameters and ensures the use of a single transportation technology as the basis for the integration of national transport systems into the global transport system.
Developing corridors are to play a system-forming role in the economic and social development of the territories along which they pass. Their creation is directly related to projects for the development of sectors of the economy and social sphere.
If a modern transport corridor connects the Caspian Sea and Black Sea, it will lead to uninterrupted cargo transportation between Asia and Europe. New opportunities for the regional states will be opened up. This was confirmed by the first meeting of the foreign ministers of Azerbaijan, Romania, Georgia and Turkmenistan, held in mid-March 2019 in Bucharest.
According to its results, a political declaration was signed. The document reflects the determination of the four states to implement the project of an international freight route between two seas by joint forces.
As expected, the corridor between the two seas will have a real impact on the standard of living in the participating countries and cause a sharp surge in business activity in neighboring regions.
The idea of the project is to make full use of the geographical proximity of Romania, Georgia, Azerbaijan and Turkmenistan, as well as the capabilities of the ports of Constanta in Romania, Poti in Georgia, Baku in Azerbaijan and Turkmenbashi in Turkmenistan.
New transport route will allow establishing a direct connection between the port of Constanta and the Danube River, and then the rivers and canals on the European continent, that will open access to Central and Northern Europe.
In general, the Caspian-Black Sea region is becoming links of a single Eurasian transport network.
The main question is how to direct the necessary volumes of cargo along this route, which would make its work profitable and profitable. To meet these challenges, in the near future four countries have planned to create an expert working group, optimize working procedures, harmonize tariffs, identify remaining infrastructure and legal constraints, and jointly promote the project at the international level, including in the course of interaction with the European Union. But it will not be easy for them to achieve all these ambitious goals.
The closest allies of Azerbaijan, Turkey and Russia, support all the projects aimed at strengthening economic cooperation between Baku and other countries of the Caspian-Black Sea region. Moscow and Ankara are lobbying for the creation of a transport corridor between the two seas.
Azerbaijan once again demonstrates that it is becoming one of the most important transport hubs of Eurasia – a transit hub in which the East and the West are tightly tied.
This country is interested in East and West, not conflicting with each other, but driven forward by the single energy of partnership.
China’s changing interests in South Caucasus
On April25-28,“Second Belt and Road Forum for International Cooperation” took place in the capital city of China. From South Caucasus region only Azerbaijan leader Aliyev was in the list of 36 top-Level attendees (Diplomat, April 27).As the Azerbaijan was participating first forum in 2017 on ministerial level, visit of President in second forum demonstrates intention of both sides for close cooperation within the framework BRI.
Despite fact that China’s strong ambition to enter European market through BRI makes Georgia one of the most important players in the region (it has FTA both with China and EU) its high-level officials did not attend the forum (Emerging-Europe, January 3, 2018).
Generally, South Caucasus region was not in the Chinese focus when the BRI project was unveiled in 2013.Its attitude to the region has changed afterwards. Being part of the Central Asia-West Asia Economic Corridor, South Caucasus has strategic importance for China. At the same time, transportation projects such as Baku-Tbilisi-Kars railway and Anaklia Deep-Sea Port has increased significance of the region.
From geopolitical point of view stability in Azerbaijan and Georgia’s political problems with Russia creates ground for Chinese presence in Caucasus. It is clear that having political problems with West Russia is not willing to confront China. Therefore, using these opportunities and establishing good relations both with Georgia and Azerbaijan China is able to avoid its biggest rival in Eurasia and use shortest way to European markets (Trend.az, April 10).
Importance of South Caucasus countries within the BRI framework is not same. Armenia has less potential for BRI. It does not have enough transportation infrastructure and its borders with Azerbaijan and Turkey closed. Armenia has a potential to become a corridor to markets of Eurasian Economic Union (EEU) and Iran. However, it does not have borders with the members of EEU and railway project between Armenia and Iran is not viable due its high costs ($3.2 billion) and less importance in commercial means (Vestnikkavkaza, August 25, 2018).Also, China has borders with two biggest members of EEU and could easily reach EEU markets through them.
In the case of Georgia, China is the biggest foreign investor. China’s Hualing Group controls Kutaisi free industrial zone (FIZ), owns Basis Bank, hotels, wine export enterprise. It also constructs “Tbilisi Sea New City” near Tbilisi Sea in which company has already invested around 150 million dollars (hualing.ge).Another Chinese company CEFC Energy owns 75% of Poti FIZ (Cbw.ge, March 20).
Unlike the Georgia, mostly state-owned Chinese companies have invested in Azerbaijan. One of these companies CTIEC Group constructed biggest cement factory in Azerbaijan in 2014.China also has a great interest on Baku International Sea Trade Port as it is one of the main ports within BRI. Based on intergovernmental grant agreement China transferred $2 million worth equipment to the port (Azernews, April 4, 2018).
Despite fact that Azerbaijan is China’s key trade partner in the South Caucasus (it accounts 43 percent of China’s trade turnover in the region) it has massive investments in Georgia (Azernews, April 25). It mostly related to political orientation of these countries. Georgia follows more western orientation that made it more attractive for China while Azerbaijan implements balanced strategy and it does not want to feel China’s pressure. Besides, Azerbaijan is not in need of financial assistance like Armenia and Georgia as it has enough financial reserves.
However, recent developments of Sino-Azeri economic relations within the framework of the Second Belt and Road Forum creates new perspectives for China’s presence in South Caucasus. During the forum 10 agreements worth of 821 million USD has been signed (Azvision.az, April 24). These contracts cover different economic spheres of non-oil sector including the construction of a tire factory in the Sumgayit chemical-industrial park, the creation of a 300-hectare greenhouse complex in the Kurdamir region of Azerbaijan, and the construction of agrological industrial parks in the Guba, Goychay and Khachmaz regions (Turan.az April 24).If we take in account that Chinese investors have invested800 million USD in the economy of Azerbaijan since independence, obtained agreements in the forum worth of same amount shows China’s growing interest in Azerbaijan.
Nevertheless, it does not mean that China’s preference of Georgia has changed. Within the BRI project both Azerbaijan and Georgia are of geopolitical importance for China. It is in China’s interest to boost bilateral relations with both of countries. It is apparent that China already has considerable investments in Georgia and now it is time to deepen cooperation with Azerbaijan. At the same time Azerbaijan is not going to cross limits of its balanced policy. Chinese companies that signed agreements in second forum are government affiliated companies as well. It again shows that Azerbaijan is willing to deepen cooperation without creating room for pressure in its domestic economy.
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