Economic Problems, International Support and Illicit Money

Weekly Roundup October 25, 2023

4th Moldova Support Platform Held in Chisinau

Last week representatives of 30 countries came together in Chisinau at the 4th edition of the Moldova Support Platform. The Platform, which was created by Romania, Germany and France at the outset of the war, is designed to help Moldova gather funds for budgetary support and energy sector projects. Welcoming the delegates, and thanking them for attending, President Sandu said:

"We have a word in Romanian - clăca. It's an old tradition in our country – when neighbors or friends get together to help each other with labor-intensive tasks like harvesting a crop or building a house. It is a process in which the community spirit is very present. The way you came together for us was just that - clăca,"

The President went on to explain that while Moldova is far more prepared for winter than last year, the country continues to face serious hybrid threats from Russia. In particular she called out Russian attempts at interfering with next month’s local elections and efforts to politically destabilize the country.

Prime Minister Recean went on the describe the country’s difficult economic situation. He noted that Moldova’s GDP decreased by 6.5% in 2022 and is projected to have a further decrease of 2.2% over 2023. Inflation is down from the high of nearly 35% but remains high at 10%. Meanwhile, budget revenues are lower than expected and the country is running budget deficits. This year’s deficit is projected at 18.3 billion lei (~$1 billion dollars) with 1.9 billion ($104 million dollars) of that deficit remaining unfilled - aka they project this shortfall but do not yet know where they will find the funds to patch it. Next year’s outlook projects deficits of 16.2 billion lei ($894 million dollars) of which 7.62 billion ($420 million dollars) are uncovered.

Prime Minister Recean at the Moldova Support Platform. Source gov.md

At the conclusion of the platform the Moldovan government announced that it received support in the form of 148.7 million euros of which 38.7 million were grants and 110 million were "loans on favorable terms." At the same time, countries participating in the forum themselves announced additional amounts of support, some of which will be allocated now but paid out over time in tranches. These include:

• France announced 300 million euros for social support projects and 200 million euros over 3 years for energy investment projects.

• Germany announced financial support of 95 million euros.

• The United States announced $90 million dollars in new support of which $30 million will go towards modernizing the Moldovan army.

• The United Kingdom announced 9 million pounds in support.

Other International Affairs News

Here’s a rapid fire roundup of other key stories in Moldova’s international relations from the last week:

• Svetlana Tikhanovskaya visited Chisinau for the Women's Forum 2023. During her trip she was recognized as the elected President of Belarus by Parliamentary Speaker Igor Grosu and met with President Sandu. After meeting with President Sandu, Tikhanovskaya gave a statement saying:

“Dear President, thank you for welcoming me to Moldova. Your courageous leadership is leading Moldova towards a bright European future. Today we begin a new chapter of our relations, which are based on common values ​​- freedom, democracy and respect for human rights. (...) Do not doubt that the future belongs to female leadership! Thanks to the president and wonderful women, Moldova has achieved so much. This is an example for Belarusians to follow,”

• Former President Dodon gave a statement opposing Tikhanovskaya and the Belarusian opposition saying they should “treasure what they have” (referring to the dictatorship of Belarusian leader Aleksandr Lukashenko) and saying:

“God forbid the fraternal Belarusian people have such pseudo-democracy as we have today in Moldova. Such unlucky and unscrupulous rule will bring any country to ruin. Believe me, you don’t need all sorts of political puppets of Soros in power. This is the right path to degradation,”

• Speaker of Parliament Igor Grosu attended the “Crimea Platform” summit in Ukraine representing Moldova. Once again Speaker Grosu reiterated Moldova’s strong support for Ukraine, and the tied fates of the two countries, saying:

“Russia will not voluntarily give up its hostile actions against Moldova, because it wants to maintain its status as a metropolis and leave Moldova as an underdeveloped colony hostile to the West. But we confront and resist these threats, fighting propaganda, disinformation and attempts to destabilize the country from within. The most important factor of our security is ensuring the independence of Ukraine as a member of the large European family,”

• Ukraine has officially recognized the “Romanian” rather than the “Moldovan” language as the language spoken by its national Romanian speaking Minority. The decision was heavily lobbied by Romania and welcomed by both the Romanian and Moldovan governments.

• Moldova continuing to work with partners to protect Moldovan citizens in Israel and Gaza. The Moldovan Ministry of Foreign Affairs has been working with Israel and the United States to try and allow Moldovan citizens in Gaza to evacuate to Egypt. So far no residents of Gaza whatever their citizenship have been able to leave. At the same time Moldovans continue to return from Israel with 357 citizens flying back over just 2 days last week. Starting October 19th the border police increased security at land borders and the airport citing the deteriorating situation in the middle east. The Ministry of Foreign Affairs has also called on Moldovans planning trips to the middle east to exercise “extreme caution.”

• Moldovans show support for Israel and Palestine. On October 19th a rally “against genocide in Palestine” was held in front of the Parliament building in Chisinau. Only around 15 people attended the rally and called on Parliament to condemn the war and “stop genocide in Palestine.” At the same time, organizers stressed that  “supporting the people of Palestine is not the same as supporting Hamas.” Moldova’s Jewish community responded by strongly condemning the protest saying that “supporting Hamas and its allies means supporting global terrorism.” The Jewish community also condemned the issuing of authorizations to hold such a protest.

Author’s Analysis: Tensions around the Israel - Hamas war in Moldova are nowhere near what they are in many countries around Europe. The fact of this protest and its condemnation serves more to highlight how unusual it is in Moldova for people to take to the streets and protest world events outside the country. The fact of such demonstrations, as well as the government and parliament’s strong support for Israel in this time show a Moldova that is changing and thinking of itself much more in the context of a global community - both for individuals and as a nation. At the same time their small size highlights that this shift in the way people are thinking about their role in the world is only beginning.

Moldovan Security News

Here’s a rapid fire roundup of the latest security and defense news in Moldova:

• Ana Revenco was proposed by President Sandu to lead the new Center for Strategic Communication and Combating Disinformation. Revenco was previously the Minister of the Interior until she resigned this summer following the shooting at the Chisinau airport. She will now lead the new center and spearhead Moldova’s fight against disinformation and manipulation of the media space.

• Soldiers from the US military Security Force Assistance Brigades (SFAB) will conduct exercises with the Moldovan army from October 25 - 30 in northern Moldova. These exercises will include parachute jumps near multiple northern cities and towns utilizing a NATO C-17 Globemaster. The authorities have asked people to be aware that movements of military equipment in the area are only exercises. Moldova has also announced exercises in Moldova with the Romanian army and participation in multi-national exercises in Germany. The pace of joint exercises and trainings with partners has continued to increase over the course of 2023.

• Moldova concludes a defense cooperation agreement with France. The agreement was first brought forward at the EPC Summit in Moldova this spring. The agreement will “include collaboration in areas such as defense policy and planning, reform of the armed forces, exchange of experience, etc.”

• Moldova’s Security and Information Service SIS announced the blocking of 22 online news portals which violated the rules of “promoting the aggressor state” in the war. Of these 21 were Russian sites and 1 was based in another CIS country. The Kremlin responded by calling this an "openly hostile step" and accusing the Moldovan government of trying to remove Russian language news sources ahead of the coming elections.

Politics and Local Elections

Here’s a rapid fire roundup of the latest political news in Moldova:

• MP Veaceslav Nigai announced last week that he was leaving the Communist Party along with some regional party members. Explaining his move he seemed to suggest personal disagreement with Communist Party actions in support of Shor saying: "We do not want to participate in any game with the so-called leftist parties led by oligarchs and runaway thieves. From today I will be an unaffiliated deputy." He did not stay unaffiliated for long and this week announced he was joining the extra-Parliamentary "Respect Moldova party" which was founded by a former member of the PDM (Democratic Party) who also once defected from the Communist Party in order to join Plahotniuc’s political faction. .

• Socialists trigger vote of no-confidence in the Recean government. The opposition motion for a vote of no confidence was proceeded by an 8 hour floor debate with lots of aggressive rhetoric and questioning of members of the government. During the debate, Socialist MP Vladimir Odnostalko claimed that the state bakery Franzeluța had raised the price of a standard loaf of bread considerably and demanded to know why. Prime Minister Recean was quite prepared for this question saying that it was “so predictable” that he asked Chairmen of the Parliamentary Commission on the Economy and Budget to buy a loaf of bread before the meeting. MP Radu Marian then showed the loaf of bread to the opposition and noted that it had not changed in price at all. At the same time the bread company had released a larger loaf, the price of which the Socialist MP was referencing. The debate continued in much this fashion until a vote was finally held at 2:08 AM where the vote of no confidence was defeated 60 - 16 with 6 abstentions. The Socialists and Communists asked that another vote be held but were denied by Speaker Grosu who asked them "Do you want to embarrass yourself one more time?"

• President Sandu promulgated a bill requiring Gagauzia to reimburse overpayments of VAT taxes from the autonomy’s budget. In the previous situation, a legal error of sorts had led to a situation where Gagauzia is able to collect and retain its region’s VAT tax but is not responsible for tax-refunds when they occur. This bill corrected this issue and infuriated Gagauzia. The Socialist Party has vowed to appeal it to the Constitutional Court.

• The European Court of Human Rights (ECHR) unanimously ruled in favor of a petition by former Prosecutor General Alexandr Stoianoglo. Stoianoglo was first suspended from office and then finally removed this summer in a long running fight by PAS to replace him as Prosecutor General which began in 2019. This summer President Sandu had finally simply fired him as court proceedings in his many criminal cases were taking too long. Stoianoglo appealed saying that his rights were violated by not getting a chance to contest his suspension or firing in court and the ECHR agreed. They ordered Moldova to pay moral damages to Stoianoglo of 3600 euros. Stoianoglo plans to appeal in Moldovan court on the basis of this ruling and try to get his job back.

• The Supreme Council of Prosecutors (SCP) approves rules for the hiring of a new Prosecutor General. At nearly the same time as the ECHR ruling, the SCP approved rules stating that lawyers or judges hoping to compete for the position must have certain professional qualifications, know the Romanian language, have no criminal record and more. The competition for a new Prosecutor General will likely take place with the backdrop of Stoianoglo continuing to stubbornly appeal his removal.

• The first election financial filings were released. Filings covered party spending from September 30th to October 18th and showed PAS in the lead with 4.5 million lei followed by “Our Party” at 1.8 million and the Socialists at 1.6 million. Of all the “Shor” parties only one reported spending any money at all with Renaissance reporting 240,000 lei in spending. Other Shor affiliated parties reported zero lei having been spent on the election. Naturally this contrasts sharply with their robust campaign spending which is apparent on the streets around the country.

“Shor” Parties News

Last week TV8 published an investigation into a new financial scheme initiated by Ilan Shor. This scheme is the "Moldovan Village" project that Shor announced in August where he claimed he was ready to give every city hall in Moldova (898 mayor’s offices) 20 million lei (1 million euros) over the next 3 years. This money would be provided in a simple application process for use in local infrastructure projects.

TV8 reports that in a short period of time 40 localities had filed applications for this money. The process was extremely simple. The mayor fills out a short application and then gets a confirmation that the money will be sent. He or she is then told to open a Euro bank account and ratify the contract with a vote of the town council. After that the money is transferred into the account. Through numerous examples and interviews journalists found mayor’s who applied for funds and quickly got unanimous approval from their town council. Asked if they care about the source of the funds everyone interviewed said “no.”

What is the source of the funds? According to Shor’s promotion of the program the money comes from his foundation. But when the contracts arrive they are signed by someone called “Igal Shved,” who has been referred to as a “generous sponsor” from Israel. Journalists discovered that the man is really Shved Igor Aleksandrovich, a 61 year old Moscow native who has resided in Israel for some years. His bank accounts are in Kazakhstan which is where the transfers to city hall come from. At the same time, no one in Moldova has ever seen this man and border police have no records of him ever entering the country.

According to PAS MP Andrian Cheptonar some transfers have gone through but anti money laundering authorities have begun to block them. He claimed investigations are ongoing.

Here’s a roundup of other stories pertaining to the unconstitutional Shor Party and its cutouts:

• Marina Tauber running for the defacto Mayor of Balti? Marina Tauber, Shor’s top deputy in Moldova has been barred from running for mayor of Balti. However, it seems she found another workaround. Victoria Sapa, a candidate for mayor closely associated with Shor has now announced that if elected she would make Tauber her “deputy.” The Shor “Party” apparently wants to pull voters in by promising that even if they can’t be on the ballot, they can still be the power behind the throne if their latest cutout is elected.

• Mihai Bagas has been freed from detention. Bagas was arrested following the undercover operation of Arina Spataru and charged with money laundering and various campaign finance crimes linked to Ilan Shor. Anti-Corruption Prosecutors commented on Bagas’s pictures on social media showing him sitting at a cafe by stating that he had been let out of arrest but is prohibited from leaving Chisinau. The investigation is ongoing but in “early stages.”

Economics and Infrastructure

Here’s a rapid fire roundup of the top economics and infrastructure news of the week:

• Causes of the budget deficits. As Prime Minister Recean explained at the Moldova Support Platform, the country has significant budget deficits and is struggling to find out how to bridge them. Experts interviewed about the causes note a few explanations. Firstly, smuggling may be increasing which causes customs revenue to fall. Additionally, VAT tax collections are down highlighting less consumer spending as well as potential cash purchases of smuggled goods. Finally, the continued strengthening of the lei against foreign currencies means that imported goods are more competitive than locally produced ones. Taken together, Moldova remains in a very serious economic situation.

• Cricova doubles its vineyard land. That state property agency has transferred 672 hectares of land from the government to the Cricova winery (state owned) for a major expansion of the winery’s vineyards.

• Russian media is attacking Moldova for offering only 153 million dollars to settle historical debts for natural gas that they claim amounts to hundreds of millions more. Minister of Energy Parlicov commented on the Russian press saying that the “amount is correct, the currency is wrong.” Moldova has in fact only offered 153 million lei. The minister continued saying:

“These information attacks indicate Russia’s painful reaction to our successes in diversifying gas suppliers and completing the separation of gas transportation system operators. These attacks also hint that Gazprom has no arguments regarding the audit results,”

• President Zelenskyy has continued promoting a “grain corridor” between Ukraine, Moldova and Romania. He has spoken about the national, regional and global importance of developing this "economic triangle" and noted that the required infrastructure investments would stimulate future trade between the countries.

• USAID has assisted the Moldovan government in creating a study on the viability of wind power in the country. The study showed that Moldova can produce 30% of its electricity needs from wind by 2030 and identified 11 key regions where large scale wind farms can be built. The Ministry of Energy is preparing tenders for potential construction projects which they hope will be ready by the end of the year.