Saturday

27th May 2017

Moldova and the EU: On a long road to nowhere?

  • Lazar: 'We have human capital and fertile soil, that is all' (Photo: EUobserver)

EU diplomats like to speak of Moldova as a success story in terms of reform, but deep-rooted corruption and Russian influence pose questions over its European future.

It is poised to move closer to the Union at an EU summit with six post-Soviet states in Vilnius next week.

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Its fragile coalition government is set to initial a political association and free trade pact with the Union.

Signature and ratification will come later and, the government hopes, before elections in November next year, giving a bump to the pro-EU leaders.

“We are in a very important junction of our development,” Prime Minister Iurie Leanca told EUobserver during a visit to Chisinau.

However, two shady deals involving billionaire bosses from Dagestan, Russia, and a Moldovan bank tarnished by links to the Russian mafia, pose questions over the country's commitment to two important conditions for EU integration - rule of law and transparency.

The government recently sold a 49-year concession to run Moldova's airport to UK Komaks LLC, a firm registered in Khabarovsk, a city in Russia's far east, near the border with China.

The contract puts one of the country's few business assets into the hands of two little-known billionaires, the brothers Bazhayev from Russia's restive and crime-ridden Caucasus region of Dagestan.

The government in summer also sold a majority share in the state-owned Banca de Economii.

It says it cannot disclose, by law, the identity of the firm which now controls Moldova's biggest lender, and in effect, its financial stability.

Igor Corman, the speaker of the parliament, said Chisinau had no choice because the state itself lacked the capital to save the bank from ruin.

But another Moldovan source told this website the new Banca de Economii chiefs also have links to Moscow.

The contact said the parent company of the buyer is a firm called Constanta Ltd, which is owned by a Ukrainian businesswoman who also has two other companies, including a meat processing plant in the Russian capital.

The sale makes it less likely that Moldova's National Anti-Corruption Centre will ever complete its probe into alleged money laundering by its top bank.

EUobserver has seen bank records showing that the Banca de Economii was used to channel funds embezzled from the Russian tax payer by a convicted Russian fraudster, Dmitry Kluyev, to banks in EU states.

Fifty three million dollars, to be precise.

The Kluyev scam is linked to Sergei Magnitsky, a Russian auditor who uncovered the $230 million tax fraud, and who was later found dead in a prison cell, leading to widespread calls by European parliamentarians for EU sanctions against his tormentors.

Moscow flexes muscle

The curve bank toward Russian influence despite the Vilnius agenda comes amid wider Kremlin pressure on Moldova, along with its much larger neighbour, Ukraine, to join Russian President Vladimir Putin's Customs Union instead of going down the EU road.

Russia over the summer banned Moldovan wine on health grounds despite the fact it meets EU phytosanitary norms.

“We don’t call it a ban but a suspension, but we will call it a ban in the next two weeks if nothing happens,” the Moldovan PM, Leanca, told this website.

Moldova also buys all its gas from Gazprom, Russia's state-owned export monopoly, via Cold-War-era pipelines linked to Russian and Ukrainian networks.

It wants to invest €650 million in a new electricity grid and gas infrastructure to reduce its energy dependency on the Kremlin.

Its EU neighbour, Romania, is happy to foot half the bill. But Moldova still needs to find the other half.

Corruption a way of life

Meanwhile, the airport and bank deals come as little surprise to Moldovan people, who have seen political vendettas and high-level graft become ever-more ingrained into daily life in recent years.

In March, its former leader, Vlad Filat, was forced to give way to Leanca, amid corruption allegations.

The two men differ vastly in style: Leanca, a former foreign minister, is more affable than the stony-faced Filat.

The former PM now chairs the Liberal party, the largest of the three factions in the ruling coalition, which tries to keep infighting behind closed doors and to maintain a facade of stability for its EU sponsors.

But the internal tensions are not far out of sight.

“The coalition is not in a honeymoon [phase],” Filat told EUobserver.

Government sources told this website that high-level corruption in Moldova is so widespread that any genuine reform would tear the coalition apart.

The country's President, Nicolae Timofti, a former top judge, says it is so bad that it amounts to a national security threat.

The man whose job it is to clean things up is Moldova’s general prosecutor, Corneliu Gurin, who is paid a paltry €500 a month.

The parliament recently tabled a bill that would require judges, prosecutors and police officers who carry out criminal investigations to themselves take polygraph tests due to lack of trust in officials' integrity.

Meanwhile, a government transparency commission found that 60 percent of mayors, vice mayors, presidents, and vice presidents of local councils did not even bother to submit declarations of income for 2011.

Moldovan society is trapped in an old mentality in which students, for instance, are forced to bribe professors to read their PhD theses.

The cash is delivered in envelopes, each stuffed with around €300.

“It’s a system that dates back to Soviet times,” one disgruntled Moldovan post-graduate told this website.

For his part, the head of the opposition Communist Party and Moldova's former president, Vladimir Voronin, says he espouses liberal, pro-European views.

“We are in Europe, and there is no other path for us,” he told EUobserver.

Voronin in his time at the top signed a three-year action plan to boost EU ties.

But his politics embodies the contradictions and confusion in Moldova's political elite.

Sitting in an office adorned with a bronze statue of himself with Lenin and a coffee mug of a grim-faced Stalin on his desk, he added that Moldova should anyway join Putin's Customs Union.

He also accused the EU of all-but bribing Moldovan politicians by handing over €100 million in annual assistance if they take the EU path.

“If the EU is such a paradise, then why are people leaving for the east?” he asked.

Poverty forces workers abroad

Crippling poverty has forced half of Moldova's working-age population abroad, with many toiling away on construction sites for Putin’s winter Olympic dreamscape in Sochi, on the Black Sea coast.

Putin has threatened to deport them if Chisinau initials the EU pact in Vilnius.

It is no small threat.

So many work abroad that remittances account for 25 percent of Moldova’s GDP. Children are left behind with relatives or others and grow up as "social orphans," abandoned by a system which provides no social care.

Few can afford to live in Chisinau, where a one-bedroom apartment costs around €200 a month and where Russian heating adds another €100 a month to the utility bill, while average monthly salaries are at best €300.

Life in the countryside is hard: Only half of Moldovan villages have piped water systems.

The World Bank, in a report out in October, noted that the state of disrepair in the country's water and wastewater infrastructure “is such that about 45 percent of these systems need serious rehabilitation.”

Ion Sturza, a former prime minister turned wealthy industrialist, echoed the PhD student's lament on Moldova's backward-looking culture.

“We are still practically in a post-Soviet style mentality, we have not modernised our society. Even the young have inherited the mentality,” he said, while sipping a traditional chicken broth in a wood-panelled restaurant in Chisinau city centre.

Oligarch rule in Transnistria

To add to its woes, the country split in two when the breakaway region of Transnistria declared independence over 20 years ago.

Not recognised by anyone, Transnistria is almost entirely bankrolled by Putin, who keeps thousands of Russian "peacekeeping" troops in the region.

It is run on a day-to-day basis by an oligarch, whose chain of "Sheriff" businesses dominates almost every street corner in the de facto capital, Tiraspol.

In a sign of just how far Kremlin influence penetrates this forgotten corner of Europe, Transnistria's self-styled minister of foreign affairs, Nina Stanski, even attributes a recent spike in birthrates to Russian patronage.

“There is no shooting. Nobody dies here. We have an increasing birth rate here and if people are not afraid to give birth, it means the peacekeeping operation is successful,” she said.

At the same time, Russia sells gas to Transnistria at well-below market rates.

If it ever tried to rejoin Moldova, the arrangement would force Chisinau to pay Russia around $4 billion in arrears - an impossible sum for Europe’s poorest nation.

Alongside its EU aspirations, Molodova has little more than remittances, wine, apples and customs duties to keep the country going.

“We have human capital and fertile soil, that is all we have, nothing else,” Moldova’s minister of economy, Valeriu Lazar, told EUobserver.

A moustachioed man in his 50s, the minister went on to rattle out a long list of grim statistics in a drab government meeting room, situated off a long, long hallway that seemed to vanish into its own horizon.

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