Between Silence and Speculation: Moldova's Reaction to the Russian Crisis

Weekly Roundup June 26, 2023

Author’s Note: This Part 2 of last weeks’ roundup was supposed to come out over the weekend. As with most political watchers in Moldova and many around the world we spent the weekend fixated on the momentous and bizarre situation that unfolded in Russia. We’ll take a brief look at how that impacts Moldova and then get caught up on the news we’ve missed in the past few weeks.

A Surreal Weekend in Russia

Just as in the rest of the world, the attempted coup / mutiny / armed insurrection / whatever in Russia captivated Moldova over the last 48 hours. The press struggled to keep up while most people here followed Telegram accounts to try and understand the latest on the unfolding crisis in Russia.

This newsletter is about Moldova and we won’t throw our hat into the ring of newly minted Russia experts and comment much more on the actual events. If you are looking for a really well thought out summary and analysis of the crisis check out this post from Lawrence Freedman’s excellent substack “Comment is Freed.”

Like many governments in Europe and America the Moldovan government took a careful “wait and see” approach publicly. A spokesman for the government told press that "we continue to closely monitor the situation in Russia." Foreign Minister Nicu Popescu stated that the events in Russia emphasize more than ever why Moldova must move towards the EU and away from the "Eurasian space, destruction and war." The Foreign Ministry also advised Moldovan citizens not to travel to the regions of Russia bordering Ukraine and instructed citizens in this zone who are in need of help to reach out to the Moldovan Embassy in Moscow. Other than that there has been little in the way of official statements from those in power.

More telling though was the response from the Pro-Kremlin opposition - total silence. As of writing Igor Dodon, Ilan Shor and other senior leaders of the parties affiliated with (or controlled by) the Kremlin have said absolutely nothing about the weekend’s events. Any attempt at explaining this is mere speculation - stunned silence? fear? What will be very interesting going forward is how these politicians will reconcile their consistent invoking of Putin and Russia’s strength against the very public evidence of weakness and disorder.

We’ll follow the fallout of the coup / mutiny and reactions in Moldova in future articles.

Transnistria and Moldovan Security

Moldova’s Deputy Prime Minister for Reintegration, Oleg Serebrian, made statements last week that have started to flesh out Moldova’s approach to Transnistria following the war. The Deputy PM said that Ukraine’s President Zelenskyy is correct that the settlement of Transnistria is 100% dependent on the outcome of the war. Minister Serebrian noted that while the current 1+1 format is working well for the 2 sides to clarify technical issues, he believes that following Ukraine’s victory the problem "will be resolved by itself." He went on to explain saying that:

“… Transnistria cannot exist as an island. After all, even a microstate, more stable in terms of economy than Transnistria, for example, Andorra had to be an enclave in the European Union between France and Spain in order to regulate their relations. Technically it is part of the European Union, in fact it is not. But Andorra is an internationally recognized state, while Transnistria is not a recognized state,”

He further noted that if you exclude energy, 90% of Transnistria’s trade is now with the EU or Ukraine facilitated by companies registered in Moldovan.

President Sandu emphasized this way of approaching the region in an interview with Bloomberg saying:

“The key to resolving the separatist conflict is to continue economic reforms and fight corruption. This will put the country of 2.6 million people - one of the poorest in Europe - on a clear path to EU membership. And this will show the residents of Transnistria that it is the connection with the EU, and not with Russia, that will be beneficial for their lives, ”

Meanwhile, following a Ukrainian missile strike on a bridge tying Crimea to mainland Ukraine the Russian “governor” of the occupied Kherson Oblast threatened strikes against the bridge tying Moldova to Romania near Giurgiulesti. Moldova’s Ministry of Foreign Affairs called these statements “absolutely unacceptable” and demanded explanations from the Russian Ambassador. Russia’s Ambassador to Moldova responded by saying that all their military objectives are in Ukraine and that the Ministry of Defense and not local officials speak on matters of targeting.

Political News & Updates

As predicted in our first part of the Weekly Roundup, following the Constitutional Court’s declaration of the unconstitutionality of the Shor Party, Ilan Shor has begun consolidating his forces under a new political umbrella. Today Shor announced that he was creating a new political formation called “Chance. Responsibilities. Implementation” - which just happens to have the acronym in Romanian “ȘOR” (linguistic note: at Moldova Matters we use the Anglicized “Shor” reflecting the Romanian letter “Ș” which has an “sh” sound). Shor announced that he would have the role of “political coordinator” of this new entity. It is not clear if the former Shor Party plans to found a new party, or a “block” association of existing affiliate parties such as “Renaissance.”

Accessed via Newsmaker

Possibly hoping to capitalize on the need for new political parties, “activist” Vyacheslav Valko announced that he would begin building a party he founded in 2021 but left dormant. The party, called the "Popular Resistance Front" aims to support “complete economic, political and military neutrality” and protect the Church by banning LGBTQ rights. In his announcement Valko promised the party "will not be someone's business project." In this he was responding to the unstated fact that he is often a front man for other people’s “political business projects.” In the last Parliamentary elections Vlako ran as an independent candidate but allowed himself to be represented by proxy in all debates and appearances by (now fugitive) oligarch Veaceslav Platon. Later in April 2022 he “organized” a massive “concert” with Russian rapper Morgenstern in central Chisinau which was later discovered to be funded and backed by Ilan Shor (causing Morgenstern to pull out). It is likely that more and more political opportunists with inactive parties will emerge as the opposition lurches from criminal case to criminal case and illegal party financing continues to look for outlets.

Highlighting the almost comical illegality of the Shor Party’s financing, elections monitoring NGO PromoLex put out an analysis of party financing for 2022. In it they found that the PAS Party was dominant in (legal) party financing bringing in 16.6 million lei - more than twice their closest competitor the Socialists. The Shor Party reported 1.7 million lei, lagging behind 4 other much more minor parties. This contrasts with prosecutor’s cases citing tens of millions of dollars in illegal financing of the organization.

Responding to ongoing criminal cases and new EU sanctions Shor Party leader Marina Tauber invoked the Holocaust saying:

“With unceasing pain, I remember my relatives who were burned alive in the gas chambers of Nazi concentration camps. And when I found out that the European Union included me in the sanctions list, I just smiled and said to myself: thank you, Europe! You're mocking my family again. And all the apologies made so far are just dust in the eyes of the world community. And now, together with Maia Sandu, you are committing a new genocide against the Jews, against me, against Ilan Shor and our entire team here in Moldova,”

This led to the Israeli Ambassador to Moldova condemning the statements and calling on the Moldovan government to do more to combat “Holocaust distortion and denial.” No mention was made of the fact that Israel is itself sheltering the individual at the center of the sanctions and who runs the party making these statements.

Meanwhile, on June 22nd Parliament reacted to the decision of the Constitutional Court by voting a package that begins implementing the CC’s decision. In this package MPs of the Shor Party will retain their seats as independent deputies but be stripped of membership in parliament’s coordinating bureau and in any international standing delegations that they served in.

Other Key Political Stories

Here is a rapid fire roundup of the key political stories from the past few weeks:

• Farmers Protest for Increased Subsidies : Moldovan farmers, organized by the Farmer's Power Association, have been protesting for the last few weeks by parking tractors in central parts of Chisinau and other towns around Moldova and occasionally blocking traffic. They are protesting what they call a dire economic situation for farmers caused, in part, by the war. Farmers are demanding subsidies for small and medium farmers of 3000 lei / hectare of land as well as the temporary suspension of imports of some cereals, grains and oils from Ukraine. Farmers met with the Prime Minister and Minister of Agriculture last week but were dissatisfied with what they heard. The PM and Minister announced that the government allocated 533 million lei for subsidies and is processing a backlog of applications. Farmer’s Power says that 700 million lei is required ASAP as “by fall it will be too late.” Later farmer’s representatives met with President Sandu and called the meeting “constructive” but are continuing the protest awaiting concrete outcomes. The Director of Farmer's Power Ion Plamadeala spoke about the nature of the protests saying:

“They believe that this is someone's campaign and that we are politicizing the process. But there is no politics here. We came here because we have a very lousy economic situation. For three days [of protest] we have not achieved any results,”

• Igor Dodon congratulates Russians on “Russia Day” : The former President stated that "the majority of citizens [of Moldova] will stand for friendship and cooperation with Russia." He did not mention the war. Local press reported that Dodon secretly attended a reception at the Russian Embassy and was joined by Communist and Socialist MPs Vladimir Voronin, Vlad Batryncha and Grigory Novak, former socialist Vasile Bolya (now Shor) and Mark Tkachuk of the extra parliamentary Civic Congress Party.

• Government to Nearly Double Minister’s Salaries : The Government has announced that Minister’s salaries will increase to 50,000 lei / month with the exception of the Prime Minister. Previously a minister’s take home pay barely amounted to 1000 euros / month. Explaining the decision the PM said that this was necessary to attract and retain specialists in key positions. This has led to an outcry from opposition parties. Addressing the outcry Minister of Economy Dumitru Alaiba explained:

"I understand this is a difficult conversation. But I confess honestly that for these 4 years I received the lowest salary in my life. We must get used to the fact that ministers do not steal or engage in illegal schemes. And this means that you need to reward them for quality. Of course, we wouldn't steal even if we didn't get paid. But when you want to hire professionals, they need to make a good offer,”

• President Sandu Signs Law on Paid Internship Positions : The new law will allow state agencies to create paid internships for the first time in Moldova.

• PAS Announces Lilian Carp as it’s Chisinau Mayoral Candidate : Lilian Carp is currently a prominent PAS MP but one who is primarily associated with foreign affairs due to his service on the National Security and Defense committees. Carp began the campaign by criticizing Chisinau Mayor Ceban’s record of trying to block the Pride March.

• Biggest Pride March in Moldova’s History : This month saw Moldova’s largest and most successful pride march in the country’s history. Compared to previous years substantially less police presence was required for security (though there was still quite a lot). The Shor affiliated Renaissance Party promised a counter protest but no one showed up - either organizers or participants. Orthodox Church representatives did show up in small numbers and Veaceslav Valko held a small protest against LGBTQ rights outside the US Embassy. In the same month Estonia made history as the first former-Soviet country to legalize same-sex marriage. Speaking while marching himself, PAS MP Eugeniu Sinchevici said that legalization in Moldova will not happen in the near future. He explained:

"The role of a deputy is to represent the population. When the population is ready and supports it, then of course we will do it. Now we must explain to the population, hold various debates so that as many people as possible understand that this is normal. Until 2008, the population was not even ready for the idea of ​​European integration. It is difficult for society to accept new ideas, but this process goes in one direction - towards progress. We are moving towards the future, and this is a matter of time,”

Economic Updates

Here is a rapid fire roundup of the key economic stories from the past few weeks:

• Air Moldova “unlikely to work again” : The head of Moldova’s Civil Aviation Authority Vasile Sharamet stated that the airline’s attempts to restructure their debts were not meeting with a positive response from creditors and that the airline most likely will not work again.

• Government Revises the Airport Tax : The authorities announced that the airport tax would be cut from 9 euro / passenger to 4.5 euros / passenger. At the same time the fare tax will increase from 6.2 to 7 euros. Budget airlines have said that flights to Moldova are not realistic because of the unusually high airport tax and Parliamentary Speaker Grosu previously spoke about eliminating the tax altogether in talks with Ryanair. The choice to cut but not eliminate the tax goes against multiple previous statements of government officials. Also this week the Minister of Infastructure Lilia Dabizha made ambiguous statements implying that the Airport may be privatized again in a concession deal. She did not provide further context on the potential of a concession deal. She did note that the airport tax will be fully eliminated in December.

• Increasing Formality in Real Estate Rentals : The first 5 months of 2023 saw a 38.4% increase in tax payments for property rentals in Moldova as compared to 2022. Authorities say that the increase comes from "voluntary compliance" and "informal actions" but noted that 178 persons were checked and fined for failing to register contracts and pay taxes. The authorities encourage everyone renting out properties as AirBnbs or for long term rent not to forget to register transactions and to pay taxes.

• Various Poor Economic Indicators Reported : Preliminary numbers show that 2023 Q1 GDP has decreased 2.2% when compared to Q1 2022, though it shows a 1.1% increase compared to Q4 2022. These numbers may not mean much as Q1 2022 had some pre-war data and Q4 2022 was an especially hard month with energy prices and blackouts. Balance of trade numbers are also bleak showing that from January to April exports shrank by 4.8% when compared to the same period in 2022 and that Moldova now imports roughly twice as much as it exports. The trade deficit is now 1.6 billion USD or around 19% higher than the same period in 2022. These economic issues are compounded by the fact that…

• Moldova Saw Greatest Population Drop in History in 2021 and 2022 : Think tank IDIS "Viitorul" released a study showing population decreases of 2.35% in 2021 and 2.4% in 2022. They attribute the decrease to increased migration driven by the end of COVID restrictions and the war. In both years average annual migration accounted for around 2.1% population decrease with a negative growth rate (more deaths than births) accounting for the rest. They estimate that the country has fallen to 1956 population numbers. At peak, in 1950 there were 103,000 births, in 2022 only there were only 30,000. The study estimates a total of 3.5 million Moldovan citizens (not counting Transnistria) out of whom 2.3 million live in Moldova on a permanent basis. The study estimates that all population statistics are substantially worse in the Transnistria region which has also seen massive decline and net migration. Experts believe the labor shortage will reach a critical point within the next 2 years and will force the government to take significant action to attract immigrants and workers from abroad.

• British Fintech App “Revolut” Enters Moldova : The company bills itself as a “bank without branches” and will allow Moldovans to send money and process payments. So far only the Lite version of the app will be available to Moldovans. The entry of Revolut is a victory for the Ministry of Economy which has been working for months to attract major 3rd party payment processors to the Moldovan market.

• Patenta Holders Protest in Chisinau : Micro businesses who utilize “Patentas” protested against the government’s plan to eliminate the business structure by July 1st. A “Patenta” is essentially a business structure allowing individuals to pay a small yearly fixed fee (around 3000 lei or $150) and then conduct commerce without any additional taxes or reporting. The structure was envisioned as a simple way to legalize street vendors when it was created in the 1990s. The Ministry of Economy has mandated a transition to a structure called “Individual Entrepreneur” (IM) and has already made many concessions to simplify this process including quadrupling the yearly income cap from 300,000 lei for Patentas to 1.2 million lei for IM’s. Vendors will be required to get cash registers and keep basic records but will only pay around a 1% tax on sales. In spite of what are *very* generous conditions when compared to registered companies in Moldova Patenta holders continue protests against the change. They claim the main problem is the requirement to register sales in a cash register which is “inconvenient.” This may be true, but it is also likely “inconvenient” for some vendors that tax authorities will now be able to know if they have been complying with sales limits for the previously unmonitored business structure.

Thanks for making it to the end! That was a long catchup article! This week we will get back to our normal schedule of Weekly Roundups. If you haven’t already, consider subscribing! It’s only $5 / month and goes a long way towards supporting the work that goes into Moldova Matters!