Lukashenko Predicts an Invasion of Moldova (again)

Weekly Roundup August 21, 2023

Aug 21, 2023

Welcome back to Moldova Matters. After last week’s mammoth roundup Moldova has finally settled into August which is traditionally a quiet vacation month. As such this week’s roundup will be a bit shorter. Moldova Matters will also take a short break this month and barring any major breaking news will return with normal roundups and other feature articles in September.

Moldovan Security and International Affairs

On August 14th, 45 employees of the Russian Embassy in Chisinau were escorted to the airport where they boarded planes and left the country. Officially they were not expelled but were ordered to leave in order to achieve “diplomatic parity” between the Moldovan Embassy in Moscow and the Russian Embassy in Chisinau. Semantics aside, they were ordered to leave as part of the fallout of the spying and electronic warfare scandal that we previously wrote about on July 27th.

Since the announcement of the reduction in Embassy staff the Russian government has been threatening vague retaliation. This week they announced their retaliatory action and have banned 20 Moldovan citizens from entering the Russian Federation. 18 of the 20 are MPs from the PAS Party. The other 2 are the deputy head of the border police and the director of the Independent Press Association Petru Macovei. In response Mr. Macovei stated:

"I wouldn't say it's an honorary list, but I'm flattered."

Most of those who were banned also took this as a badge of honor. PAS MP Radu Marian, head of the Finance and Economy Committee in parliament said:

"We received this news with great personal satisfaction - it means we are on the side of good. It is the clearest evidence of our categorical stand against Putin's brutal invasion of Ukraine and the war crimes committed by the Russian military in the neighboring country. (…) I have no intention of going to Russia as long as it is led by the Putin regime, or by another regime that supports the war and does not respect the independence, sovereignty of its neighbors",

Meanwhile, Belarusian President Lukashenko gave an interview this week where he continued to predict a sweeping Russian victory and occupation of parts of Moldova. In the interview he shows a map where he explained that Russian troops would move forward to capture Odesa and then link to Transnistria.

Highlighting just how out of touch the elderly Belarusian Dictator is, Odesa announced this week that they are opening their beaches for the first time since the beginning of the war. Select beaches will be open from 8 am to 8 pm, but closed during storms and air raids. The beaches have been installed with anti-mine nets and bomb shelters within running distance for swimmers. Previously multiple groups of bathers who had ignored the beach closures have been killed or seriously injured by drifting naval mines.

It is worth noting Lukashenko’s interview because Russian war aims continue to be maximalist and include designs on Moldova. While this is not discussed much internationally due to the success of the Ukrainian army it is well known in Ukraine and Moldovan political circles. Ukrainian Foreign Minister Dmytro Kuleba addressed a meeting of all of Moldova’s foreign ambassadors hosted by President Sandu this week. He praised Moldova’s resilience in the face of hybrid and economic threats and thanked the country for its strong support of Ukraine. Addressing the threats he noted:

“Be sure that Ukraine is your ally and friend. We continue to fight to ensure that Russian aggression never reaches the borders of Moldova. We continue to fight to keep Ukraine and Moldova free,”

His speech ended with "Spre victorie, dragi prienteni!” (Romanian for “To victory, dear friends!”

Extraordinary Session of Parliament

Parliament returned from August recess for an extraordinary session this week. While no overriding reason for the session was announced and multiple laws and amendments were passed, the origin of the session most likely originated in the surprise Supreme Court of Justice ruling last week rejecting many of the pre-vetted candidates for the Superior Council of Magistracy and Superior Council of Prosecutors. Following this ruling, President Sandu refused to promulgate (vetoed effectively) the law on vetting passed on July 31st and returned it to parliament for amendments. In reasoning her rejection the President asked parliament to add new language to the law that would allow the Vetting Evaluation Commission to challenge and override the Superior Council of Magistracy and Superior Council of Prosecutors in situations there those bodies act in ways contradicting the recommendations of the vetting commission without providing reasoning. Effectively, this change strengthens the Vetting Evaluation Commission in the face of increased challenges by judges to the concept of getting vetted. Parliament quickly approved the changes.

Additionally during the session Parliament proposed and then passed in the first reading amendments to the regulations on currency exchanges. These amendments are to a law passed on March 30th that required currency exchanges to record the ID information of people changing money for sums greater than 10,000 lei. This law came into effect July 1 and according to Head of the Parliamentary Committee on Finance and Economy Radu Marian it already showed problems. He noted that people were simply changing money in multiple tranches just under 10,000 lei. The new amendments require an ID to be shown for any currency exchanges of any amount. The purpose of the law is to fight money laundering and individuals who change more than 200,000 lei cumulatively will be checked by the Money Laundering Prevention and Combating Service (SPCSB). Across the EU there is no common standard for currency exchange tracking with some countries requiring IDs and some not. These changes mirror Romanian law which has similar requirements.

Economics and Infrastructure

Here is a roundup of other top economic and infrastructure stories of the week:

National Bank forecasts falling inflation. The bank is now forecasting a 2023 yearly average inflation of 13.3% and a 2024 yearly average of 4.8%. The National Bank’s target rate of 5% (± 1.5%) should be hit by October.
The Moldovan Lei is strengthening against the dollar and euro. Director Armasu of the National Bank noted that this is hurting Moldovan exports and that the bank has bought $200 million dollars in foreign currency to keep it from strengthening further. Explaining the situation Director Armasu said:

“Imports are declining as domestic demand is falling. This contributes to low demand for the currency. […] Whether we like it or not, this, in turn, leads to the strengthening of the leu. The NBM buys the currency so that there are not too large fluctuations in the exchange rate. But the NBM cannot buy foreign currency to create trends,”

The Ministry of Agriculture is preparing a plan to allow Moldovan farmers to grow “technical hemp.” The Ministry notes that the country is currently a net-importer of hemp flour, hemp non-woven material, hemp seeds, and hemp oil. The crop can be very valuable, including as an energy efficient insulation material, and can be grown in all regions of Moldova.
The Government announced new support for farmers. Small farmers growing wheat, barley and oats can receive compensation up to 400,000 lei with a total budget of 200 million lei allocated. Farmers with more than 1,500 hectares suffering from 50% or higher drought conditions can receive deliveries of diesel fuel. Farmers continue to say that the government is not doing enough and are considering further protests.
Tourism up 58.6% in first half of 2023 compared to last year. While that sounds like a heartening statistic, it is important to remember that in the same period last year Moldova faced the threat of possible invasion and didn’t have a great tourism season. Total tourists in the first 6 months of the year amounted only to 65 thousand.
Moody's upgrades Moldova's credit rating from "negative" to stable" because of "a significant improvement in the country's energy security."
The Ukrainian Energy Minister announced that the country has no plans on negotiating with Russia on an extension of the gas transit contract after the current contract’s expiration in December 2024. This is the first explicit statement confirming what analysts have been forecasting and that we wrote about in last week’s roundup. Should the contract not be renewed the entire economic basis for Transnistria’s existence will likely be destroyed. We will write more about this topic in the future. Explaining the decision Ukraine’s Energy Minister said:

“We will definitely not be a party to negotiations with the Russians. I think that next year will be indicative in terms of Europe's ability to function without Russian gas at all,”

Crime and Corruption

Former Democratic Party MP Vladimir Andronachi was released from detention on 22,000 lei in bail put up by 4 seemingly random individual guarantors. Mr. Andronachi fled Moldova when Plahotnuic fell from power and has 3 open criminal cases involving bank fraud, large scale theft, money laundering and doing all those things on behalf of a criminal organization. He disappeared after fleeing Moldova in 2019 but was apprehended in Ukraine and expelled to Moldova in November 2022. Bail was posted by 2 mayors formerly associated with the Democratic Party, a pensioner and someone noted as a “representative of a religious group.”

Anti-Corruption Prosecutor Veronica Dragolin called out the decision saying that 22,000 lei is hardly a guarantee against a second attempt to flee the country for a person accused of stealing and laundering millions of dollars. Dragolin noted that prosecutors do not have the right to appeal decisions like these by judges that they consider incorrect or even illegal to a higher court. She called on parliament to address this.

Should Mr. Andronachi flee again his guarantors will be out “their” money but will otherwise face no consequences. Commenting on his release President Sandu said:

“We see how, with the help of abuse, they [judges] are trying to save a person accused of serious corruption schemes. There are state institutions that must take action. For our part, we will insist on clearing the system of such people, of people who are trying to abuse their position for personal gain and play into the hands of corrupt officials,”

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