2024 - The Year Ahead

January 10th, 2024

Welcome back to Moldova Matters! This week we’re going to take a break from the Weekly Roundup as Moldova’s extended holidays and slow news period continue. Instead we’re going to take a look at what 2024 might have in store for us and touch on some recent developments, including about Transnistria along the way.

If there is one lesson to be learned from the past few years of Moldovan news, it is that making predictions in January about the year to come is likely to be hopeless. With that in mind, this article is meant as an analysis of the main themes that I think are likely to drive the news in the year ahead. Some black swan events along the way are almost guaranteed, but the hope is to broadly outline the topics we’ll likely be covering and the overall challenges and opportunities they involve. As such this article will be a mix of analysis, a dash of (hopefully well informed) opinion and also a covering of current events related to the themes discussed. This is particularly true about Moldova’s relationship with Transnistria which is likely to be a major theme of the year ahead and which has already dominated the news this week.

So then, in no particular order here are the top focus areas I believe will be driving the news in 2024:

1. The War in Ukraine

2. Transnistria

3. Negotiations with the European Union

4. Elections - The Moldovan Presidential Election, the EU Referendum, Parliamentary Elections(?) and the US Presidential Election

We’ll go through each of these topics one by one.

The War in Ukraine

The progress of the war is both the most important factor looking ahead and the one we can say the least about. While conflict lines appear static in the east, the conflict is not “stalemated” or “frozen” as both sides continue to pursue maximum war aims and both countries are increasingly preparing for a long war. The failure of the Ukrainian counteroffensive to attain its objectives in 2023, as well as the failures of multiple Russian offensives last year, have underlined the fact that this conflict will likely continue through 2024 and into 2025. Very critically the delays in the provision of aid from the US Congress and looming American presidential election make it very hard to know what comes next in the medium or long term.

For Moldova the continuation of the war is likely to have impacts in a few key areas:

1. The Direct Military Threat - As we wrote about all the way back in April 2022, the security lynchpin for Moldova is the city of Odesa. With Russian forces pushed out of Kherson and across the Dnipro river, Ukraine has put a formidable natural barrier between Odesa and Russian forces. In fact Ukraine is making gains in this territory with cross border incursions. With that said, former CIA Director David Petraeus in an interview with CNN re-emphasized that Moldova would likely be the next target should Ukraine lose this war. So while there is not a current direct threat to Moldova, it is worth remembering that Ukraine winning the war, or at least not losing further territory, is existential to Moldova.

2. Hybrid Attacks from Russia - As we traced in the 2023 year in review article, the Kremlin’s hybrid warfare tactics in Moldova shifted significantly over the course of last year. We can expect additional shifts in tactics and focus this year as the stakes are even higher with multiple critical elections scheduled. We’ll talk more about this in the section on elections below.

3. Continued Economic Dislocation - The war has significantly disrupted supply chains and led to major inflation in Moldova over 2022 and 2023. Experts predict annual inflation in 2024 to be around 4.5%. This is a major reduction, but does not mean prices will fall to pre-war levels. In addition to prices, Moldova faces challenges of migration, workforce and lack of investment all inextricably tied to the war.

4. Impacts on EU Accession - For better or worse, Moldova and Ukraine are walking the path towards the EU together. The length and course of the war will have real impacts on the pace of reforms in both countries and the speed at which government, economies and societies can prepare for EU membership. Further, the fact and course of the war impacts decision making within the EU itself, especially about openness to including an economy and agricultural base the size of Ukraine.

5. Continued Uncertainty - For the 3rd year in a row people in Moldova just don’t know what the future will bring. Things are less bleak than they were a year ago, and there is for sure hope in the air, but nothing is certain. This means delayed investments, life choices (buying a home, starting a family, etc) and an increased incentive to migrate.

Moldova has effectively zero ability to impact the course of this war. At the same time the war has a major, maybe existential, impact on Moldova’s future. Due to this, many of the actions taken by the government this year will likely still be reactions to events and will be attempts to mitigate the impacts of the war.

Transnistria

In stark contrast to the war, the relationship between Moldova and Transnistria may represent the area where the Moldovan government has the most leverage, and most challenging decisions, in the next year. As we wrote about back in September, Transnistria is in a Pickle. The course of the war, developments in Moldovan politics, the accelerating EU trajectory and historic weakness of Russia in relation to Moldova have come together to imbalance the status quo. The breakaway region is now facing a series of historic challenges and has very few cards to play.

Back in our September article we linked a great English language article in Open Democracy Russia (sadly since shuttered) by Moldovan journalist Evghenii Ceban. In it he argued that Moldova needs to rapidly develop a strategy vis a vis Transnistria given the changing situation and falling apart of the status quo. Evghenii Ceban followed this up with an article in December which crisply analyzed the situation and made the case that 2024 is the year that Moldova can (and his opinion must) aggressively pursue re-integration. The article is in Russian but is 100% worth a read. Here’s a link to it via google translate.

It is worth stating right away - none of this conversation is about military action or violent escalation. Neither Chisinau nor Tiraspol has any interest in this. We’ll look at the political and economic realities underpinning the relationship - and why 2024 is potentially an inflection point.

Note: As we’ve done before with articles about Transnistria we will sometimes say “Moldova” and “Transnistria” as a way to indicate the parts of Moldovan territory controlled by Chisinau and Tiraspol respectively. This is easier for most readers than “left bank” vs “right bank” and is simply a convienent shorthand. All territory in question is Moldova.

So why 2024? Here are a few of the key factors in play:

1. Gas - Ukraine has firmly stated that it will not renew gas transit contracts with Russia’s GazProm when they expire in December 2024. Moldova currently does not consume any Russian gas but does benefit from electricity generated from this gas at the MGRESS plant in Transnistria. If this electricity went away, electricity prices would rise as they did last winter when the plant was shut down. But if the gas makes life easier for Moldova, it is existential for the Transnistrian “authorities.” Residents of the region are accustomed to highly subsidized energy and the money collected from residents for gas being provided for free from Russia makes up the majority of the region’s budget.

2. Reliance on Moldovan Business Structures - Transnistrian companies are allowed to conduct business with the EU so long as they register a Moldovan legal entity. This gives Moldova leverage in regulation and permitting over most of the region’s export economy. 75% of the region’s exports go to the EU.

3. Sustained focus by international partners - Moldova’s international partners, primarily the EU, US and individual EU member states, have never been more interested in Moldova or willing to support the country. Any talk of reintegration would be *expensive.* Moldova has never had the support it has now, and we don’t know how long this will last in an increasingly dangerous world.

4. Alignment with Ukraine - Transnistria exists because it was long tacitly supported by Ukraine. This involved support to the separatists during the war and accommodations for the Russian military after it. Russia could not supply its army in Transnistria without using either Ukrainian roads, railroads or airspace. All of this cooperation is done and will not resume. More critically, Ukraine has multiple border points with Transnistria which have long been used for smuggling since Moldova does not fully control its “border” with Transnistria. Moldova and Ukraine are now aligned in the goal of removing the Russian army from the region. If the countries work together on border control, the small land-locked region has very little leverage.

Taken together, Moldova has a critical window in 2024 where various decisions will be made. Transnistria is going to need a mechanism to get natural gas after December 2024, and to do that they are going to need the cooperation of Moldova and / or Ukraine. Chisinau has no incentive to allow residents of Transnistria to go cold next winter, especially since around 250,000 of the 300,000 residents of the region are Moldovan citizens. The question is what kind of deal will be made? Will it set out a path towards gradual reintegration? Will it kick the can down the road? Will brinkmanship from one side or the other lead to crisis?

We don’t know. But what we do know is that in this one area Moldova actually holds some cards. And from the news of the last week it appears they are starting to play them.

First Moves and Countermoves of 2024

As we wrote about in last week’s roundup, Moldova’s updated customs code has massively ruffled feathers in Transnistria. The laws which came into effect on January 1st require all Moldovan companies operating in Transnistria (aka Transnistrian companies that registered themselves in Moldova in order to trade with the EU) to pay import and export taxes. This move simply aligns Transnistrian companies with all other companies in Moldova and removes an exemption that they long enjoyed. It has been explained by the Reintegration Bureau as a step towards “gradual” economic reintegration.

The reaction this week from Transnistrian “leader” Vadim Krasnoselsky was firm…ly worded. He called on the Chisinau government to stop following the “path of aggression” and also called Moldova the real “separatists” because they left the USSR. In arguing against the taxes he stated:

“It was Europe that granted Pridnestrovie [Transnistria] the right, through the Deep and Comprehensive Free Trade Area (DCFTA) program, to conduct foreign economic activity with the European Union, and thanks to them for this. What did you do? You did everything to put a spoke in the wheels of these decisions,”

Obviously the EU did not sign the DCFTA with Transnistria. Apart from the statement seeming to reject just how much the region is riding on Moldova’s coattails, his statements were even more telling when he gave an interview with Russian state broadcaster TASS saying:

“As for statements about Moldova’s accession to the European Union without the territory of Transnistria. I would call this a realistic approach. We are a separate subject of international relations. Neither the EU nor Moldova can decide for us. Therefore, if a neighboring country wants to join somewhere, please do so, and we ourselves determine our destiny,”

In these 2 statements we see how the Transnistrian position has become impossibly incoherent. Krasnoselsky wants to maintain EU market access by operating Moldovan registered companies but without paying full taxes in Moldova. Simultaneously, he wants full independence which would completely sever this relationship and make the issue of import / export taxes look like peanuts compared to the other economic crisis the move would create. This contradiction was possible with massive Russian support and leverage, now it is beginning to look untenable.

Reacting to the unified tax code, Krasnoselsky convened the region’s “security council” and announced a number of retaliatory measures against Moldova. Starting February first, Moldovan companies operating in Transnistria, as well as individuals working for the Moldovan government who reside in the region and Moldovan government buildings connected to the region, will cease paying subsidized rates for utilities and will be charged the same rates as the rest of Moldova. This is a little confusing, but basically this will apply to villages such as Varnița which is located close to Bender and is connected to Bender’s central heating, water and electricity grid. Additionally, Romanian language schools in Transnistria and some government buildings in villages in the security zone will see tariffs go up.

Additionally, people living in the security zone, particularly the villages of Doroțcaia, Pârâta, Coșnița , Pohrebea, Cocieri, Molovata Noua, and Vasilievca will no longer be able to simply bring their agricultural products into Transnistria but will need to import them. Finally, residents of Doroțcaia have been singled out for some unknown reason and will not be able to drive in Transnistria without paying a road tax.

Technically these actions were just proposed and still need to be passed in the region’s “parliament.” But true to authoritarian form they have already been implemented before the rubber stamp vote is held.

Most likely these actions are meant to signal to Chisinau that Tiraspol can still impose some costs in response to actions taken by the government. At the same time, these are small villages they are targeting. The effects will locally be harmful, but nationally they are economically irrelevant. Tiraspol signaled both that they can retaliate, but also that their tools are very limited. We’ll follow this case over the next weeks as an early example of the move - countermove that we are likely to see this year.

Negotiations with the European Union

After the European Council agreed to begin accession negotiations with Moldova and Ukraine in December, it was immediately clear that this process would dominate the news in 2024. This is not to say that there will be a consistent roll of punchy headlines about what are ultimately very technical negotiations, but it does mean that the start of this process will underly many if not most, government and parliamentary work this year.

The first news we can expect on this front in 2024 will be the Prime Minister naming a lead negotiator from Moldova. Prime Minister Recean stated on December 29th that this person would be one of the Deputy Prime Ministers. His stated reasoning was that the negotiations process will need to be a joint effort of the whole government and that only someone of this rank will be able to coordinate the necessary inter-ministerial process. Right now the 4 Deputy Prime Ministers are as follows:

1. Dumitru Alaiba, Deputy Prime Minister, Minister of the Economy and Digitization

2. Oleg Serebrian, Deputy Prime Minister for Reintegration of Moldova

3. Nicu Popescu, Deputy Prime Minister, Minister of Foreign Affairs and European Integration

4. Vladimir Bolea, Deputy Prime Minister, Minister of Agriculture and Food Industry 

No announcement has been made as to which Deputy PM will lead the negotiations, but it is possible to speculate a bit based on their briefs and backgrounds. Ministers Bolea and Serebrian are highly unlikely picks. The Minister of Agriculture has proven very unpopular with farmers as he continues to manage protests and fallout from the various challenges to the export supply chain caused by the war. Meanwhile the Minister for Reintegration is one of the least publicly known ministers and most likely does not have the high profile needed for these negotiations. Additionally, for reasons we spelled out above, he should have his hands full with Transnistria this year.

This leaves us with Ministers Alaiba and Popescu. So far, most conversation has focused on Minister Popescu being the likely candidate to lead the negotiations. In part this is because Minister Alaiba is already managing a broad portfolio of economic and digitization reforms, a workload only expected to increase during the negotiations process. But also Minister Popescu has been the lead on Moldova’s diplomacy efforts with the EU thus far and is likely best situated to continue working in the context of relationships he has already built.

This is not guaranteed and it is always possible that there could be a reshuffle or additional outside candidate nominated for negotiations. We should know more in the weeks to come.

Why is it important who leads the negotiations?

Selecting a lead negotiator is only the first important step in what will be a major regulatory and legislative effort that will span all parts of the government this year.

Vadim Pistrinciuc, Executive Director of the Institute for Strategic Initiatives explained the challenges as follows:

"We must and we are very grateful to our diplomacy, but directly the negotiation process cannot be managed or done entirely by diplomacy. Specialists from all fields will do it.”

…

"There are few people. There are few people who can manage such processes. That is why, surely, the attention of the Government must be aimed at creating a mechanism, in fact, that this process be an effective one and not an ordinary one in the context of the Republic of Moldova. Certain groups and temporary institutions will probably have to be created to ensure the entire negotiation process. Most importantly for us, to ensure the implementation of these negotiations. It's not a joke, nothing will be given for free"

Mr. Pistrinciuc was not simply speaking about who the leader of negotiations will be, but about the complexity of the whole process. Up until this point Moldova has had major diplomatic victories as well as some successes in implementing reforms. From here on out the quick-wins and low hanging fruit are pretty much behind us. Major reforms will need to be structured and implemented in record time.

This is true in terms of economic reforms as Moldova updates regulation and legislation to adapt to the EU market. But it is most immediately true in terms of Justice reform. Without successfully overhauling a corrupt justice system the country has little chance of progressing towards the EU.

Opportunities and Peril in Reforms

On one hand, the prospect of EU accession will represent a powerful motivating factor for the government and parliament to push beyond past disagreements and begin a more rapid reforms process. On the other hand, it is very possible that these reforms will be painful for citizens and companies as Moldova implements new quality standards, environmental standards, labor standards and more - and as costs pile up.

There is a reason that the accession process is called “negotiations.” The EU will be presenting many templates and best practices that they ask Moldova to adopt… but Moldova has the opportunity to make counter-offers as well. The EU is not a Federal system and member states have great leeway to implement EU directives in ways that are adapted to their local needs. This means that negotiators will face dual challenges - moving fast and moving carefully enough to protect local interests.

For many countries entering the EU this has been a political and economic discussion. For example Romania is often seen as a country that moved too fast and missed critical opportunities to create carveouts for domestic industries that then felt left behind in a rapid integration process. For Moldova the stakes are much higher. Here is another statement from Vadim Pistrinciuc on the challenge:

"What we saw last year, but also in other years, Russia obviously uses social networks, influencers, the press, to intoxicate the media space, to destroy the political character of any politician in the Republic of Moldova. We have presidential elections and this means that the hybrid attacks on the Republic of Moldova will intensify. We should not expect that there will be a quiet period. After the holidays we will see many fakes, disinformation campaigns, the target will obviously be the president Maia Sandu, her party and the Government. But not only. In general, I think that the European idea, the idea of ​​movement towards civilization, the idea of ​​European democracy will be attacked. This is what bothers the Russian Federation and Putin the most,"

Negotiations and reforms will therefore not only be a technical exercise, but a highly political one. The Kremlin’s propaganda and disinformation machine will be working overtime to attack any missteps, failures or missed opportunities. And these attacks will not only come from Kremlin proxies such as Ilan Shor. Nominally pro-EU critics will also attack the government along the way, some in good faith, some very much not.

Elections in 2024

Globally 2024 has been called the “Year of Elections.” There will be elections in 64 countries around the world, as well as the European Union, which together will theoretically involve around 49% of the world’s population going to the polls this year. The caveat “theoretically” is important though, as no one believes all of these elections will be free and fair - Russia being case in point.

In Moldova, there will be 3+ elections in 2024 that will be incredibly important to watch for Moldova’s future. They are:

1. The Moldovan Presidential Election - The election is scheduled for November and will see President Maia Sandu running for re-election against an as yet unknown set of rivals from both traditional pro-Russian parties (Socialists, Communist, Shor) and other pro-EU parties (though some like Ion Ceban’s MAN or Irina Vlah may only be nominally so).

2. The Referendum on European Union Membership - The referendum on Moldova’s European future will be held on the same day as the presidential elections. Parliamentary leaders have suggested that this would be a Constitutional Referendum rather than a consultative one and pro-EU parties hope to use it to enshrine European Integration in the Moldovan Constitution.

3. The US Presidential Election - The election between President Biden and (presumably) former President Trump is scheduled in November. It will have major impacts on the war in Ukraine and on Moldova as we will describe below.

4. Moldovan Parliamentary Elections (scheduled for 2025) - In our 3+ elections this one is the plus. While it is theoretically possible that parliament could go to early elections this year it is exceedingly unlikely. Constitutionally there are limits about how close parliamentary and presidential elections can be held and there is no indication that PAS is in a rush. With that said, parliament holds the real political power in Moldova and all this year’s presidential election and referendum will be viewed in the lens of an upcoming parliamentary election scheduled for summer 2025.

The Presidential Election and Referendum

This November voters will decide whether to give President Sandu a second term and whether to enshrine European Integration in the national constitution. Taken together these votes will be critically important, both politically and symbolically, in determining the country’s future direction.

We’ve written before about the somewhat strange nature of the Moldovan Presidency and government. Namely, that the President actually has very few powers but a stronger electoral mandate than the constitutionally appointed role of a national figurehead. President Sandu transformed this role with her political skills and force of personality and is seen by many in the country as the nation’s leader - much more so than Prime Minister Recean. In that sense President Sandu’s re-election bid is a referendum not only on her personally, but on the country’s direction. This is only underlined by the holding of a literal referendum on the country’s future direction on the same day.

There are currently no credible pro-European, anti-corruption, reformist candidates who are planning to run against the President. So politically she has secured her lane in this election quite clearly. Formerly pro-Russian, anti-EU candidates who have had a very recent “change of heart” such as Chisinau Mayor Ion Ceban and former Bashkan Irina Vlah will attempt to push into this lane, but current polls suggest that they are unlikely to succeed. Similarly, overtly pro-Russian candidates from the Socialist or Shor Parties are also polling poorly. Of course, it is very very early to trust any horse race polls.

None of this means that a re-election victory for the President is a guarantee, a lot can happen before November. It does highlight the type of campaign and political conversation that will likely dominate the year. Following the July 2021 parliamentary elections I wrote an article for the Wilson Center arguing that the election was about domestic issues, primarily corruption and economic reform, and not geopolitics. This election will very much be about geopolitics. Russia will undoubtably play a major role in terms of propaganda, disinformation and other forms of election subversion. A re-election for Maia Sandu and a codification of European Integration into the constitution is a nightmare scenario for the Kremlin. So while President Sandu doesn’t currently have strong domestic opponents, this promises to be a very contentious election year.

The US Presidential Election - What’s at Stake?

It seems strange to write anything about American politics here at Moldova Matters, but it is important to highlight just how critically important the US election is to Moldova. This is not because the Moldovan government or politicians have a stronger relationship with the Democratic vs the Republican Party. In fact, historically the “old” Republican Party was far more interested and involved in supporting Moldova than the Democrats were. This was highlighted in terms of congressional visits and the reception of Moldovan delegations in DC. Things have changed however and the major threat to Moldova is the return of Donald Trump and the MAGA GOP to the White House.

Trump is not the Republican nominee at this time and there caucuses, primary elections and not a few court cases between now and election day. But any reasonable analysis of the situation shows Donald Trump as the frontrunner for the nomination with almost no credible challenge remaining. So what does this mean for Moldova?

Most critically, American support for Ukraine hangs in the balance. The Republican Party is already holding up appropriations supporting Ukraine right now. As we mentioned above, credible experts believe that should this money not get passed through Congress, European countries will be unable to make up the difference - particularly in armaments manufacturing - and Ukraine will slowly begin to lose this war. Donald Trump is far more hostile to Ukraine, American NATO membership and supportive of Putin than rank and file Republicans in Congress. Should he be re-elected it would be an understatement to say that the political shockwave in Europe will be massive. It’s impossible to speculate what this means directly for Moldova - will USAID’s budget be cut? who would be the ambassador? this is all too far off. At the same time it is impossible not to realize that a Trump administration is strongly desired by Vladimir Putin and the Kremlin, and that a return of American isolationism would be devastating to Ukraine, Europe and very quickly to Moldova.

So this year will be a buildup to 2 elections and a referendum that will all be held in November, likely only a week or so apart. Moldova is in the challenging position of needing all 3 to go a certain way in order to secure the country’s European future. One election is very much out of Moldova’s hands, one will be hard fought and likely involve much Russian interference and a simultaneous referendum clearly highlights the stakes and end goal.

2024 will not be a boring year. We’ll be here week to week covering the ins and outs at Moldova Matters. Thank you for reading and for subscribing.