Note #7 – July 2005

Moldova-Transnistria: Avoiding Total Destruction
by Alexander Romanov
 

The business on both banks of the Dniestr became hostage of the politics  

“Transnistrian Market and its impact on Policy and Economy of the Republic of Moldova” is the topic of the analytical report prepared by the Center for Strategic Studies and Reforms (CISR) on the initiative of Friedrich Ebert Stiftung (Germany). The report’s presentation and discussion with participation of a series of independent experts and representatives of different institutions from both banks of the Dniestr revealed that viewpoints of the parties coincide in many respects, while differences lie in their interpretation sometimes. Let us consider everything gradually however. 

Paradoxes of Ignorance 

“We know each other very little, therefore all attempts to find a common language have failed yet” were the words of Anatol Gudym, CISR’s director, who started the presentation of the study. “International bodies try to make nongovernmental organizations, mass media and other representatives of civil society search for common grounds through financing multiple seminars, roundtables and projects. But authorities from both banks of the river refuse to talk to each other, analyze and comprehend arguments, search for mutually acceptable solutions. One can only wonder why Russia, Ukraine, OSCE propose ways to settle, while the direct participants in the conflict neither propose any initiatives, nor express wish to meet each other halfway, to search for a compromise. That is why one of the principle tasks of our study was to show the possibility of economic interaction between Moldova and Transnistria, the impact of decisions made today upon development of business connections both between these two banks (Moldova – Transnistria) and as regards the wider region as a whole”. 

The statement that “the Transnistrian problem in its economic dimension greatly influences policy, economy and, above all, existence of the Republic of Moldova as a young European state per se” accentuates the importance of the analysis realized by the Center for Strategic Studies and Reforms. The main idea of the study is that impact of Transnistria’s economy upon Moldova is considerable and “multi-vectored”, but this phenomenon has been poorly examined, and politicians do not consider it while making decisions. During the discussion of the research done by the CISR, experts stressed out that the case in point concerns both the direct impact and regional collaboration where the Transnistrian economy takes part. 

What does this imply? The report produces many numbers and statistical calculations that make one take a different look at the left-bank region’s economy – rather than through the prism of the stereotyped assertion of the “black hole”. Dynamics of the Transnistrian export to the European Union countries as compared to the aggregate export over the last years is more than impressive: 2000 – 19.3%, 2001 – 23.4%, 2002 – 34.0%, 2003 – 32.2% and 2004 – 33.3%. Those who wish can easily make certain that success of the Republic of Moldova is far less modest in this regard: it achieved its best indicator last year with 30.1% of export to the EU countries within the total export. It would be naïve to assert that Transnistria’s trade with the EU countries is criminal and comes within the definition of the “black hole”. As well as the export to the Mediterranean and Balkan countries is, share of which within the total export increased from 7.7% in 2000 to 19.3% in 2004.

This data predetermined the experts’ conclusion that Transnistrian economy should not be considered a separate component, but from the viewpoint of regional dimension instead. It is obvious that the left-bank region of Moldova plays a considerable role in export of textile, metal roll and machinery to the European market, as well as lets the neighboring countries (Ukraine, first of all) earn quite a good amount from transit, as raw materials for MMZ and finished articles are mainly transported via the Ukrainian railroad and sea ports in Odessa and Ilyichevsk. Moldova considers all this trade to be illegal, but the fact that buyers of goods are the EU and more distant countries makes this assertion disputable. The more so since Transnistrian producers of textile and metal even enjoy EU preferences granted to the Republic of Moldova. Therefore toughening of control over the Moldovan-Ukrainian border that Moldova thinks to be a blockade of foreign trade activity of Transnistrian enterprises can actually turn out to be a new cause of tension with neighbors, rather than a key to the conflict settlement. 

Moldova Disappears 

On the other hand, Moldova itself lost Transnistrian market for its goods. The study underscores that in the course of just a few last years Moldova’s weight within the foreign trade turnover of Transnistria has substantially decreased. Transnistrian export to the Moldovan market has constantly been at 11-13%, while Moldovan export to the region dropped to 1.5-2%. Vladislav Kutyrkin, former Moldova’s StatePlan chairperson, who participated both in preparation of the report and the presentation discussions, mentioned in this regards: “We have no idea what to do with sugar, cigarettes, perfumery, confectionary and many other goods, while Transnistria has been importing all this from Ukraine and Russia. Today, Transnistrian producers of canned goods, furniture, machinery and electronics seek a possibility to work legally, through Moldova, while we turn away from them and demand taxes. Does it make sense? No enterprise can pay taxes twice, as well as disregard local problems and state bodies. That is why we should find a mutually acceptable way out of the situation, to let enterprises work legally and develop, instead of trying to block their activity for good to make them go bankrupt. If interosculation of business happens and two banks of the Dniestr reintegrate from the economic viewpoint, politicians will quickly come to an understanding and find common grounds. But we do it all back to front: we want to find a political settlement of the problem first and then attend to reestablishment of economic ties. Such an approach can result in that there will be nothing left to reestablish”.  

Mikhail Mankowsky, entrepreneur, said that businessmen from both banks still keep in touch more or less and even solve and do something jointly. But state officials often impede such cooperation. “It is very important to stop looking at the problem of economic interaction with Transnistria from the political viewpoint and create conditions for an unhampered and efficient work of businessmen. It is our people who live and work there, plain citizens, with whom we lived together for a long time and will live in the future. We talk of free trade with the EU, countries of the Pact of Stability, while we do not want to create basic conditions for the free movement of capital, services and goods to ensure efficient utilization of the whole potential of the economy here, at our home”. 

It is natural that both the report and the discussion especially accentuated that both parties have to take mutual steps to develop a constructive economic dialogue and collaboration between Moldova and TMR. In particular, it was noted that Moldovan goods disappeared from the Transnistrian market due to a specific reason, namely the introduction by the authorities of the unrecognized republic of a 100% additional fee for goods imported from Moldova. 

Let Us Interchange the Cart and the Horse  

Moldova and Transnistria have already moved away from each other and got used to living in such an “aggrieved” format over the fifteen years of the conflict. As it was noted during the discussion, it is not accidental that opinion polls show that Moldova’s inhabitants place the Transnistrian settlement among the second ten most important problems of our state. At the same time, both politicians and plain people on both banks of the Dniestr realize that direct financial losses and economic problems due to the lack of a common economic area grow every year, as a snowball. And their effect upon Tiraspol and Chisinau is equally negative (as well as upon our neighbors). The report produces specific numbers and facts in this regard. As international experts estimate, Moldovan budget loses circa $470 bil per year due to decreasing tax and customs earnings and higher transportation expenditures. Formation of an autonomous enterprise in the Transnistrian sector of railroad and rupture of relations with Moldova in this field caused severe damage to both the conflicting parties and the neighboring Ukraine, which invested more than $2 bil into technical reconstruction of the Cuciurgan border station, and bears billion losses due to the impossibility to use it now. As for Transnistria, the same cause will make its budget receive $2 bil less this year. Yet Moldova found nothing better than spend $20 bil for urgent reconstruction of the Revaca-Cainari railroad branch line. The fact that goods from South of the republic or backward deliveries will have to be transported through Ocnitsa (northern region of Moldova), which costs twice as much, is not considered for all that.  

“Experts of the CISR supported by Fridriech Ebert Stiftung have done a very important and useful job. And it would be quite good to present its main findings to the Government, Parliament and President so that they would take into account these factors while making decisions concerning Transnistria” said Elena Gorelova, economist. “It is time for us to interchange the cart and the horse, create conditions for a full-bloodied economic collaboration of both banks and formation of a common economic, customs and currency area on the territory of the Republic of Moldova. It will be to everyone’s benefit.”