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Report 147 / Europe & Central Asia

Moldova: No Quick Fix

The conflict in the Transdniestrian region of the Republic of Moldova is not as charged with ethnic hatred and ancient grievances as others in the area of the Organisation for Security and Cooperation in Europe (OSCE), and it is more conducive to a sustainable settlement.

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Executive Summary

The conflict in the Transdniestrian region of the Republic of Moldova is not as charged with ethnic hatred and ancient grievances as others in the area of the Organisation for Security and Cooperation in Europe (OSCE), and it is more conducive to a sustainable settlement. However, a “quick fix” in 2003, as envisaged by the Dutch Chairmanship of the OSCE, is also unlikely. To reach the sustainable agreement that is required if the forthcoming European Union (EU) enlargement is not to be compromised by a nearly open border with international crime and serious poverty, a comprehensive approach is needed that takes into account the root causes of the original conflict and the factors that have blocked the settlement process since 1992.

The Transdniestrian authorities are not recognised by any state and have been subjected to targeted sanctions such as travel bans by the EU and the U.S. but they have acquired for their small territory on the left bank of the Dniestr River with barely one-sixth as many people as Moldova some of the attributes of a state. They have gained control over local enterprises and the customs service covering their section of the Ukraine-Moldova border and their side of the internal Moldovan boundary. This enables them to profit not only from legal trade but in all likelihood also from the trafficking of other goods in transit to Moldova and beyond. Such illicit activities pose a threat to the security of the wider region. The EU, which will share a common border with Moldova after the accession of Romania in 2007, has a particular interest in settlement of the conflict and regularisation of Transdniestria’s status.

The Transdniestrian elite (and others) prefer the status quo to any negotiated agreement. An important part of a settlement process, therefore, must be to design steps that would reduce and even abolish the benefits that flow from that tainted status quo – for example, the imposition of sanctions on Transdniestrian leaders and enterprises and help for the Moldova government to establish a unified customs system along its entire border.

The vested interests of elites on either side of the river do not necessarily correspond to the interests of the broader population. Although the majority on both sides would certainly profit from increased investments and trade after settlement of the conflict, there is no general awareness of the real costs of separation and the political stalemate. Moreover, the authorities in Transdniestria hinder the development of civil society, free media and party pluralism. As a result, there is no opportunity to express views freely on the future of the region. Another important pillar of the process, accordingly, must be the fostering of an open society in Transdniestria. A settlement that merely cemented the Smirnov regime in place would be unacceptable.

At the same time, economic transformation, democratisation, rule of law, freedom of the media and human rights are also deficient on the other side of the river. The third pillar of a comprehensive approach to a final settlement, therefore, should be to make Moldova more attractive for the Transdniestrians in order to provide incentives for them to support an agreement. Joint benchmarks for legislation and its implementation in Moldova and Transdniestria should be worked out and reviewed regularly, with clear rewards for compliance and targeted punitive measures for non-compliance. For Moldova, this initially could mean not getting loans or access to aspects of the European market. For Transdniestria, it would include further visa restrictions, the freezing of individual and enterprise assets and perhaps a ban on trade with Transdniestrian companies not registered with the Moldovan authorities. Additional aims of this process would be to harmonise the legislation of Moldova and Transdniestria and reintegrate state structures that have developed in parallel for more than a decade, in order to prepare the way for reintegration.

The fourth pillar would have to be a fair proposal for a final settlement tabled by the Moldovan side. A federation – preferably asymmetric and multi-member – would be the best political system for a unified Moldova; it would not only give Transdniestria broad autonomy but also keep it in constant interaction with the central authorities. It should include a framework for a functioning dispute settlement mechanism to cope with new disputes.

Finally, any agreement would need political and military guarantees. The former should include a functioning dispute settlement mechanism. The latter are important to prevent spoilers from provoking violence, including military people on both sides until they are decommissioned, and should come in the form of an international security presence mandated by the OSCE.

Chisinau/Brussels 12 August 2003

Report 175 / Europe & Central Asia

Moldova's Uncertain Future

With Romania’s expected entry into the European Union in 2007, the EU will share a border with Moldova, a weak state divided by conflict and plagued by corruption and organised crime. Moldova’s leadership has declared its desire to join the EU, but its commitment to European values is suspect, and efforts to resolve its dispute with the breakaway region of Transdniestria have failed to end a damaging stalemate that has persisted for fifteen years.

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Executive Summary

With Romania’s expected entry into the European Union in 2007, the EU will share a border with Moldova, a weak state divided by conflict and plagued by corruption and organised crime. Moldova’s leadership has declared its desire to join the EU, but its commitment to European values is suspect, and efforts to resolve its dispute with the breakaway region of Transdniestria have failed to end a damaging stalemate that has persisted for fifteen years. Young people have little confidence in the country’s future and are leaving at an alarming rate. If Moldova is to become a stable part of the EU’s neighbourhood, there will need to be much greater international engagement, not only in conflict resolution but in spurring domestic reforms to help make the country more attractive to its citizens.

Two recent initiatives by the EU and Ukraine gave rise to hopes that the balance of forces in the separatist dispute had changed significantly. An EU Border Assistance Mission (EUBAM) launched in late 2005 has helped curb smuggling along the Transdniestrian segment of the Moldova-Ukraine frontier, a key source of revenue for the authorities in Tiraspol, the Transdniestrian capital. At the same time, Kiev’s implementation of a landmark customs regime to assist Moldova in regulating Transdniestrian exports has reduced the ability of businesses in the breakaway region to operate without Moldovan oversight, striking a major psychological blow.

But optimism that these measures would ultimately force Transdniestria to make diplomatic concessions appears to have been false. Although EUBAM has had significant success, particularly given its small size and budget, widespread smuggling continues. Nor has the Ukrainian customs regime had a decisive effect on Transdniestrian businesses, which remain capable of profitable legal trade as they were in the past. Moreover, domestic political uncertainty has raised questions about whether Kiev will continue to enforce the new regulations. 

Russia has increased its support for Transdniestria, sending economic aid and taking punitive measures against Moldova, including a crippling ban on wine exports, one of its main revenue sources. Moscow refuses to withdraw troops based in Transdniestria since Soviet times whose presence serves to preserve the status quo. With Russian support, the Transdniestrian leader, Igor Smirnov, has little incentive to compromise in his drive toward independence. The internationally-mediated negotiations between the two parties are going nowhere, despite the presence since 2005 of the EU and U.S. as observers. Although some understanding had been reached about the level of autonomy in a settlement, Moldova has hardened its position to match Transdniestria’s intransigence.

Barring a softening of Russia’s stance, the best chance for moving toward a sustainable settlement is to convince the Transdniestrian business community that cooperating with Moldova is in its own interests. There is evidence that some business leaders are growing frustrated with Smirnov and may be willing to work with Chisinau. 

For this to happen, however, both Transdniestrians and Moldovans will have to believe in the country’s economic future. Its business environment is poor, foreign investment is low, and GDP per capita is on a par with Sudan’s. The Communist Party government, headed by Vladimir Voronin, has shown little will to root out corruption and improve the business climate, and its Transdniestria policy seems based more on easy rhetoric than engagement. Moldova’s relatively new commitment to a Western-oriented policy is opportunistic rather than deep-rooted.

The EU has the leverage to play a greater role in pressuring Moldova to carry out reforms; it can also help by lifting tariffs on agricultural products, including wine, that Moldova could potentially sell in its market, as well as on products from Transdniestrian factories such as steel and textiles. Transdniestria’s smuggling revenue must be further restricted, through long-term assistance to the Ukrainian and Moldovan border and customs services and a multi-year extension of EUBAM’s mandate. The Transdniestrian business community needs confidence it can make money in a united Moldova but it is equally important to limit the economic benefits of the status quo.

Even if efforts to alter the economic calculus are successful, however, the absence of mutual trust will remain debilitating. Addressing this will likely require years of confidence-building, through political dialogue, transparent customs rules and trade relations, and measures to increase democratisation and freedom of the media on both sides. It may also require international guarantees to convince Transdniestrian businesses that they will not be stripped of their assets by the Moldovan government following a settlement.

Moldova is increasingly reliant on the EU and so is vulnerable to pressure from Brussels for reforms that would increase its economic and political attractiveness to its own citizens, including Transdniestrians. These reforms will have to have a central place if the groundwork for a settlement is to be prepared. The U.S. has been content to let the EU lead on Moldova, and the EU has done so – to a degree. But it must do far more with both incentives and pressures if it is to secure peace and prosperity in its neighbourhood and strengthen the weak roots of Moldova’s European policy.

Chisinau/Brussels, 17 August 2006