Weekly Roundup
January 8 - 14
Welcome back to Moldova Matters! In this weekly roundup we will check in with the top stories of the week in Politics and Economics. Subscribe to Moldova Matters to get our Weekly Roundup and other content sent right to your email! And consider becoming a paid subscriber to support our work at Moldova matters. For just $5 / month, the price of a nice coffee, you can support this work and help us expand into even better content!
This week in Moldova we have seen more and more signs that foreign affairs and regional developments are going to be the major challenge, or at least distraction, for the Moldovan government in the first part of 2022. With a new gas crisis looming and the threat of conflict in the east we will be watching to see if the government can maintain a positive legislative agenda moving forward.
Political Updates
From the government, the only real news regarding a positive political agenda this week was from the Ministry of Justice which proposed over 100 amendments to the legislation regulating punishments for various crimes. Overall the changes seem to focus on streamlining the rules and tweaking liability in a variety of petty offenses. For example, criminal fines for the non-payment of household utility bills have been canceled with the ministry noting that this is a civil offence and can be handled via civil action. They have also removed fines for the holding of “religious services for faiths not officially registered in Moldova.” Previously, churches not recognized by the government could be fined for gathering.
In other cases fines were raised, reduced or supplemented by community service. Here are a few examples that stood out:
Increase of fines for drivers caught driving after their license was revoked
Increased fines for organizing animal fights
Adding a community service option of 20 - 35 hours instead of a 1200 - 1500 lei fine for people who don’t pick up their dog’s poop
Increased fines for people doing noisy apartment repairs on sundays
New fines of 2500 - 5000 lei (or 20 - 40 hours community service) for citizens providing “illegal remuneration” (aka bribes) for state workers. This is particularly focused on the education sector where unofficial classroom funds are common both as bribes for teachers and as supplementary money for the classroom budget. It is also directed at the healthcare sector.
Addition of fines or community service for people faking disabilities while panhandling
Fines for prostitution have been cut in half while fines for hiring prostitutes have doubled (basically just switching places from how they had been)
Major increases in fines for selling food without properly identifying the expiration date
While all this is important it’s also fairly cosmetic in a lot of cases and leaves open questions about enforcement. Selling food without expiration stickers is pretty much what the open air bazaar does all day so it’s unclear how that will change (or if it can). Meanwhile, fines for not picking up dog poop are all well and good but seem more of a revenue generating mechanism than an attempt to clean up a city overrun by street dogs. Finally, adding fines for illegal remuneration of teachers and doctors is great… but where are the fines for extorting these bribes? “Pay me money or I won’t set your leg” or “pay me money or your kid doesn’t get into kindergarten” are much more complicated issues than a matter of fining parents and patients.
Hopefully the government and parliament can look to some bigger issues when the legislature returns to session in February.
Socialists Start to Find an Agenda
Meanwhile, the Socialist Party has begun proposing a fairly populist agenda as they seek to define themselves after last year’s major electoral defeats. This week they proposed a package of initiatives designed to fight inflation including zeroing the tax on reinvested profits for companies, zeroing taxes on natural gas consumption, selective tax holidays for 6 months to one year, moratorium on tax inspections, zero VAT taxes of essential local producers, and much more in that vein. Some of these ideas are strong and have previously had support from elements of the PAS Party - for example, zeroing taxes on reinvested profits during the economic crisis. Others are pure populism and mostly amount to just promising to cut taxes with no answers as to where budget revenue will come from. Furthermore, it’s really unclear how massive tax cuts across individuals and businesses will help “fight inflation” and in spite of that being the target of the bill this remains unexplained in the reporting.
In another move along this line the Socialists had proposed a bill in August for a one time exemption for Moldovan diaspora returning home to bring their personal property (furniture, car, etc) into the country without paying major import duties. Previously this bill was proposed in June 2021 by President Maia Sandu and drew criticism from Igor Dodon who called it "pure pre-election populism." He noted that almost everyone in Moldova knows someone in the Diaspora and would love a tax free car. Mr. Dodon said this will never pass and if it did it would draw blowback from the World Bank and IMF… but the Socialists would be willing to support it. This week, the government rejected their bill saying that it would lead to huge budget deficits.
So what’s going on? Well, the opposition Socialist party seems to be looking for ways to outflank the government via economically populist positions. Mr. Dodon proposed a bill fulfilling parts of President Sandu’s promise to the diaspora and as he predicted it was killed by President Sandu’s own party. Then they propose sweeping tax reductions in an attempt to out-flank the nominally pro-business “right wing” PAS party. This all goes back to an Explainer we did at Moldova Matters last spring about whether or not Moldova really has right or left wing parties (not really). We can see in the Socialist moves that their ideological “flexibility” has allowed them to jump all around the policy spectrum to try and find an attack on PAS that will stick. We’ll see how that goes.
Ion Ceban and the National Alternative Movement
Meanwhile, the Socialist’s main up and coming political prospect, Chisinau Mayor Ion Ceban, has founded a new political entity called the National Alternative Movement. As mayor, Mr. Ceban officially left the Socialist party though he continues to be closely associated with it. Starting a new “movement” doesn’t clearly mean he is out of the party as it is pretty common for a group in the political wilderness to spin off new party elements to try and find a formula that sticks. This one had a rather inauspicious start as Mayor Ceban didn’t really define what it was all about and failed to secure a social media presence before launch. This has led to a spoof page attracting the most online attention with the acronym MAN (using a Romanian acronym for his movement). Mr. Ceban is furious and once again accuses various parties of sabotage.
Just how the Socialists get out of the political wilderness remains to be seen, but we are starting to see a direction to put together a populist economic agenda while trying out new branding options for spin off “allied” parties as well.
Gas Crisis… Again?!
This week the leadership of MoldovaGaz announced that there is "real risk of gas disruption" due to their inability to pay GazProm for January’s gas supplies. This is being caused by gas prices rising considerably in January according to the purchase algorithm negotiated with GazProm last year. If prices hold at current rates then the household tariff which currently stands at 11.08 lei / cubic meter of gas could rise to 14.7 lei in February. Though officials are quick to caution that the market is volatile and may actually go down. This has all had the knock-on effect of Moldova’s largest electricity supplier Premier Energy requesting state regulators give them permission to increase the electric tariff from 1.51 lei / kWh to 2.79 lei - almost double. They cite increased prices for electricity from Moldova’s largest supplier in Transnistria that uses natural gas. At the bottom line though, MoldovaGaz is not able to pay for January’s gas bill since the bill went up but household tariffs have not. This has led to a shortfall of around $38 million dollars and the threat of a gas cutoff in the coming weeks if they don’t pay.
This has all led to the government convening the Emergency Situations Commission to attempt to head off another crisis. This commission has called on MoldovaGaz to seek a bank loan to patch up the hole in their accounts. Further, the commission will consider some state aid as well as deferring VAT payments by MoldovaGaz in the short term to help their cash flow. State agencies have also been directed to begin rationing energy again and the Parliament turned off heating to their extensive garage.
What is not clear is if this set of actions will actually help. MoldovaGaz is struggling to get a loan and has already been turned down flat by one bank on account of their huge “negative capital” situation arising from their large historical debts to GazProm. The company is negotiating with 3 other banks but insists that a key element of this plan must include state aid which they believe will reduce their shortfall to $18 million dollars in the short term via a combination of deferred payments and deferred taxes.
What does this all mean?
Overall, it seems likely that some solution will be found involving state aid to MoldovaGaz. The problem is that this situation is a political nightmare for the government which is trying to thread the needle of sane economic policy in the form of having consumers actually pay for their energy, and major outcry over skyrocketing prices. Minister of Infrastructure Andrei Spinu has tried to mute concerns by noting that Moldova still only pays around 50% of the market rate for natural gas in Europe and by calling Premier Energy to hold on electricity price increases until April. President Sandu discussed the issue with constituents while visiting villages and assuring residents and small businesses that the government is working on this and other issues and that we will all get through these hard times together. Meanwhile, the Socialists are calling for emergency parliamentary hearings on the issue and the full publication of the confidential agreement with GazProm as well as full compensation by the government for people’s gas bills (here’s that economic populism again). All told, the energy crisis is likely to remain a major expenditure in terms of political resources and capital as the country tries to get through the winter without interruption.
Foreign Affairs - Regional Tensions
The evolving situation next door in Ukraine continues to cast a shadow over events in Moldova while still not getting serious attention in the Moldovan press. Outlets are following the Russia - US / Russia - NATO talks but there has still been very little talk on how this affects Moldova other than noting times when Moldova’s name comes up in the talks - for example when the NATO Secretary General called for Russia to withdraw its troops from Moldova this week. Publically, the Moldovan government and presidency have said almost nothing on this topic and seem to be relying on a sort of “strategic silence” either to avoid Russian ire or to keep the topic out of the domestic political conversation as long as possible.
In concrete actions, Foreign Minister Nicu Popescu consulted with the NATO Deputy Secretary General on a phone call discussing regional stability and security. He stressed that the talks existed in the context of Moldova’s constitutional neutrality but that the state had every right to determine the best way to assure its own security. He also noted that a key priority of the Moldovan government is the withdrawal of Russian troops from Moldovan soil.
As talks seem to have stalled (or even broken down) following the flurry of diplomacy this week, the Chairmen of the Organization for Security and Cooperation in Europe OSCE has stated that the risk of war in Europe is the highest it’s been in 30 years. Meanwhile, this morning a large-scale cyber attack by unknown actors (*cough* Russia) was launched against Ukrainian government websites resulting in the defacement of the website of the Ministry of ForeignAffairs, Ministry of Education, State Emergency Service, Cabinet of Ministers and more. On each site the following message was posted in Ukrainian, Russian and Polish:
"All data on the computer is destroyed, it is impossible to restore them. All information about you has become public, be afraid and expect the worst. This is for your past, present and future. For Volyn, for the OUN-UPA, for Galicia, for Polissya and for historical lands "
This story, which Moldova seems to continue to ignore, has the potential to be hugely consequential for the country in the coming months as Russia’s threats of invasion seem more and more serious.
COVID-19 Update
Well, now we know, Omicron is here. This week Moldovan authorities announced that in a batch of sequenced positive tests around 10% of new cases were Omicron. Moldova does very little sequencing of cases due to the high cost (2000 euros per sequence) so it’s hard to know just how widespread the new variant is. At the same time, if we accept the 10% of new cases number we can infer from the experience of other, much much more vaccinated countries, that Moldova is in for a rapidly escalating COVID wave in the next month.
Currently, Moldova’s 7 day case average is 877 cases / day and 11 deaths / day. We have these numbers because after Moldova’s extended holiday period someone decided to start updating the official online portal again! That said, the *massive* addition of 585 deaths on December 31st has neither been explained nor removed. This totally skews the typical charts for daily deaths so we’ll just post the new daily case chart until this is figured out.
As you can see there was a huge spike in cases in recent days up to 1503 cases reported yesterday alone. To prepare for the wave Mayor Ceban announced that the MoldExpo COVID center would be brought back online and other hospitals are being prepared to re-enter the “red zone” to treat new patients.
Party scandals aren’t just for Boris Johnson….
Meanwhile, there was a scandal this week when the Chisinau children’s hospital held a party celebrating the 36th anniversary of the institution. The scandal wasn’t the party - these are allowed. It wasn’t even that people weren’t wearing masks - that’s not great, but pretty typical here. The scandal was that some intrepid employee decided to photoshop masks onto people who weren’t wearing them! See if you can guess who it is…
The scandal exploded over the internet with calls for the Ministry of Health to explain what is going on here. The Ministry instead chose to pass the buck and blame the city of Chisinau. Great job everyone!
Economic Updates
This week, the main economic story in Moldova remains inflation. The price of gasoline reached a record high of 21.93 lei / Liter this week as just one more sign of rising prices hitting critical sectors. In response to inflation fears the National Bank hiked the base rate by 2% up to 8.5%. While inflation is a regional and even worldwide problem we can expect it to be a major political and economic story in Moldova through 2022.
Crime and Corruption
This week something rather new happened. A fugitive corrupt official was arrested in a foreign country and will be extradited to Moldova! No, not one of the ones you’re thinking of, but someone who is important. The former director of Moldova Railways Iurie Topala was arrested in Belgium after Moldova sent out an interpol notice. Mr. Topala is accused of abuse of power and various crimes related to the pilfering of the railroad while he was its director between 2015 and 2019. He is being charged in schemes resulting in the losses of 250 million lei from the enterprise at a time when he was Mr. Plahotnuic’s client there. At this very time employees hadn’t been paid in 6 months and the national railroad was falling into a disastrous state. Mr. Topala’s property is in the process of being seized and financial investigations as to his embezzlement is underway.
Speaking of Extradition…
Mr. Ilian Shor was spotted and filmed in a shopping mall in Israel. The fugitive oligarch was seen walking through the mall surrounded by bodyguards. The prosecutor’s office responded to journalists by saying they’ve known where he was for a while and are awaiting extradition. Given that he is an Israeli citizen and their laws prevent extradition they may be waiting for a very long time…
Major Land Graft Scheme in Durlesti
This week prosecutors conducted raids and arrests concerning a large-scale case of graft involving the former mayor of the Chisinau suburb of Durlești. In 2005 mayor Veaceslav Nedelea distributed large tracts of prime property to various members of his family at no charge. Mr. Nedelea was mayor at the time and later went on to serve as a Member of Parliament in Plahotnuic’s Democratic Party in 2018. Over 21 plots of land were carved out and houses were built on them. Democrat MP Constantin Botnari as well as President of the “Democracy at Home” Party Vasile Costiuc were among those who wound up with houses on this land and were detained. Vasile Costiuc has previously been known as an anti-corruption activist of sorts and he is strongly protesting his arrest announcing he will be going on a hunger strike. He is accused of abuse of power and money laundering.
Much of the information about this criminal enterprise was formerly reported in great depth by TV8 in December 2021. As in many cases of recent arrests it seems that prosecutors and law enforcement are working through the treasure-trove of information reported by the media in years past that was never acted on under the Plahotniuc or Dodon governments. The 4th estate has been active for many years in Moldova… but only now are we beginning to see real accountability emerge from their reporting.
Ending on a High Note!
For this week’s high note, I wanted to first note the huge positive reaction that we got from last week’s high note talking about the amazing Moldovan engineers working on electric solutions in public transport! Lots of great emails poured in about this story with people asking that more stories about innovation and business success stories be featured in Moldova Matters! That particular story was featured here because a reader sent it in and suggested it as a weekly high note. Unfortunately, the press usually covers bad news and there is often quite a lot of it to get through each week. So I’m asking for your help - if you see a story that warrants attention in Moldova Matters because it highlights a positive story about just how many amazing things go on in Moldova week to week send it in!! You can leave a comment or email it to dave.in.moldova@gmail.com for it to be considered for the newsletter!!
And consider becoming a paid subscriber to support our work at Moldova matters. For just $5 / month, the price of a nice coffee, you can support this work and help us expand into even better content!