26 July 2023Moldova

Breaking Good

How Moldova is Moving Away from Russia Because of Russia

by Nikolay Pakholnitsky
© Vladimir Soloviev

Russia has always believed that Moldova is within its sphere of influence and therefore tried to strengthen its influence. The paradox, however, is that it is Moscow’s actions towards Chişinău that resulted in a steady decrease in Moldova’s dependency on Russia. And a decrease in the economic dimension typically has a considerable effect on both the political and geopolitical ones.

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The Moldovan authorities for about a year have been regularly and harshly criticising Russia. This has not been the case before, even despite the fact that the relations between Chişinău and Moscow have never been an easy affair. The war Russia unleashed against Ukraine radicalised the rhetoric of the Moldovan leadership. Moldovan president Maia Sandu takes care when making public speeches to draw attention to the war and, apart from that, to criticise Russia’s actions. With regard to the full-scale armed conflict, Moldova is entirely on the side of Ukraine and has been helping Kyiv within the limits of its capabilities.

Today's Moldovan leadership looks exclusively to the West, joining the EU being a strategic objective for Moldova. European integration as a foreign policy choice is planned to be written into the country’s Constitution. So also have Ukraine and Georgia aspiring not only to join the EU but to join NATO. In 2022, Moldova was accepted as an EU accession candidate and is now hoping to move up a level and start EU membership negotiations.

Of course, all of the above does not mean that the country will soon become a member of the coveted European club. But granting the EU candidacy status is undoubtedly an important step on the part of Brussels towards making sure that Moldova’s geopolitical vector remains without an alternative. In Moldova’s recent history, two kinds of politicians have been succeeding each other in power: pro-Western ones and those who looked towards the East, towards Russia, and the Russia-backed Eurasian Economic Union. The West and Moscow have been supporting those who were closer to them.

From today's perspective, pro-Russian parties seem to have little chance to come to power in Moldova. At least this is what the recent opinion polls show. It is evident that Russia’s political influence in Moldova is now on the wane. And it should be kept in mind that Moscow places this country within the ‘sphere of its privileged interests’. The use of such wording was proposed in 2008 by the then Russian president Dmitry Medvedev.

Over the past few years, there has been another trend. Following the weakening of political ties between Moldova and Russia, Moldova’s economic dependence on Russia began to weaken, too. This process deserves special attention as it cannot but affect various aspects, including politics.

The Apples of Discord

In early 2023, an unusual news story was widely covered by Moldovan media: the first container with Moldovan apples from the previous year’s harvest arrived in India by sea. The Moldovan apples travelled about 7.5 thousand kilometres in forty days.

The beginning of Moldovan apples exportation to India was personally commented on by the then Moldovan prime minister Natalia Gavrilița. “The facilitation of the Moldovan exporters’ access to new sales markets is one of the strategic priorities of Moldova’s government, especially following the disturbance of the logistic chains and closing of markets regarded as traditional. The opening of new markets for Moldovan apples is a success of the coordinated efforts between the public and private sectors,” said Gavrilița.

‘Markets regarded as traditional’, obviously, refer to Russia as well as Belarus, countries to which before the war Moldovan fruit and vegetables were exported in large quantities. They used to be moved through the territory of Ukraine which was no longer possible after February 24, 2022, and passing by Ukraine would be more complicated and expensive. The traditional logistics chains were broken. In addition, in August 2022, Russia imposed yet another embargo on the import of Moldovan crop products.

Rosselkhoznadzor [translator’s note: the Russian Federal Service for Veterinary and Phytosanitary Supervision] motivated this decision claiming that Moldovan products did not meet phytosanitary requirements. Curiously, in the same press-release, the Federal Service gave the information that the ban did not apply to Transnistria, a territory beyond the control of Chişinău.

Another curious fact emerged on this occasion. According to the Moldovan Ministry of Agriculture, with the exception of apples as well as plums and grapes, Russia was no longer the main market for exports of Moldovan fruit and vegetables. In the case of apples, Russia accounted for 90% of Moldovan exports, that is why it was so important for the authorities and producers of agricultural products to find alternative markets.

The 2022 embargo was not the first in the history of Moldova-Russia economic relations. In summer 2014, when Moldova signed an association agreement with the European Union, Moscow, which was promoting the Eurasian Economic Community (EEC), an integration project that was seen as an alternative to the EU, introduced a ban on imports of fresh and canned fruit and vegetables from Moldova. At the time, pro-Russian politicians in Moldova criticized the agreement with Brussels claiming that a free trade area with the EU would destroy domestic producers.

The Moldovan authorities’ estimates put the losses from that embargo at about $150 million. Subsequently, the problem was partially solved by exporting Moldovan apples to Belarus and from there to Russia.

Russia justified the ban on fruit and vegetable products giving the usual explanation that they were of inferior quality. But the manner in which Moscow later resumed the import of Moldovan fruit and vegetables left no room for doubt that the trade barriers had been politically inspired.

In the 2014 parliamentary election, the largest opposition party in the Moldovan Parliament became The Party of Socialists under the leadership of Igor Dodon (who would be elected president of Moldova in 2016). Dodon and his party advocated Moldova’s accession to the Eurasian Economic Union (EAEU) and even promised to cancel the Moldova-EU Association Agreement. Moscow and Vladimir Putin personally supported Dodon and his party.

In 2015, Rosselkhoznadzor suddenly allowed ten Moldovan companies to resume exports of fruit to Russia. The Socialists and Igor Dodon immediately claimed credit for it, saying the Rosselkhoznadzor’s decision was the result of long negotiations on behalf of of his party with their Russian partners.Dodon said that representatives of these ten companies had turned to him for help and urged other farmers to follow suit so he could help them regain access to the Russian market. The list of companies allowed to resume exports was steadily growing.

Incidentally, in the case of the 2022 embargo Moscow returned to the proven whitelist scheme. But instead of Igor Dodon whose political star fell, export-related issues were decided by Moscow’s new darling, fugitive businessman and politician Ilan Shor. A few words should be said specifically about him. Shor is quite a phenomenon in politics. In Moldova, he was sentenced in absentia to 15 years of imprisonment for his part in a mass fraud: in 2014, one billion dollars was illegally withdrawn from the country's banking system. Shor now lives in exile in Israel. Despite the long distance from Moldova, he plays an active role in the country’s political life. He criticises president Maia Sandu and her government, among other things, for severing all contacts with Russia and accuses the country’s leadership of being vassals. Vassals of the West, of course.

So here we are, last October Russia reopened its market for seven fruit growing companies from the Orhei district of Moldova (where Ilan Shor’s position is especially strong). Lifting the ban on these companies was negotiated by politicians associated with Ilan Shor. Today 52 Moldovan companies are allowed to export apples.

However, Moldovan producers are looking for alternative export destinations for their apples, and not without success: they started trial deliveries to India, to the Gulf States, to the neighbouring Romania. Market diversification will likely be a long and difficult process but it is underway. And Russia’s share in the apple export structure will continue to decline.

Whining About Wine

It is worth noting that the Moldovans are well aware of the concept of ‘Russian embargo’. As early as in 2006 Moldova and Georgia were among the first post-Soviet countries to have been punished by the Russian sanction whip. On that occasion Russia banned imports of Moldovan and Georgian wines. The reasons given for the ban were that the wines contained pesticides and heavy metals.

At that time, according to various sources, Russia accounted for 75%–85% of Moldovan wine exports. Wine made up about a third of all the country’s exports, and the market share of Moldovan wines in Russia was estimated at 25%.That was quite a blow to the local economy. Moldovan winemakers lost, according to different expert opinions, from $180 million to $300 million.

The embargo was instituted within a certain political context. The decision to ban exports of Moldovan wines to Russia came amidst a marked cooling of the relations between Chişinău and Moscow (Georgia had its own history of confrontation with Russia which subsequently led to the 2008 Russo-Georgian War). The relations deteriorated in 2003 when the Moldovan authorities at the last moment refused to sign the Moldova and Transnistria reunification plan prepared with the Kremlin’s participation (read more about this in the OWM article An Outpost with Feet of Clay). The Kremlin took the rejection of the plan very hard and the political relations between the two countries were at their worst for years.

After 2006, Russia repeatedly allowed and disallowed imports of wine from Moldova. In 2010, commenting on another ban Gennady Onishchenko, long-time head of Rospotrebnadzor [translator’s note: the Russian Federal Service for Surveillance on Consumer Rights Protection and Human Wellbeing], said “Moldovan wine should be used to paint fences.”

In September 2013 Moscow yet again imposed an embargo on Moldovan wines. And here the backdrop of the events is very important. The Moldovan government was at the time controlled by right-wing pro-Western politicians who succeeded the Party of Communists that ruled the country from 2001 to 2009. In 2013, things were moving fast towards making decisions important for the relations between Chişinău and Brussels. The Moldova-EU Association Agreement and the Deep and Comprehensive Free Trade Area Agreement were ready for signing, preparations were being finalised for the lifting of EU visas for Moldovan citizens. Moscow was dissatisfied with Moldova's rapprochement with the European Union and imposed a new wine embargo within a few months before the Eastern Partnership Vilnius Summit at which both sides initialled the Association Agreement.

The ban, as before, was due to wine quality issues. At the same time, Transnistria, which is outside the control of the Moldovan authorities, did not fall under the embargo. “We don't intend to act as a nanny for the Moldovan economy,” commented Onishchenko, Chief Sanitary Inspector of Russia.

Moldovan winemakers, meanwhile, learned from their operation in the Russian market. Gheorghe Arpentin, the then head of the Union of Oenologists of Moldova, said that after the first Russian embargo wine companies diversified markets and found new business partners. By 2013, Russia’s share in the Moldovan wine export structure shrunk to a third. Moldova exported to Russia $207 million worth of wine in 2005 and only $40.4 million in 2012.

After the 2013 embargo the National Office of Vine and Wine was created in Moldova. It began promoting Moldovan wines in other countries. In 2014, once the Association Agreement was signed by Moldova, the EU market was liberalised for Moldovan winemakers. It is noteworthy though, that Russia in its turn was gradually lifting the ban and allowing Moldovan companies back to the Russian market.

Statistics shows that Moldovan winemakers managed to diversify markets for wine exports. Some companies completely disregarded Russia for lack of predictability and clear rules of the game. They instead started exploring other markets, e.g. China. Russia's share of Moldovan wine exports is decreasing from year to year. At the beginning of 2023 Ukraine became the top Moldovan alcohol importer. Its share in Moldova’s total exports was at 17.6%. The neighbouring Romania was in the second place, Belarus in the third. According to Russian statistics, in 2022, Moldova did not even make it to top ten wine suppliers to Russia. For comparison, last year Moldova exported to Russia $9.5 million worth of wine, three times less than to Romania, $27.8 million.

He Who Pays the Pipe

For 30 years, Russia’s Gazprom remained the only gas supplier to Moldova. But here too, the situation has lately started to change. The problems with the supply of Russian gas began in autumn 2021, in a few months after the pro-Western Party of Action and Solidarity (PAS) had won a majority of seats in the Moldovan Parliament. PAS took over from a pro-Kremlin coalition comprising Socialists and politicians affiliated with Ilan Shor.

In October 2021, the contract on Russian gas supplies to Moldova expired. On the last day of the contract it was urgently extended one month. The pricing and terms negotiations were not easy. As it turned out later, the Russian company agreed to supply only two-thirds of Moldova’s requirements. Moreover, Gazprom threatened to cut off gas supplies completely.

The resulting energy crisis was one of the reasons that in October 2021 Moldova for the first time in its history started buying gas from alternative suppliers. At the end of October 2021, Chişinău and Moscow extended the gas contract by a further five years. But in 2022, Gazprom suddenly cut gas supplies to Moldova to 5.7 million cubic metres per day, by a third below the country's needs. Gazprom explained that decision by referring to problems with gas transit through Ukraine.

The Moldovan authorities urged the population to save energy while they were organising tenders and buying gas from Europe on credit from the European Bank for Reconstruction and Development. And by the beginning of December Moldova stopped importing Russian gas. All the gas supplied by Gazprom was redirected to the Cuciurgan power station in the unrecognised Transnistria region. The electricity generated from gas by the Cuciurgan power station is transferred to the right bank of the Dniester.

The outcome of this story is that Moldova made it through the 2022/23 winter heating season in a relatively calm manner and continues to use gas that is not bought from Gazprom. But that is not all. It is evident that with each passing year, Moldova is becoming less economically connected to Russia. In 2013, Russia accounted for 26% of all Moldovan exports ($632 million, with the total export value at $2.43 billion), in 2021, for only 9% ($276 million, with the total export value at $3.1 billion). For comparison, the share of Moldovan exports to the EU countries over the same period grew from 47.6% ($1.1 billion) to 61% ($1.9 billion).

Economics invariably affects politics and geopolitics. What is more, economics can change the geopolitical vector. The above examples show that the present situation has been created with the direct and active participation of Russia, which wanted to pull Moldova closer to itself but only achieved the opposite.

Translated from Russian by Alexander Stoliarchuk

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