Independence Day and More. Catching up after a slow August.

Weekly Roundup: September 7, 2023

Welcome back to Moldova Matters! After our late August break we’re back with a roundup of the news you may have missed in this slow vacation month. Going forward we’ll be back on our normal weekly schedule plus we have some other exciting articles about key regional and national developments we’re excited to share in the weeks to come.

Moldova and Ukraine Celebrate their Independence

In late August both Moldova and Ukraine celebrate their independence from the Soviet Union. This year, as with last, this holiday has taken on much more significance as citizens of both countries are faced with threats to their independence on a scale not seen in the last 32 years.

On Ukrainian Independence Day, August 24th, President Sandu congratulated Ukraine on their independence. The President appeared in a video filmed in front of the Presidency with a youth choir singing “Oh, the Red Viburnum in the Meadow.” This traditional Ukrainian song has become one of the anthems of resistance during the war and the song, as well as the President’s comments ending with “Glory to Ukraine” served as a strong reminder of Moldova’s support for Ukraine and gratefulness to the country which is also defending Moldovan freedom.

Moldova celebrated its independence day on August 27th with various events, speeches and marches celebrating the country’s 32 years of independence. President Sandu released a video entitled “In the Eyes of Moldova - Reflections of Our People.” In the video, set to an a cappella version of a traditional folk song, Moldova is shown through the eyes of its citizens. Natural beauty, hope for the future, dignity in work and the readiness of the national army to protect peace. In her speech celebrating independence the President said:

“On this day, as we celebrate our freedom and unity, we share a sense of optimism and hope for the future of our country. I want to talk today about those who make our country stronger every day. I want to talk about the world, because this is the most sacred thing - to be able to raise your children in the world …

We managed to keep the peace at home. We do not start wars and do not want them on our land or anywhere else. This is a firm desire of the Moldovans, and no one has the right to violate it. We are choosing the European path because we are choosing the world,”

In an additional event, highlighting the young country’s history, the President met with members of the first Parliament who declared independence 32 years ago.

Regional Developments and Security

Here’s a rapid fire roundup in the key security news of the last weeks

• Russia continues attacking Ukraine’s Danube river ports. Attacks against Ismail and Reni have targeted grain export infrastructure and killed multiple people while injuring many more. During one of these attacks Russian drones struck across the river in Romania, most likely by mistake. Ukraine first reported the strikes hitting Romanian soil but Romania denied any attacks on their land before eventually admitting that parts of drones were found.

• Russia’s Foreign Ministry accuses Moldova of becoming a “logistical appendage” to Ukraine. In comments to the press the spokeswoman for the ministry called out Moldova’s strengthening of infrastructure connections to Ukraine, most likely referring to the work of Moldova Railways to transport Ukrainian grain to western markets. The Russian Ministry also accused Moldova of being a storage and transit point for “American weapons” being supplied to Ukraine. The Moldovan Foreign Ministry denied this and pushed back on Russia’s interference in Moldovan affairs. While there is no indication at all that Moldova facilitates the supply of weapons, it is important to note that the Russian Foreign Ministry, whether it is lying or not, is seeking to paint Moldova more and more as a party to this conflict.

• RISE Moldova reports that the identity of a Moldovan engineer was stolen and used in the Nord Stream pipeline attacks (allegedly). German authorities suspect that 5 men and 1 woman who rented the sailboat Andromeda were responsible for the attacks on the pipelines. The man who rented the boat showed a Romanian passport which had been altered but bore the legal information and ID number of a Moldovan engineer living outside Chisinau. Apparently the German authorities referred this to the Romanian police who realized it was a fake. No one informed the man whose identity had been stolen until RISE released their reporting. The man was alarmed to be caught up in such events and was unsure how his passport could have been used as he has only traveled on it a few times.

• Fallout from Chisinau Airport attack. The new Mister of Internal Affairs, Adrian Efros, announced the results of the ministry’s investigation into the fatal shooting at the Chisinau airport. 9 employees of the police, border guards and officials were reprimanded with 4 of them being dismissed. The head of the border police was severely reprimanded but kept his job. The investigation found numerous gaps in security including the lack of any new emergency places after a review conducted in 2013… a time with a substantially different security environment. The report also laid some blame on Shor’s company Avia Invest which managed the airport. It said the company failed to create secure areas for detention and interrogation as well as failing to provide a space for locating an “operational group” (SWAT style response team) on the airport grounds. The Ministry is implementing upgrades in the security structure and posture following the attack.

• Moldova marked the Day of the National Army on September 3rd. Speaking on the occasion Prime Minister Recean applauded the steps taken by the army to modernize in the last year but noted that there is much more to be done. He specifically cited the Swiss model of “armed neutrality” as a long term goal for Moldova. In a speech President Sandu said:

In the face of danger, calamities and emergencies, we trust our soldiers with confidence. The crises of recent years and the relentless border war have reminded us that the safety of our citizens depends on the good training and equipment of the National Army. We are now working to compensate for the period of neglect of the defense sector. This year, by mobilizing internal resources and with the assistance of strategic partners, we achieved a significant increase in budget allocations for defense modernization. The military and civilian employees of the National Army must have good living and working conditions, modern equipment and quality training.

• Defense Minister Nosatii spoke about modernization of the armed forces. He stated that Moldova will have air identification radars which will cover the whole country by the end of the year. These are early warning systems, not air defense, and were purchased with the national budget. The Minister also announced that from September 25 to 29 the army will hold exercises. Reservists will be called up by their local military recruitment offices with summonses to participate in exercises and refresh their skills.

Energy and Infrastructure

The biggest news of the last week was the conclusion of an international audit of MoldovaGaz’s debts to its parent company GazProm. Recall, in late 2021 GazProm suddenly notified Moldova about $756 million USD in “historical debts.” The Russian energy giant demanded Moldova accept the debt and negotiate a payment plan under the threat of cutting off gas during winter. At the time, Moldovan authorities claimed that this was nothing more than threats and bullying and that they would not recognize this debt without an audit by an internationally recognized firm. The audit was conducted by the firms Wikborg Rein Advokatfirma AS (Norway) and Forensic Risk Alliance & Co (UK).

This audit is now complete and it clearly shows that the vast majority of the debt is unsupported by documentation, unenforceable, or otherwise defunct. Minister of Energy Parlicov announced that in the end Moldova only owes $8.6 million dollars to GazProm. He has offered to pay it and close the matter.

Here is a short summary of how the auditors came to this conclusion:

• $278 million in debt was recorded as coming before 2003 and did not have supporting documentation. Effectively, GazProm claims this debt but did not prove it existed.

• $400 million more was awarded to GazProm by Russian Arbitration courts in a process not recognized in Moldova. This is unenforceable in Moldova.

• In addition, MoldovaGaz made investments to the tune of $134 million dollars between 2011 and 2020 which were not approved by the National Energy Regulator of Moldova. These investments included a series of fancy new office buildings. Given that these investments were not approved, and that MoldovaGaz is majority owned by GazProm the auditors concluded that these were essentially investments made in place of debt repayments to the parent company.

• Additionally, the Audit found that Moldova can counterclaim $160 million dollars that GazProm failed to pay in gas transit fees via Transnistrian infrastructure.

There is much more detail in the report and auditors also raised serious questions about the initial creation of MoldovaGaz under GazProm and the methods of valuing assets during the network’s privatization. In conclusion, Minister Parlikov has offered the Russians $8.6 million. They will then respond and almost certainly reject the audit and the offer. Moldova no longer buys gas from Russia (except Transnistria) so they have far less to threaten than before. The audit itself cost $1.15 million which the Minister noted was a pretty good deal for the taxpayer.

Responding to the news, Prime Minister Recean stated Moldova’s position that

“We will not allow this debt to be placed on the shoulders of citizens. Moldova is not going to pay non-existent debts, and the citizens of Moldova, obviously, are not obliged to pay for this either,”

In a parallel development, the Ministry of Energy announced that a Romanian company SRL "Vestmoldtransgaz" (operator of Iasi-Ungheni-Chisinau pipeline) will take over all gas transit infrastructure in Moldova under 5 year tender. This infrastructure will be separated from GazProm and now managed by Vestmoldtransgaz which is 75% owned by the Romanian government and 25% owned by the European Bank of Reconstruction and Development EBRD.

Through these various actions Moldova is completing its break with Russian energy supply and clearly sending a message to Moscow. The country is still heavily reliant on Transnistrian electricity (made with Russian gas) so this is not a full break, but a major step.

Political Updates

Here’s a rapid fire roundup of the top political news of the last few weeks:

• Everyone is violating the new election rules. As local elections approach the Central Election Commission CEC continues to remind candidates and parties about the prohibition against campaigning before the campaign period starts, as well as the new rules that require pre-approval of public messaging from current officials and local governments. No one is listening and enforcement appears selective. PAS and the Socialists both have tents up in parts of the country and are passing out election materials. Victor Chironda, DA candidate for Chisinau mayor has campaign videos online. Ion Ceban, Chisinau Mayor keeps trying to put out materials from city hall discussing their projects (without his name or a call to vote) and CEC keeps rejecting them. In a particularly telling situation the CEC prohibited the Balti City Hall from publishing a flier called “Transparent City” saying that it did not have “public value.” The mayor of Balti plans to appeal this in court. To give a flavor of what these new CEC rules imply for current officials using public / administrative resources in their messaging, and why this is resulting in a confusing situation, here is the CEC’s justification for rejecting the Balti mayor’s office communications:

“After examining the content of advertising materials, the commission found that they do not contain any references to the problems of society, the prevention or fight against corruption. They talk only about the successes of the Balti City Hall. According to the Law on Advertising, messages of public interest cannot contain information about the management achievements and / or goals of public sector entities,”

It appears that this election season will be very contentious as candidates and parties attempt to adapt to the new rules and restrictions. Undoubtably there will be more and more allegations of subjective or unfair application of the rules as well.

• On September 9th a Congress of Deputies of all Levels will be held in Gagauzia. In the run up to this event the leader of the People's Assembly of Gagauzia Dmitry Konstantinov suggested that the delegates to this congress may declare Gagauzia a Republic and announce intentions to secede from Moldova. He stressed perceived wrongs against the autonomy by the Chisinau government and called for various concessions including elevating Gagauzia’s status in the Constitution and for prosecutors to refrain from investigating electoral crimes in Gagauzia. Within a few days Mr. Konstantinov was rapidly backtracking these remarks calling the Chisinau government “good neighbors,” saying that Gagauzia is surely part of Moldova and that he does not support secession at all. It’s unclear what will come out of the congress but so far signals have been very mixed.

• President Sandu gave a wide ranging interview to CNN’s Christiane Amanpour in English covering the impacts of the war in Ukraine and Moldova’s challenging neighborhood. It’s well worth a listen in full.

• The People’s Assembly of Gagauzia PAG approved the structure of Bashkan Hutsel’s executive team (kinda). In an extremely contentious meeting on August 25th, Bashkan Hutsel once again tried to get the PAG to approve her team after making some concessions and replacing some members who did not speak the Gagauz language. Deputies of the PAG began by attacking the Bashkan for the conduct of one her her deputies who recently scolded a mayor with 12 years of experience for not properly attributing the success of all his projects to Ilan Shor. Deputies warned the Bashkan not to “teach the mayors” or she would “break her teeth” in the process. Eventually the Bashkan stormed out of the meeting at which point deputies called a 30 minute break before sending someone to get her again. A deputy remarked that “Thirty minutes is enough for her to call her daddy,” [Ilan Shor]. Finally the PAG approved the structure of her team but with the caveat that she trim the team down and return with a new structure by November 15th. They did not approve the actual team members and again failed to do so on September 5th citing technical problems with some applications and 3 person’s failure to pass a language test. Vice-Chairman of the People’s Assembly Alexander Tarnavsky spoke frankly to the Bashkan highlighting the bitterly antagonistic relationship developing between the executive and the legislature of the autonomy saying:

“I don't want you to take this personally. You are someone's parent, someone's daughter, and maybe a good person, but you are not ready for this job. You haven't made your own bumps in the mayor's office or in the area of ​​public administration. I don't blame you. I blame the person who is trying to take advantage of you [Ilan Shor]. The best way out for everyone in this situation is [for you] to leave.”

• Police continue to interdict illicit funding for parties and criminal activity. Irish police detained a man trying to fly from Dublin to Moldova with $116,000 in cash in his bags. Moldovan police also detained a person trying to enter the country with over 100 pre-paid debit cards from a gulf company that specializes in untraceable cards. These have not been linked to Shor or any other group but an uptick in illicit funds trying to enter the country is very likely ahead of local elections.

• Journalists asked Bashkan Hutsel’s team about where they are getting money for numerous infrastructure investments that she continuously announces. The Shor officials refused to comment other than saying that it was from anonymous “Turkish Investors.”

Economic News

Here’s a quick roundup of important economic stories from the past few weeks:

• The Government is continuing to see successes in attracting new air carriers to establish direct flights to Moldova. AirBaltic has announced direct flights between Riga and Chisinau to start in 2024. HiSky announced a doubling of flights between Chisinau and London starting in late fall. Finally, Aegean Airlines will begin running direct flights between Chisinau and Athens in November.

• A new EU / UNDP program will provide 50,000 Moldovan families with vouchers to purchase more energy efficient appliances. Vouchers will cover 80% of the cost of approved appliances (refrigerators, electric stoves, washing machines) and additional vouchers will be given for LED light bulbs. The purchase of the program is to reduce demand for energy this winter.

• The Minister of Agriculture stated in an interview that the government may soon ban the cultivation of crops in regions where there is not sufficient rainfall to support them. Particularly this is targeted at corn. The Minister then backtracked and said that the government would not ban farmers growing what they want but may soon tie agricultural subsidies to the Ministry’s “recommendations.” This did not help the Minister’s already strained relationship with farmers, but is backed up by experts who say that major changes will need to be made to accommodate changing climate conditions.

• On September 4th Moldova ceased to have any “Duty Free Shops.” The network of stores, allegedly owned by Ilan Shor, are now subject to taxation just like any other business in Moldova.