Note 6

Seminar on Moldova / Transnistria
Institut de relations internationales et strategique (IRIS)
Paris, 28 April 2006

Flow of Goods in the Transnistrian area:
“Normalization” of the Customs Regime
by CISR

The chronicle of the Transnistrian conflict totals about 20 various initiatives to find a solution acceptable for all parties. Most of them intended to try to “cover” all aspects of the problem, including political, legal, military, economic and humanitarian ones. The most noteworthy of those attempts (after the military stage of the conflict during March-July 1992) were:

• Proposals of the OSCE mission formed again and mandated to facilitate a comprehensive political framework for negotiations, consolidating the independence and sovereignty of the Republic of Moldova along with an understanding about a special status for the Transnistrian region (Report #13, November 1993);

• Moscow memorandum (may 1997);

• E. Primakov’s plan on the “common state” (August 2000);

• Kyiv paper signed by three mediators – Russia, Ukraine and the OSCE that described the RM as a unified, federal state (May 2002);

• D. Kozak’s memorandum stipulating for creation of an asymmetric federation of the Republic of Moldova and a federal subject, the Transnistrian Moldovan Republic (September 2003);

• Finally, V. Yuschenko’s initiative based on the “3 D’s principle” – demilitarization, decriminalization and democratization (April 2005).

Each of those attempts, no matter how constructive or formal it was, implied implementation of both the aggregate of coordinated steps and guarantees and the readiness to compromise, refusal from ultimatums and unilateral actions. This concerned political, legal, military, as well as humanitarian aspects of the conflict. 

The position of the Center for Strategic Studies and Reforms (CISR) is that economic interests have been constantly underlying the “Transnistrian conflict” and showing through from the very beginning. First, it was interests of the region as a whole, as the richest and the most industrially developed part of soviet Moldavia and, consecutively, interests of the local “red directors’ corps” who proclaimed their enterprises as “collective” ones. Later, after the monetary privatization with participation of both local elite and foreign investors (Russian first of all), it was interests of the new owners and the local administration collaborating with them. 

The beginnings of the current dramatic situation as regards traffics in the Transnistrian sector of the Moldovan-Ukrainian border lie in the realities new for the Republic of Moldova as a WTO member (2001) and Ukraine’s preparation to become a member of that organization, as well as their common pro-European orientation. And there can be distinguished three stages in the customs drama at the Moldovan-Ukrainian border (Transnistrian sector). 

Stage 1. First, as is well known, Transnistria was deprived of the right that Moldova had granted to that region in 1996 to use customs stamps of the Republic of Moldova performing export-import operations. Transnistria objected to that, citing the Moscow memorandum that specifies its right for self-supported foreign-economic activity[1]. Ukraine’s reaction was noticeably late due to active involvement of its economic agents in traffics in Transnistria (Ukraine's share in import of goods to Transnistria is 40% as of 2005, which is 1,5 times larger than the import from Russia) and it was only May 15, 2003, when the State Customs Service of Ukraine and the Customs Department of Moldova signed the Protocol on common recognition of shipping, commercial and customs papers. Further, Moldova’s Government issued decree #712 on July 12, 2003, under which Transnistrian economic agents can execute papers necessary for export-import transactions only after the temporary registration at the State Chamber of Registration of Moldova. 

To prompt Transnistrian enterprises to legal traffics it was established that: they are conferred ID numbers free of charge; no customs fees are collected for declaration and customs clearance of goods during export/import, except for customs legalization of 0.18%; licenses are issued free of charge; Transnistrian economic agents bear no liability for the budget of the Republic of Moldova. In the upshot, circa 320 enterprises of the region obtained such a registration in Chisinau during a year, before the mid 2004.  

Stage 2. During another outbreak of exacerbation in the Transnistrian zone ( “school crisis” – blockade of Moldovan schools situated in the region) the Moldovan Government decreed on July 30, 2004, that economic agents may only execute export-import transactions within the Moldovan borders in strict compliance with the national legislation and international norms and rules. And on August 17, 2004, the Moldovan Ministry of Foreign Affairs notified the Ukrainian Government that passage of goods belonging to physical persons is suspended at 11 frontier points situated in the Transnistrian sector of the Moldovan-Ukrainian border (beginning from August 20, 2004). 

At the same time, Moldova submitted a proposal for EU and OSCE to conduct an international monitoring operation in the area. The arguments were as follows: ensuring economic security and regional stability in the Transnistrian zone and legalizing foreign trade activity of the region’s enterprises under the Moldovan legislation and international rules, norms and standards. EU, starting from its commitments under the EU – Moldova Action Plan, decided to appoint a Mission to provide help on the Moldovan-Ukrainian border, which started its operation in December 1, 2005. 

Stage 3. Moldovan government issued decree #815 in July 2, 2005, on regulation of traffics resulting from the Transnistrian foreign trade activity. And the Moldovan State Chamber of Registration was charged to introduce Transnistrian enterprises executing export-import transactions into the State Registry of Enterprises and Organizations (temporarily), with the right to obtain “C”-type certificates of origin and “CT-1”-type – for export to Ukraine. The enterprises registered permanently can obtain “A”, “CT-1”, “RM” and EUR”-type certificates of origin. 

But more than half a year has passed before such a regulation was introduced into operation (March 3, 2006), which took a common statement of Moldovan and Ukrainian Prime-Ministers (December 30, 2005), a series of bilateral consultations with participation of EU and informing business community and the Transnistrian administration. The latter recommended Transnistrian enterprises to not register in state bodies of the Republic of Moldova, perceiving it as an attempt to take them out from the Transnistrian “legal area” and financial-budgetary system. 

Later on, Transnistria conducted quite an effective PR-campaign (“economic blockade”, “humanitarian disaster”, etc.), which resulted in political and economic demarches of Russia (declarations of the State Duma and the Ministry of Foreign Affairs, the decision to grant credits and humanitarian aid for Transnistria, the introduction of restrictions for Moldovan export). 

Now, after the twelve months of V. Yuschenko’s plan and two months of the “new customs regime”, the situation in the Transnistrian zone is very contradictory. On the one hand, a rather small group of Transnistrian enterprises has registered at the State Registry of RM (58 – temporarily and 55 – permanently). At the same time, according to estimates, the Moldovan Customs Service controlled no more than 4.0% of import and 15.0% of export of Transnistria during the period from 3^rd of March to 19^th of April (see Annex). Many enterprises (as the region’s administration recommended) stopped their production or just keep filling up their warehouses. Some enterprises agreed for double taxation. Others (a group of light industry enterprises that work by contracts with partners from the EU countries) have no restrictions as regards import of raw materials (cotton, fabrics, accessories, etc.) and export of finished commodity. “Grey schemes” of traffics also continue existing, fuelled by interests of administrative-economic conglomerations from Ukraine (Odessa – Illyichevsk seaport, Vinnitsa, Nikolaiv), Transnistria and Moldova. Some estimates, for instance, show that the “new customs regime” has been yielding daily losses of 2 mil USD – for regional budgets and economic agents of Ukraine.  

Political costs are more evident: the 5+2 format negotiations on settlement of the Transnistrian conflict suspended; Russia and Ukraine turned from mediators and guarantors into participants in the conflict; implementation of the “Yuschenko’s plan” proposed a year ago (“3 D’s” over 18 months!) is being more and more put off for the future. 

The situation is being aggravated by the contradictory actions of the Republic of Moldova concerning political and economic guarantees for both Transnistrian business and population (property rights, registration and taxation, relations with the budget and banking system of RM, etc.) and the region as a whole (local self-government, financial autonomy). It seems that Transnistrian authorities and population are not quite delighted of the prospect of the (much curtailed) rights and resources granted to the other “problematic” region – Gagauzia, which obtained special status of “administrative territorial unit” in 1995. In the meantime, it is the status that is being also proposed for Transnistria under the new law of the Republic of Moldova (July 2005). 

Currently, the confrontation mood dominates relations between Moldova and Transnistria. In the meantime, they will have to search for a solution sometime or other (you cannot pick neighbors in the end). And it will most likely be within the framework of the European Charter of Local Self-Government that the Moldovan Parliament ratified in 1997. Besides, there are signs that the new generation of Transnistrian business elite (and politicians derived from it) is inclined towards a compromise in the form of a free economic zone with a special customs and tax regime. Thus, the connection of times would be restored: it was namely the decision of the Congress of Deputies of Transnistria “On creation of the Transnistrian free economic zone” (June 1990) that started self-assertion of the region as an autonomous administrative-territorial unit. And even in July 2003, after the joint Moldovan-Ukrainian actions to “normalize” the traffics in the Transnistrian sector of their border started, the Supreme Soviet of Transnistria (the local parliament) announced through its statement on measures to ensure foreign-trade activity of enterprises that “the efforts of the parties should be aimed at elaboration and implementation of the policy of a common state, including foreign trade relations, by helping economic agents to develop and advance to the new external outlets”. 

According to the logics of life, it is the Transnistrian business community, which is a rather independent and the most motivated and organized supporter of the conflict settlement. A new generation of politicians and businesspersons – self-made persons – comes to replace the total control of the regional administration of the post-soviet type and the “red directors’ corps”. The Transnistrian business is internationalizing quickly (investors from EU and CIS, trade partners from 80 countries) and the limits of the “unrecognized state” are too tight for it. 

Besides “Sheriff” that dominates the region’s market of foodstuffs, oil products and communications, as well as a group of light industry enterprises that works by contract basis with partners from the EU countries, a conglomeration of businesses dependent on the Russian Gazprom (Rybnitsa Steel Works, GRES – the regional power station (Cuciurgan), “Elektromash” plant, Gazprombank (Tiraspol) and others) are interested in the real normalization of export-import flows. Interests of Gazprom do also exist and lie in the stability of its legal presence in Transnistria, along the way to the Balkans. 

The disregard of the economic component of the “Transnistrian issue” will only further postpone finding the mutually acceptable political solution of the problem. Europeanization of business rules, norms and standards in the Transnistrian zone, consideration of economic and social interests is the most suitable way for reconciliation.