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Former Soviet Republic’s Fragile Democracy Tested by Geopolitics Abroad, Corruption at Home

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a4.molodova.balan.profile.storyIt’s been just over a month since Moldova’s long-awaited Feb. 24 parliamentary elections, but enormous billboards promoting the country’s four leading political parties still seem to dwarf every major intersection in Chișinău.

The irony is that — given the inconclusive results — little may actually change in Moldova, one of Europe’s poorest and most obscure countries.

According to official results, President Igor Dodon’s pro-Russia Socialists won 35 out of 101 seats, while Vladimir Plahotniuc’s ruling pro-Western Democratic Party of Moldova (PDM) got 30 seats, followed by the anti-corruption ACUM coalition with 26, and the Șor party led by Israeli-born businessman Ilan Șor, with seven.

Moldovan politicians are now jockeying to form coalitions even as the Maryland-size country’s relations with the 28-member European Union take a turn for the worse.

Cristina Balan, Moldova’s ambassador to the United States, said her country’s Central Electoral Commission accredited a record 667 foreign observers, 17 diplomatic missions and 10 local and foreign NGOs to monitor the election, as well as 2,353 Moldovan observers, and another 81 for national elections organized abroad.

“What’s important for us is that the elections went relatively well,” she said. “It’s never perfect, but the results were recognized by all the main international partners. The OSCE [Organization for Security and Cooperation in Europe] report states that Moldova’s elections were competitive and that fundamental rights were generally respected.”  

Observers were less impressed with the vote, which saw a turnout of only 49 percent and was marred by reports of widespread irregularities, intimidation and vote-buying. There were even bizarre reports of opposition leaders claiming the ruling Democratic Party was poisoning them with mercury, charges that the PDM dismissed as ridiculous. Yet, for all the fighting among Moldova’s elite, in the short term at least, living conditions are not likely to improve for Moldova’s 3.5 million people.  

“The growing perception in the United States and the European Union is that Moldova’s ruling elite is neither pro-West nor pro-Russia, but rather non-ideological and self-interested,” Jonathan D. Katz and Stela Leuca wrote in a March 13 article for the German Marshall Fund. “It oversees a captured state, controlled by oligarch Vladimir Plahotniuc, and uses elections as democratic window-dressing while pursuing authoritarian political goals and personal enrichment at the expense of Moldova.”  

a4.molodova.parliament.storyBusiness-Oriented Approach 

But Balan, who previously served as vice president of the DPM, insists that her government has been working to implement much-needed reforms, although she admits that political divisions have “slowed down the process.”

Last November, The Washington Diplomat hosted Balan for a Q&A as part of our ongoing Ambassador Insider Series (AIS).   

At the talk, the ambassador conceded that the February vote will be more complicated than previous ones, with pro-Western candidates competing against one another and Russia supporting parties that want to polarize society and “portray the West as a space of moral decay in which the local traditions will be destroyed.”  

Balan, 42, arrived in Washington in June 2018 after spearheading DPM’s foreign affairs department, including its pro-EU agenda. In 2017, she was named Moldova’s “Top Female Politician of the Year” and also chaired the Foundation for a Modern Democracy, a think tank. Balan is fluent in both Romanian and Russian, the two dominant languages of Moldova.  

“When I graduated from high school and was about to go to university, my dream was to become an artist,” she said. “But then the Soviet Union collapsed and I had to choose a real profession. The country was poor, so I became an economist and started working for multinational companies.”  

After working in the private sector for over a dozen years, she switched to politics in 2015, although she says her business skills have been useful during her first ambassadorial posting.

a4.molodova.tank.transnistria.story“I come from a business background which is highly competitive and dynamic, and I’m trying to apply the same principles of success here,” she told us. “Just work hard, communicate well, find opportunities for development, find partnerships that would benefit both parties — and you will definitely succeed.”  

Yet for all her optimism, Balan, who was sent to Washington for a four-year term, admits she has no idea what’s next.

“I cannot be sure I will stay,” said the ambassador, who heads a staff of 10 at the Moldovan Embassy at the intersection of Florida and S Streets near Dupont Circle. “At this point, it all depends on the future coalition. The government I represent formally supports the pro-Western integration of Moldova, and we will do our best to form a coalition so that we can continue all the reforms we started.”

Enduring Specter of the Soviet Union

Those reforms are urgent in an impoverished country crippled by corruption and the remnants of Soviet communism.

Moldova itself traces its modern roots to the Moldavian Soviet Socialist Republic, which was cobbled together in 1940 from parts of neighboring Ukraine and Romania. As such, it was the second-smallest republic in the U.S.S.R. (only Armenia was smaller). The forced collectivization schemes of the Stalinist era led to widespread famine in the late 1940s and early 1950s, although the Brezhnev years brought substantial Soviet investment to Moldova in the form of subsidized factories and public housing.

By 1991, the country’s annual per-capita income was eight times higher than that of Romania. But once the U.S.S.R. collapsed, Moldova’s situation took a turn for the worse. As of 2018, according to the World Bank, Romania’s annual per-capita income exceeds $26,500, while Moldova’s hovers at around $2,700. Nearly 30 years after the fall of the Iron Curtain, Moldova has effectively replaced Albania as Europe’s poorest nation.

The Transnistria Tug of War   

One of the biggest impediments to Moldova’s economic progress has been the breakaway region of Transnistria — home to a big chunk of the country’s steel and electricity production.   

a4.molodova.eternity.memorial.storyWedged between the rest of Moldova and Ukraine, Transnistria comprises about 12 percent of Moldova’s land area and 7 percent of its population, and is internationally recognized as a part of Moldova. Yet the government in Chișinău exercises no control over the territory.  

Transnistria’s bid for independence in the early 1990s was driven by separatists who balked at becoming a part of Moldova, where people are more closely related to their Romanian neighbors. A two-year civil war ensued, and while a ceasefire stopped the fighting, Moldova lost control of the thin sliver of land — along with about 40 percent of its economy and 56 percent of its factories.  Ever since then, the Russian-speaking enclave of 500,000 people has been in legal limbo — much like the breakaway republics of Abkhazia and South Ossetia in Georgia. At present, Balan said that Moldova’s national defense capacity is around 8,800 troops, while 15,000 troops are stationed in Transnistria (including 2,500 from the Russian Federation).

“This difference in size is definitely too large not to be taken into consideration while we assess our country’s national security risks,” Balan said. “Russia has signed international agreements to withdraw the troops, and the Moldovan government has been insisting on its right of sovereignty and territorial integrity to be respected at all levels. And to be clear, it is our God-given right to national independence, which is being violated right now.”

Last year, Moldovan officials established a dialogue with their Transnistrian counterparts and even managed to sign several protocols — in what Balan calls “an unprecedented success.”

“This was done without the involvement of the Russian Federation,” she said, adding that Moldova and Ukraine have also established joint patrols along Transnistria’s entire border, enabling authorities to regain control over the cross-border circulation of goods and citizens.

a4.molodova.malldova.chisnau.storyEconomic Efforts

In the meantime, the government has been forced to get creative to make up for the loss of its manufacturing base in Transnistria. Balan said that in addition to efforts to attract foreign investment and build special industrial zones, “we adopted legislation that would facilitate the development of the IT sector. Basically any company in the world can register in Moldova virtually and pay just a 7 percent tax rate and operate in Moldova. This will help us keep our IT engineers … and prevent brain drain and of course generate GDP.”

In addition, the country’s low taxes and labor costs have attracted automotive companies from countries such as Germany and Japan to produce spare parts in Moldova, she noted.

a4.molodova.wine.storyBalan also praised her government for boosting tax revenues by 30 percent in its first year in power, while eliminating bureaucracy and raising the salaries of poorly paid public servants.

“For example, we’ve reduced the number of ministries from 16 to nine,” she said. “Therefore, we saved money and we’ve been able to increase the salaries and pensions for those who need it.”

And following a 2014 Russian ban on agricultural imports that hit Moldovan farmers hard, the country’s producers improved standards and increased imports to the EU to make up for the loss of the Russian market.

The result has been steady growth. Balan said that in 2016, “when the current government took over, we had economic development of -0.5 percent. Right now, the economic development is 5.2 percent.”

Continuing this economic growth, she said, is key to showing the people of Transnistria the benefits of returning to Moldova. Likewise, it’s critical to persuading Moldovans who’ve left the country for better jobs to return home.

“We have to open new opportunities for the younger people,” she said. “They need to travel to the EU and the United States to see how the West operates, then come back and re-evaluate their values.”

‘Theft of the Century’

That may be easier said than done, given that Moldovans in the top echelons of power may need to seriously re-evaluate their own values — as evidenced by a massive corruption case that local media still call “the theft of the century.”

a4.molodova.election.posters.storyIn June 2017, a Moldovan court sentenced Ilan Șor to seven and a half years in prison for his role in defrauding the country’s three largest banks out of $1 billion — or 12 percent of Moldova’s GDP. The businessman (who remains free on bail) says he’s innocent and has appealed the verdict. In a fair bit of irony, his Șor party — which won seven seats in the recent parliamentary election — campaigned on an anti-corruption platform.

Even as the 2014 banking scheme was unfolding and massive sums of money were drained from three banks into a web of secretive offshore companies, a fourth bank — Moldindconbank — “was routing $20.8 billion in Russian money through its accounts as part of the Russian Laundromat, the biggest money laundering operation ever uncovered in Eastern Europe,” according to the Organized Crime and Corruption Reporting Project (OCCRP). “Most of that money would leave the country as well, getting routed to Europe and beyond to pay for luxuries like two Bentley cars, expensive prep schools of some rich person’s kids and electronics for the Russian defense industry.”

OCCRP says both schemes “were similar in design, and that they both involve the same person” — Ilan Șor.

Yet Șor is not the only shady character in Moldovan politics. Oligarch Vlad Plahotniuc, chairman of the PDM, has been called the “puppet master” who’s been pulling the strings of Moldovan politics “for more than a decade without ever being in official charge of the government or holding office,” according to filmmaker Glenn Ellis, who wrote about Plahotniuc in a March 2019 article for Al Jazeera.

The oil-to-hotels tycoon has faced an array of lurid accusations — including blackmailing an investigative journalist with a sex tape recorded on cameras hidden in her apartment, and even orchestrating an attempted assassination — charges that Plahotniuc adamantly denies.

Still, his influence over the country’s political system is undeniable. Despite not outright winning the February parliamentary election, Plahotniuc’s pro-Europe party could cobble together a ruling coalition by joining forces with Șor’s ACUM, despite that party’s pro-Russian leanings.

Machiavellian Politics

These political machinations bolster accusations that Moldova’s leaders are exploiting the war of influence between Russia and the West to enrich themselves and fleece their countrymen. “They are interested in maintaining Moldova as a gray zone between Russia and the West. It’s about running a local fiefdom under the pretext of fighting a geopolitical battle, unaccountable to either Brussels or Moscow,” Vlad Kulminski of the Chișinău-based Institute for Strategic Initiatives told Foreign Policy’s Maxim Edwards for a March 3, 2019, article.

Meanwhile, Brussels has become increasingly fed up with the dysfunction. The bloc signed an association agreement with Moldova in 2014 and granted its citizens visa-free travel to the bloc. Since then, however, the EU has suspended a $100 million aid package to Moldova and the European Parliament said the country has been “captured by oligarchic interests.” 

Despite the EU’s push for democratic reforms, average Moldovan citizens seem just as disillusioned with the bloc as they are with their own politicians. The 2014 banking scandal in particular hurt support for the EU after it emerged that two prominent members of the European Parliament and a British conservative were outspoken in their support of Șor’s recent political campaign.

“That fraud is really a stain on our past,” Balan conceded. “It disappointed our foreign partners and we are still dealing with its consequences of it.”

The ambassador said the government has prosecuted the main engineers behind the laundering of over $20 billion through Moldovan banks and undertaken a “complete reform” of the financial system, with support from the IMF.

“All the banks are now partially or completely owned by Western investors, so there is no Russian presence at all in our banking system, and all the shareholders are trusted,” she said. “Of course, corruption cannot be eradicated overnight, and nobody is a miracle maker. However, all the polls show that corruption is not the number-one problem right now for our citizens. It’s probably in fourth place,” behind economic issues such as jobs and salaries.

And the type of corruption that irritates average Moldovans isn’t measured in millions or billions of dollars, she said — but rather low-level, everyday corruption such as bribes demanded by local policemen or doctors. “We’re looking at corruption through the lens of what’s actually bothering people, so we are still dealing with this,” she said.

a4.molodova.dodon.putin.story

Moscow’s Meddling

In the meantime, regardless which parties ultimately form a coalition, the new government will want to stay in the EU’s good graces, given that trade with the bloc now eclipses trade with Russia, with nearly 70 percent of Moldova’s exports going to the EU, compared to just 10 percent for Russia.

And while Moldova’s strategic importance in the rivalry between the West and Russia has been somewhat exaggerated, there is little doubt that Moscow would like to keep Moldova in its orbit.

Balan said that Russia has tried to undermine Moldova’s relations with the EU through both conventional methods — staging military exercises in the region, for example — and through hybrid warfare.

a4.molodova.glance.story

On that note, Moldova’s parliament passed a law banning Russian propaganda. Balan said that previously, no less than 20 Russian-language TV channels were broadcasting directly to Moldova without controls of any kind.

“Russian TV channels can still broadcast in Moldova,” she said. “However, all news and political shows have to be produced in Moldova, which in a way secures our media market.”

 

Such moves have been opposed by the country’s pro-Russian president, Igor Dodon — who had vetoed the transfer of a plot of land to the U.S. for the construction of a new American Embassy in Chișinău. But in early October, parliament voted to override that veto.

“Unfortunately in Moldova, we have always had disputes between parliament and the presidency,” Balan said. “Indeed, the pro-Russian president has been slowing down some of the processes. However, everyone has to know we are a parliamentary country and the president has only ceremonial powers. As regards to the Embassy of the Russian Federation in Moldova, it’s huge and the U.S. Embassy is very, very small, and we believe it deserves a better spot.”

Balan added: “I’m not trying not to criticize anyone. As a diplomat, I have to represent both parts of our country, the pro-Western and the pro-Russia parts. Even though it is pro-Western, our government is trying to be balanced and find compromise and constructive dialogue both with the U.S. and Russia.”

Balan said Moldova’s relationship with the U.S. “has grown progressively” and that she supports the Trump administration’s focus on the resurgence of great power competition. The ambassador says Moldova feels firsthand this “new competition to influence the world” — one that involves not only Russia but also China, which she said “uses debt-trap diplomacy to accumulate infrastructure and force concessions from smaller nations” in Africa, Latin America and Asia.

Yet Balan insists she’s not frustrated with President Trump’s constant anti-NATO rhetoric and his open admiration of Russia’s Vladimir Putin.

“We understand that the Trump administration is a pragmatic one,” she said. “I see it as a re-evaluation of the current … role of some international institutions and whether they do serve [their purpose] and whether they are in line with the current reality.”

a4.molodova.orthodox.church.story

Beating the Odds

For all the handwringing over transatlantic relations under Trump, Russian aggression and endemic corruption at home, Moldova faces another problem that is perhaps just as dire for its future but one that doesn’t receive much attention: its declining population. As is the case in nearly all former Soviet republics, Moldova’s fertility rates are low and young professionals are leaving as fast as they can. Higher salaries have lured one-fourth of the country’s 3.5 million people to work abroad — roughly half of them in EU countries, the other half in Russia.

According to Moldova’s National Bureau of Statistics, the average number of live births per 1,000 women fell by 6 percent from 2004 to 2014. If women of childbearing age continue to emigrate at the current rate, Moldova could lose up to 40 percent of its population by 2050.

This clearly concerns Balan, who has two children of her own.

“The Moldovan economy heavily relies on remittances from abroad, which is not a healthy thing for our economy,” she said. “And, of course, we are facing a major brain drain, so younger people just find a better place to live in, especially because we all enjoy a visa-free regime with the EU and most Moldovans can easily get a Romanian passport.”

Asked how her government might stop this demographic disaster, Balan sees no dramatic, overnight solutions — but that the overall answer is rather obvious.

“The main problem is stabilizing the economy,” she replied. “Improve living standards and of course they will come back.


About the Author

Tel Aviv-based journalist Larry Luxner is news editor of The Washington Diplomat. Managing editor Anna Gawel (@diplomatnews) contributed to this report

Last Edited on March 29, 2019