Weekly Roundup - Part 2

April 10, 2023

Author’s Note: This is Part 2 of another jam packed Weekly Roundup of Moldovan news. Part 1 focused on international affairs and security news. In this second part we will catch up on Moldovan political and economic news.

Socialists in Disarray

Tensions between the Socialists and their former allies in the Shor Party continue as defections from Socialists to Shor create a crisis in the pro-Russian camp. Former Socialist MPs Alexander Nesterovsky and Irina Lozovan, who defected to the “Movement for the People” (aka affiliated with the Shor Party), have announced that they are not going to remain independent MPs for long and will soon announce a new “left wing” political formation. This formation will primarily focus on good relations with Russia and cheap gas. They claim that this will be a new party but that they won’t announce a name yet as they are “waiting for more colleagues to join them.” They also announced that 6 more mayors from the Ocnita region have defected from the Socialists in the past week.

Responding to rumors that he would soon defect, prominent Socialist MP Vasile Bolea denied plans to change parties and called out Ilan Shor for “buying” deputies. He also suggested that the mastermind of these events might be "the master resting on a famous island in the Med," aka Plahotniuc, widely believed to be hiding in Turkish Cyprus. At the same time the MP noted that he had “disagreements” with the party specifically citing the candidate the Socialists are backing in the Gagauzian Bashkhan election on April 30th. We will focus a separate article on this upcoming election in the coming weeks.

The Socialist Party is clearly in crisis and without clear central leadership. At the same time the party is fighting back on 2 clear fronts - one in parliament, the other in Moscow where the party hopes to shore up support.

In parliament, Socialist deputies protested last week, blocking proceedings and calling on their former colleagues to give up their mandates and resign. As part of the protest the showered former Socialist MP Gaik Vartanyan with “30 pieces of silver” decrying his defection to Ion Ceban’s MAN party last December. Vartanyan replied saying that the Socialist Party had a “crisis of ideas” and vaguely threatened to publicly disclose internal divisions of the party from the time prior to his leaving.

Addressing the protest in parliament, PAS MP Dan Perciun asked the Socialists not to block the proceedings but instead to speak with prosecutors saying:

“I expect that our colleagues from the PSRM will turn to the prosecutor's office, because, obviously, these deputies did not leave in order to create their own political formations. Your colleagues bought them. They even talk about the amounts, about how it happened. Let me remind you that you ruled the country together for some time, and now they are simply absorbing you, ”

Meanwhile, Speaker Grosu noted that parliament will carefully consider the Socialist proposal for a ban on “political tourism” (party switching) but will need to first understand the opinion of the Constitutional Court on the matter.

Another protests by Socialist party members in front of the house of defected MP Alexandr Nesterovschi had some unintended consequences. Mr. Nesterovschi has never actually listed an address in any wealth declaration as a member of parliament. The protest gave journalists an idea of where he was living and helped investigative outlet RISE Moldova to track down multiple houses, apartments and other properties linked to the MP which he had never declared, nor had any income to support.

Socialists and Defectors seek Moscow’s support

The Socialists sent a delegation to Moscow last week which met with representatives of Putin’s United Russia party. The 2 parties have been official partners since 2017. The contents of the discussion were not reported in any detail. Meanwhile, the 2 defecting MPs countered by holding a meeting, via video call, with Leonid Slutsky, Chairman of the International Affairs Committee of the Duma of Russia.

Political experts interviewed by Newsmaker commented that these visits are an attempt by both political groups to gain recognition, money and photographs showing high level meetings in Moscow, from the Kremlin. At the same time, it is clear that Moscow is backing the Shor Party in street protests and with disinformation campaigns. The Socialists are fighting a rear guard battle for relevance. It is unclear whether the party can hold together should the Kremlin clearly signal that their favor now falls with Shor.

Justice Reform - The Gloves are Off

The fight by PAS to reform the judiciary is continuing to take a very hard and aggressive line as judges push back against the reforms. Speaking in an interview, President Sandu provided an overview of the broader struggle against corruption explaining the progress and next steps of the government saying:

“We promised that honest people would be at the head of the state, and this happened. We have honest people at the head of the state - in the government, in the parliamentary majority, in the leadership of ministries and agencies. This does not mean that corruption has been eliminated at all levels in institutions. We need strong institutions to prevent and fight this corruption, and for this we need to reform both the prosecutor's office and other institutions. We are in the process of changing, transforming these institutions,”

The first priority of parliament is to appoint members to the non-functioning Supreme Council of Magistracy SCM from among the candidates who passed the pre-vetting commission. Last week they appointed the first 3 members from the non-judge block of the SCM from among these candidates. According to the new legislation, the SCM is supposed to have 12 members, 6 judges appointed by the National Assembly of Judges and 6 non-judges appointed by parliament. With the judges still boycotting these appointments the SCM composition right now is 3 non-judges and 1 judge who is left over from the former contingent but who has an expired mandate and is serving in an interim capacity. MP Olesea Stamate, chairwoman of the parliamentary legal commission has stated that with these 4 members the SCM have a quorum and can start work on an interim basis. The judges disagree.

The SCM itself, in its truncated form, has appealed to the Constitutional Court CC for clarification of the quorum rules. The rules state that a quorum requires 2/3 of SCM members, but does not state whether that is 2/3 of the full 12 members or 2/3 of the members with valid mandates at any given time. Clarification of this process by the CC will define whether the SCM is able to proceed with the vetting process of existing judges or whether they need to wait for more members. In parallel with this process parliament has announced that it is seeking candidates for the other 3 SCM non-judge positions and that applications will be held open until May 5th.

Judicial Reform in Parliament

In addition to the fight in the SCM which is focused on the vetting of existing judges, parliament passed 2 pieces of legislation that are part of a broader attempt to reshape and reform the justice system.

First, parliament passed a bill in the first reading that clearly delineates responsibilities between the multiple prosecutor’s offices and anti-corruption agencies. These agencies previously overlapped and in many cases all blamed the others for lack of progress in fighting corruption. The proposed reorganization is as follows:

• Anticorruption Prosecutor’s Office - This office will be tasked with prosecuting “high level” corruption which is defined as corruption by the President, members of parliament, members of the government, judges, prosecutors, CNA staff, and SIS officers. These cases will presumably be tried in the new Anti-Corruption Court that the President and parliament have promised will be created in the next 3 months.

• National Anti-Corruption Center NAC / CNA - These agencies will be responsible for “systemic corruption” which most likely refers to organized corruption within state agencies and publicly owned companies.

• Criminal Investigators with the Ministry of Internal Affairs (Police) - This agency will be responsible for investigating petty corruption, most likely focusing on individual extortion and bribery complaints against state officials.

Additionally, the law reforming the Supreme Court of Justice SCJ was approved in the second reading. This law is designed to simplify and focus the work of the SCJ and will make the following primary changes:

• Limited Scope - The SCJ’s scope will be limited and the body will no longer act as a final appeals court. The new focus will be on “ensuring uniform interpretation of the law” by lower courts. In effect, the SCJ is being changed from a national appeals court to be more like European courts or the non-constitutional responsibilities of the US Supreme Court (recall that Moldova, like much of Europe lodges the responsibilities for determining the constitutionality of a law in the Constitutional Court. The Supreme Court of Justice is the highest court in the land for non-constitutional matters).

• Changes in Composition - The new court will have 9 of 20 justices appointed from legal professions outside the pool of judges. This is also in line with many European states and brings opportunities to appoint professors of law and other legal professionals onto the court.

• Amicus Briefs will be allowed in the court.

• Structural Changes to the Court Organization - The law reduces the powers of the President of the SCJ and permits the members of the court to self organize staffing as a committee. Currently the SCJ has 2.5 times more staff than the entire Ministry of Justice. This will not change immediately but the court will have more discretion on how to organize their staff and resources.

In parallel with the passage of this reform, the government is dealing with a crisis at the SCJ. As we discussed before, on February 14th 16 judges from the SCJ resigned, followed by 4 more judges later in the month. This left just 5 judges serving on the court, out of the 25 that bad been serving. In response to the growing blockages at the court, and the continued strain with the judiciary overall, the government exercised its emergency powers and has “temporarily suspended the right of judges to resign” from the court. This decision lasts for 30 days or until a judge can be replaced. The government called the decision a “last resort” to ensure that the court continues functioning as reforms come into effect. Judges and others have harshly criticized this action saying that it is impossible to force someone to work who doesn’t want to.

Taken together, all these updates about the rapid passage of reform legislation, along with an ongoing battle with judges over the vetting process, has highlighted a major change in both the PAS parliamentary faction and government since last year. The party appears focused and is willing to be aggressive to ram through reforms in order to weed corruption out of the system. It is likely that this will be a top story in Moldova over the months to come as the Constitutional Court weighs various aspects of the reform.

Economic Updates

Here is a quick roundup of the key economic and political / economic news of the week:

• Falling Interest Rates - The National Bank has lowered the base rate to 14%. Previously the rate hit a high of 20% before being decreased to 17% in February. This additional rate reduction indicates growing confidence from the National Bank that inflation will come under control this year.

• Ministry of Economy moves forward on contactless business reform - The Ministry of Economy has won government approval for a package of reforms allowing for contactless business. Moldovans and foreign investors will be able to sign documents, access online government information portals and buy company shares or property from anywhere in the world. Foreign investors will no longer have to travel (sometimes urgently) to Moldova in order to sign and stamp a document as online signatures will be available outside of Moldova. This is a major reform that will make it easier for companies to operate and for international investors to operate in Moldova without all the managers and shareholders having to travel frequently.

• Business Income Tax Reform comes into effect - Starting in March reforms to the income tax system come into effect whereby the state no longer taxes re-invested profits of companies. Starting this tax year profits will be taxed when distributed to shareholders but not if they are re-invested in operations or job creation.

• President Sandu praises ODA reform - The President spoke last week praising the reform of Moldova’s small business support agency ODA (formerly ODIMM) saying that through "major transformations [ODA] and has become a transparent, efficient institution, a real bridge between the state and entrepreneurs." The agency is rolling out new financial support programs for companies in 4 projects - Women in Business, Small producers, Local Suppliers (to increase export capacity) and Rural Tourism.

• Pensions indexed 15% in April - The government announced plans for a 15% increase in pensions for people receiving under 11,700 lei / month. The government explained that indexation is only at around 1/2 of inflation because they do not have the funds to keep up with the current 30% inflation rate.

• World Bank announces 50 million euros for small business support - Explaining where the money will go Deputy Prime Minister and Minister of Economy Alaiba said:

  “The financing project includes the digitalization of public services for enterprises so that entrepreneurs do not waste time and money on bureaucratic procedures. At the same time, more efforts need to be made to eliminate corruption in inspections. In addition, laboratories are being upgraded to make it easier and cheaper for entrepreneurs to certify products to gain access to the export market. Another important measure is access to finance. We will allocate $15 million to guarantee loans issued to enterprises. Another $13 million will be spent on developing enterprises and increasing export competitiveness,”

• Transnistria taxes onion export - The “authorities” in Transnistria imposed a $0.7 / kg export duty on locally grown onions. The duty will remain in place until the new harvest and is designed to prevent rising prices in the region. Prices in Moldova have quadrupled from 5-6 lei / kg to 20-22 lei / kg mostly driven by higher demand in Ukraine where there are shortages caused by the war.

• The Chisinau Airport is officially back in government hands - The state has taken control of the airport with the official ending of the 49 year concession given in 2013 (corruptly) to companies linked with Ilan Shor. The government has gained assets including a fleet of luxury VIP transport cars, and is opening investigations into the operations of the airport. PAS MP Radu Marian has particularly called on prosecutors to investigate news reports that Shor Party members maintained political offices at the airport itself. One of the first actions of the new government appointed management is likely to be the reduction or elimination of the 9 euro / passenger airport fee, among the highest regionally, in order to attract new low cost carriers including RyanAir. Speaking about the historic victory for the government President Sandu said:

"In 2013, through false transactions, Șor, supported by Plahotniuc, stole Chisinau International Airport from the citizens. As a result of this scheme, the state lost revenues worth 1.6 billion lei. (…) Today justice is done. Chisinau Airport is once again owned by the state, i.e. the citizens. (…) I ask the state institutions to ensure that the property taken over is inspected and the detected irregularities are documented. I request that the fee of 9 euros per passenger be revised, in the sense of the maximum reduction of this fee. I ask the Public Property Agency, the airport administration to ensure optimal operation from now on, so that citizens benefit from more routes, to more destinations, at affordable prices. (…)",

Crime and Corruption

We’ve omitted this section recently as most high profile crime and corruption stories get folded into other sections - especially news about the Shor Party. But there are a few stories worth noting from the last weeks that we should briefly outline here:

• Students allege widespread bribery at the American University of Moldova - Foreign students from Nigeria, supported by the Nigerian Union of Moldova, held a press conference alleging widespread corruption at their university. PAS MPs responded denouncing corruption in academia and noting that without a fight against corruption in universities, Moldova will be unable to attract foreign students. The Nigerian student are calling for an investigation but none has been announced yet. This news is noteworthy as it is the first time students have actively and publicly pushed back against corruption in the education system. It shows either remarkable bravery, or a sense of fresh confidence that the current authorities will respond. Personally, I think it’s both.

• National Anti-Corruption Police CNA raid ANSA offices at Giurgiulesti - CNA officers confiscated 1000s of euros, dollars, 148,000 Moldovan lei, Romanian lei, Ukrainian Hryvnias and more currencies from health department workers from ANSA at Giurgiulesti customs point. ANSA employees were apparently making 15,000 lei per day (double the national monthly salary) in bribes for allowing goods to enter the country without health safety documentation.
  Correction: This article originally stated that ANSA inspectors were working at the port of Giurgiulesti. In fact, the inspection point was at the Giurgiulesti Customs Point, which is not in the port itself.

• The Bismobil Kitchen Saga -

Author’s Note: Here is a story that we haven’t given much coverage to at Moldova Matters since it broke in January. This is mostly because it’s a rarity - a major criminal fraud case that has nothing to do with corruption. Initially we put the story on the back burner given the firehose of more critical news… but developments in the case have made it weird enough to warrant attention.

In January, news broke that the Moldovan-Romanian company Bismobil kitchen was suspected of massive fraud. The company sells custom made high-end home kitchens and apparently took a huge number of orders including advanced payments and then failed to deliver on the kitchens. Mihail Şaran, director and founder of Bismobil kitchen Moldova was arrested on January 19th while attempting to leave the country with a one way ticket to Moscow. He was held in pre-trial detention before being released on house arrest last month. Meanwhile, Bismobil kitchen Romania also collapsed with the founder being arrested. He was responsible for running 40 companies which acted as regional affiliates to Bismobil and also engaged in alleged widespread fraud by taking payments for kitchens without delivering them. Customer losses in Romania are estimated at 808,000 euros. In Moldova they are even higher with 148 suspected victims and a total of 40 million lei (2 million euros) in lost payments.

The case took an unexpected turn this week when Mihail Şaran did not show up for a hearing in his case. Prosecutors had conducted searches last week while Mr. Şaran was under house arrest and alleged that he was using his limited freedom to contact witnesses and order the destruction of evidence. Prosecutors were in court seeking his return to pre-trial detention when he didn’t show. Now police say that the accused is on the run having escaped in his lawyers car and removed his ankle bracelet near Dendrarium park. Amazingly, Mr. Şaran actually stopped immediately under a residential security camera to destroy his ankle bracelet before running off. Mr. Şaran’s lawyers deny that they helped him to escape and claim that he told them he needed to go home because he was feeling sick. Police are asking the public for help in seeking the fugitive.

Bismobil Kitchen founder Mihail Şaran - image accessed from ZdG

This case is notable because of the large number of victims and huge amount of money that vanished for a very small country. The profile of the victims is also notable as these were not cheap kitchens. A scheme to defraud Moldova’s budding middle, and well established upper, classes is a fairly new phenomenon in the country. We’ll keep an eye on the case as it is a good example to follow of how Moldova’s justice system does against criminals who are not related to the government, or from their own ranks.