by Professor Stefan Hedlund 

It is not often that the Republic of Moldova is in the news, and when it does happen the news is not usually good. Wedged in between Ukraine and Romania, this tiny country of about three million is the poorest in Europe. It has a sordid history of corruption and regulatory capture by unscrupulous oligarchs. Aside from agricultural products, its main export has been young women, trafficked into Europe’s sex industry. And the government in Chisinau has been forced to cohabit with a largely Russian-populated breakaway republic, calling itself Transnistria, protected by a Russian military garrison of 1,500 troops.

Against this unhappy background, the recent news of Russia, Europe and the United States joining hands to achieve a political breakthrough can only be called inspiring. All three powers are supporting the formation of a new Moldovan government that is bent on reform and includes representatives from the pro-Russian as well as the pro-European camps. It has even been suggested that these developments could foreshadow a much more important watershed in Ukraine, building on the recent victory of President Volodymyr Zelenskiy in parliamentary elections.

EU: frustration and euphoria

The strongest commitment to optimism on Moldova has been made by the EU. Having been included in the EU’s Eastern Partnership in 2009, Chisinau signed an association agreement with Brussels in 2014 that promised a range of opportunities for increased trade and cultural exchange. As claimed in a recent EU Fact Sheet, many good things were achieved, ranging from increased trade and better infrastructure to stronger governance.

Reality, unfortunately, did not live up to those happy visions. It is true that over 70 percent of Moldovan goods are now exported to EU markets, but this is largely thanks to a 2013 Russian embargo on almost all Moldovan produce. Despite claims of “stronger governance,” organized crime and corruption continued to hamper development.

In 2015, amid growing frustration with “democratic backsliding,” Brussels was stunned by revelations of a massive bank fraud, whereby well-connected operators had embezzled about $1 billion from three Moldovan commercial banks. This scam involved the equivalent of 12.5 percent of Moldova’s entire gross domestic product.

Brussels was stunned by revelations of a massive bank fraud

A tipping point was reached in the summer of 2018, when a pro-European candidate, Andrei Nastase, won a mayoral election in Chisinau. When his win was invalidated on murky grounds, Brussels called foul and announced it was blocking 100 million euros in Macro-Financial Assistance (MFA).

Those sins are now forgotten. Inspired by the recent developments, on July 15 the EU announced that it would transfer 14.5 million euros within days, targeting programs to bolster public administration. On July 24, it followed up with a $45 million assistance package to support economic development ($26 million), establishing the rule of law ($9 million), and implementing the association agreement ($10 million). Provided the announced reforms remain on track, the MFA will also be unlocked in installments, beginning in early fall. In terms of financial assistance, the outcome appears positive.

Hung parliament

The background to Moldova’s recent spate of good news began with the February 24 general election. The main contenders were the pro-Russian Socialist Party, the pro-European ACUM bloc (uniting the liberal PAS and PPDA parties), and the Democratic Party. With polls suggesting the Socialists might get as much as 39 percent of the vote, the stakes were high. Following a decade-long standoff between the country’s pro-Russian and pro-European camps, the election had the potential to give Moscow a decisive victory over Brussels.

One of the key players was Moldovan President Igor Dodon. Having led the Socialist Party since 2011, he was elected to the presidency in November 2016, with 55 percent of the vote. He ran on a pledge to end his country’s flirtation with Europe and to restore good relations with Russia. In this year’s parliamentary election campaign, the Socialists vowed to scrap the EU Association Agreement. As this would have effectively pulled the country out of the European sphere, it would also have eased the pressure on Russia concerning its military presence.

The February election returned a hung parliament. The Socialist Party won a relatively disappointing 31.1 percent, followed by the ACUM bloc with 26.8 percent, and the ruling Democratic Party with 23.6 percent. (In fourth place, at 8 percent, came the party of Ilan Shor, a 28-year-old businessman and politician convicted of masterminding the $1 billion bank fraud. The case is now under appeal.) Given that ACUM had declared that it would not enter a coalition with either of the other two major parties, it was expected that the Socialists would form a coalition government with the Democratic Party.

The fact that this did not happen may be explained by reluctance on the part of the Socialists. Having been in power in various coalitions since 2009, Moldova’s Democrats are a self-styled pro-European social democratic party that has emerged as a political machine controlled by an oligarch named Vladimir Plahotniuc. A Moldovan grand duke who also holds both Romanian and Russian passports, Mr. Plahotniuc has been alleged to be the de facto owner of a large chunk of the country, controlling such important institutions as the Constitutional Court. In a word, he presents an extreme case of state capture.

The Constitutional Court responded on June 9 by declaring the Sandu government unconstitutional and removing President Dodon. As interim president, Mr. Filip ordered the parliament to be dissolved and snap elections to be held on September 6. Moldova was becoming a European version of Venezuela, with two governments and presidents.

What set the Moldovan case apart from its Latin American counterpart was that President Dodon received support from all the major outside powers – including Russia, the EU, the U.S. and Canada. On June 14, the Filip government resigned, as did all the members of the Constitutional Court. Claiming to be in fear of his life, Mr. Plahotniuc abruptly left the country, allegedly for London. Ilan Shor was said to have left on a private plane for Turkey. Other cronies of the regime also preferred to leave, likely in fear of prosecution.

Moscow’s motivation

Round one thus seems to have gone to the alliance of unlikely bedfellows between Russia and the West. The question is how long it can last, and the answer hinges on what led the respective sides to get involved.

Geopolitically, the main reason for optimism is that Russia and the West have proven they can work together. Their common interest in breaking the Moldovan oligarchy was enough to override any partisan interests in supporting pro-Russian or pro-European parties. Can this be taken as a sign that the two sides are ready to cooperate elsewhere – for example, to use President Zelenskiy’s election in Ukraine as an opener to resolve the conflict in Donbas, and possibly the issue of Crimea as well?

The main reason for optimism is that Russia and the West have proven they can work together

One caveat concerns what the Russian side is likely to bring to the table. Dmitry Kozak made news already in 2003, when he tried to engineer a compromise that would have transformed Transnistria into an autonomous republic in a federal system. This proposal was refused by the West because it failed to address the Russian military presence. Mr. Kozak’s successor in handling Moldovan affairs, Dmitry Rogozin, has been declared persona non grata in Moldova.

Any ambition to draw parallels between Moldova and Ukraine will have to address Russian ambitions, which remain the same for Ukraine as they were in Moldova – to impose a federal system. This solution for Donbas has been on the table since 2014, and it likely remains as taboo for President Zelenskiy and his new government as it was for their predecessors.

Lonely position

A more credible reason why the Kremlin did not push for a coalition between the Socialists and the Democratic Party, which would have kept the pro-European forces out of power, is that Mr. Plahotniuc had run out of friends. Two of his closest associates, Ukrainian President Petro Poroshenko and the leader of Romania’s ruling party, Liviu Dragnea, have left office – the former voted out and the latter having been sentenced to jail.

Even Russia’s patience had run out. Russian prosecutors have brought charges against Mr. Plahotniuc of having created a criminal group that illegally removed over 37 billion rubles from Russia, and of being part of an international group that specialized in trafficking large quantities of Moroccan hashish to Russia.

This suggests that Russia’s acquiescence in taking out the Moldovan oligarchy may have been driven more by self-interest than concern for the rule of law. The proof of the pudding will be how the Kremlin reacts to the Socialist Party’s current mandate to clean out corruption, which has deep roots in Russian circles. Moscow’s enthusiasm is likely to begin flagging soon.

A reformer’s tale

Similar caution may be warranted with respect to any Western belief in reenergized reforms. Having campaigned on an anti-corruption agenda, the new government has opened prudently by proclaiming its ambition to overhaul the country’s judiciary. Ms. Sandu jubilantly declared that “The dictator has fallen. The oligarchic regime is in opposition as of today.” Andrei Nastase followed up by telling parliament that “It is our duty to prevent the country’s descent into dictatorship.”

There is a distinct danger here of being seduced by attractive new faces. Outside observers take heart from Ms. Sandu’s resume as a Harvard-educated former World Bank advisor who served as education minister in 2012-2015 and narrowly lost the presidential election in 2016.

Here we have a strong sense of deja vu. Russia in the 1990s and Ukraine during the post-Maidan years both featured prominent Western-educated politicians and officials who communicated well with Western audiences and won the respect of financial markets.

A good example is Natalie Jaresko. This American-born Ukrainian investment banker was trained at Harvard and served in numerous key posts in international financial markets and institutions, including as a governor of the European Bank for Reconstruction and Development (EBRD). She was appointed Ukraine’s minister of finance in December 2014 and worked wonders with foreign creditors, staving off a sovereign default. But in April 2016, following speculation that she might rise to become prime minister, she was abruptly dropped from the cabinet.

‘An odd moment’

The moral of Ms. Jaresko’s story is that the roots and consequences of protracted oligarchic rule go deep. They are by no means easy to eradicate.

In a November 2018 evaluation of its association agreement with Moldova, the European Parliament said the independence of the judiciary had been so undermined and collusion with business interests had become so widespread that it resulted “in the Republic of Moldova being a state captured by oligarchic interests with a concentration of economic and political power in the hands of a small group of people.”

The anti-corruption watchdog Transparency International has also detailed how the Democratic Party under Mr. Plahotniuc’s leadership has systematically used law enforcement and anti-corruption bodies as tools against political opponents.

The roots and consequences of protracted oligarchic rule go deep

Although Mr. Plahotniuc and some of his more notorious cronies have now left the country, it bears noting that the former oligarchy was not restricted to a few men at the top. It was a complex network of favors, obligations and kompromat that permeated and shaped the entire political system.

Just as there are good reasons to retain at least some optimism that President Zelenskiy’s recent ascendance will have a positive impact on Ukraine, one should not discount the signs of a new dawn in Moldova. But in both cases, even a positive scenario would be a long slog.

Concerning the geopolitical implications, it is easy to agree with Russian observer Fyodor Lukyanov, who argues that while the case of Moldova does suggest great power cooperation can help normalize situations in countries between Russia and the West, “it’s more likely that it was just an exception, an odd moment that will not last. I think the forecast for this region is geopolitical conflict as usual.”

Mr. Plahotniuc has been implicated as a beneficiary of the 2015 bank fraud, and The New York Times has referred to him as “Moldova’s most-feared figure, a nominally pro-Western tycoon with a reputation so toxic that even his political friends usually try to keep their distance in public.”

With no coalition possible, incumbent Pavel Filip of the Democratic Party remained in office as acting prime minister.

Venezuela clone

On June 3, three senior representatives from the major outside powers arrived in Chisinau – EU Enlargement Commissioner Johannes Hahn, U.S. State Department Director for East European Affairs Brad Freden, and Russian Deputy Prime Minister Dmitry Kozak. Their ambition was to break the gridlock, and their timing was impeccable.

On June 7, the Moldovan Constitutional Court ordered parliament to be dissolved and new elections to be held. The basis of the ruling was a law that requires a government to be formed within three months of the election results being certified. On the following day, the Socialist Party announced that it had struck a surprise deal with ACUM. With joint control of 61 of 101 seats in parliament, the new alliance would remove the Filip government from power and allow Maia Sandu of PAS to become prime minister.

(Link to original article: https://www.gisreportsonline.com/can-moldova-set-an-example-for-ukraine,politics,2971.html)

Professor Stefan Hedlund is Professor and Research Director at the Centre for Russian and Eurasian Studies, at Uppsala University, Sweden.

The views expressed on AustrianCenter.com are not necessarily those of the Austrian Economics Center.