[Joint House and Senate Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
116th Congress } Printed for the use of the
1st Session } Commission on Security and Cooperation in Europe
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Why Moldova Matters
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
June 4, 2019
Briefing of the
Commission on Security and Cooperation in Europe
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Washington: 2019
Commission on Security and Cooperation in Europe
234 Ford House Office Building
Washington, DC 20515
202-225-1901
[email protected]
http://www.csce.gov
@HelsinkiComm
Legislative Branch Commissioners
HOUSE SENATE
ALCEE L.HASTINGS, Florida ROGER WICKER, Mississippi,
Chairman Co-Chairman
JOE WILSON, South Carolina BENJAMIN L. CARDIN. Maryland
ROBERT B. ADERHOLT, Alabama JOHN BOOZMAN, Arkansas
EMANUEL CLEAVER II, Missouri CORY GARDNER, Colorado
STEVE COHEN, Tennessee MARCO RUBIO, Florida
BRIAN FITZPATRICK, Pennsylvania JEANNE SHAHEEN, New Hampshire
RICHARD HUDSON, North Carolina THOM TILLIS, North Carolina
GWEN MOORE, Wisconsin TOM UDALL, New Mexico
MARC VEASEY, Texas SHELDON WHITEHOUSE, Rhode Island
Executive Branch Commissioners
DEPARTMENT OF STATE
DEPARTMENT OF DEFENSE
DEPARTMENT OF COMMERCE
[II]
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Why Moldova Matters
June 4, 2019
Page
PARTICIPANTS
Rachel Bauman, Policy Advisor, Commission on Security and
Cooperation in Europe 1
Dr. Cory Welt, Specialist in European Affairs, Congressional
Research Service 2
Jamie Kirchick, Journalist and Visiting Fellow, Brookings
Institution 5
H.E. Cristina Balan, Ambassador of the Republic of Moldova to the
United States 7
Why Moldova Matters
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June 4, 2019
The briefing was held at 10:09 a.m. in Room 121, Cannon House
Office Building, Washington, DC, Rachel Bauman, Policy Advisor,
Commission on Security and Cooperation in Europe, presiding.
Panelists present: Rachel Bauman, Policy Advisor, Commission on
Security and Cooperation in Europe; Dr. Cory Welt, Specialist in
European Affairs, Congressional Research Service; Jamie Kirchick,
Journalist and Visiting Fellow, Brookings Institution; and H.E.
Cristina Balan, Ambassador of the Republic of Moldova to the United
States.
Ms. Bauman. Hi. Thank you, everyone, for joining us this morning,
and everyone watching on Facebook Live as well.
My name is Rachel Bauman. I'll be moderating the discussion today.
I serve as policy advisor for Russia, Ukraine, Belarus, Moldova and the
Baltics on the Commission on Security and Cooperation in Europe, also
known as the Helsinki Commission. We're an independent agency of the
Federal Government charged with monitoring compliance with the Helsinki
Accords and advancing comprehensive security through promotion of human
rights, democracy, and economic, environmental, and military
cooperation in 57 countries.
Moldova, the topic of our discussion today, is a small landlocked
country between Ukraine and Romania which is typically viewed as a
state torn between Russia and the West. It's worth exploring, however--
and today we will explore--whether Moldova's problems are more internal
or external. The country remains in a precarious position since its
February 24th parliamentary elections.
Today we'll look at Moldova in a regional context, as well as
investigating some of the post-election internal politics. Will
Moldova's deeply divided parliament be able to form a governing
coalition? What influence will Moldova's oligarch Vlad Plahotniuc have
on the process of forming a government? And is there real political
will in Moldova, especially right now after elections, to become a
full-fledged member of the EU? And finally, what's going on in the
breakaway Russian region of Transnistria?
To speak to some of these questions we have today three
distinguished panelists. And their full biographies can be found in
your folders, so I'll just introduce them briefly. Speaking first will
be Dr. Cory Welt, specialist in European affairs at the Congressional
Research Service. Next will be Jamie Kirchick, a journalist and
visiting fellow at the Brookings Institution. And finally, we have Her
Excellency Cristina Balan, Ambassador of the Republic of Moldova to the
United States.
We're going to start by having each of the panelists make a
statement, and then we'll get into some discussion and audience
question and answer. Additionally, if you're tweeting, our Twitter
handle is @HelsinkiComm; that's at Helsinki C-O-M-M, if you want to
tweet about the event.
So without further ado, I will ask Cory to come up here and give a
statement.
Dr. Welt. Good morning. Thank you to Rachel and the Helsinki
Commission for convening this briefing and for including me in it.
I am going to sidestep the question of why Moldova matters in my
opening remarks and leave that for my two esteemed panelists. Instead,
what I'm going to do is set some context for you, focus on the state of
play and the post-election talks on government formation, possible
outcomes of those talks, and potential implications for Moldova and its
foreign policy orientation. But first I'm going to give you a few words
on U.S.-Moldova relations, since I am here in my capacity as an analyst
for the Congressional Research Service.
The U.S. Government, including Congress, has generally considered
Moldova as one of three states, together with Georgia and Ukraine, who
are seeking greater integration with the West while coping with
separatist territories--separatist conflicts that have been fostered by
Russia. Now, this is generally an understandable frame. Among post-
Soviet states, Moldova is considered to be relatively advanced in terms
of its democratic freedoms, just behind Ukraine and Georgia, and akin
to neighboring states in the Balkans such as Macedonia. Moldova also,
among post-Soviet states, has a unique relationship to the European
Union. At least half a million Moldovans, probably more, hold Romanian
citizenship. Romanian is considered an ethnic kin of Moldovan. And so
about 15 percent, at least, of Moldovans are also citizens of the
European Union.
Moldova has concluded free trade and visa agreements with the EU,
and the EU has been a major aid provider for Moldova, although it has
made a new assistance package conditional on respect for democratic
mechanisms and implementation of specified reforms. Moldova is also
grappling, now for almost 30 years, with the territorial conflict in
the predominantly Russian-speaking region of Transnistria, which
seceded from Moldova in the early 1990s under Moscow's protection. Some
progress toward resolving certain elements of this conflict has taken
place in recent years. It's an issue I'll leave for the ambassador, or
we can take it up again in Q&A. It is important to remember, however,
that Moldova, unlike Georgia and Ukraine, is officially a neutral state
and it does not seek formally NATO membership.
In terms of U.S.-Moldova relations, U.S. foreign aid to Moldova has
increased substantially in recent years, particularly after Russia's
2014 invasion of Ukraine. Moldova currently is the third-largest U.S.
aid recipient in the Europe and Eurasia region after Ukraine and
Georgia. And in terms of Congress' policy toward Moldova, in the last
Congress resolutions were introduced in both the House and the Senate
supporting Moldova's sovereignty and territorial integrity and calling
for an enhanced U.S.-Moldova partnership and more focused U.S.
assistance for domestic reform.
Now I'd like to offer a few remarks on the current state of play in
Moldovan politics, possible outcomes of the current post-electoral
talks, and implications. So according to international and domestic
observers, Moldova's recent parliamentary elections were democratic but
somewhat flawed. And these flaws included allegations of vote buying
and the misuse of state resources. Nonetheless, the outcome of the
elections appears to reflect longstanding domestic divisions within
Moldova, between what you might characterize as a European-leaning
majority and a Russian-leaning minority.
It's difficult to precisely parse out what percentage, and I'm
going to refrain from trying to do so, but in terms of party
representation the European-leaning majority itself was split in the
last elections electorally between supporters of the establishment
ruling party, the PDM, the Democratic Party of Moldova, and supporters
of a party that has characterized itself as a more firmly pro-Western
reform party or alliance, called ACUM, or Now. The Russian-leaning
minority in Moldova is represented by the Socialist Party, which is the
party of Moldova's president Igor Dodon.
With over 3 months of negotiations and discussions and some
political posturing over the last few months, no government has been
formed yet, and time is running out. The president is able to call
elections very soon, within a matter of days or weeks if I'm not
mistaken. And so the talks have in fact intensified in recent days,
including visits to Chisinau of representatives of the EU, the United
States, and Russia. In addition to the three main parties that are
involved in these talks a fourth party is in the mix, the Sor Party,
which is named after and run by a wealthy businessman and regional
mayor, Ilan Shor, who is providing an interesting element in the
postelectoral talks, as he had been indicted for bank fraud and is
currently appealing a 7-year prison sentence--actually sentenced for
bank fraud.
The deadlock that the parties in Moldova are experiencing is not a
new feature in Moldovan politics. In 2009-2010, it took three elections
before a government could be formed. But it's also important to keep in
mind that this deadlock is not unique in today's European context.
Recent elections in several nearby countries, in the Baltic States and
Israel last week, have led to a highly fragmented political landscape
that has made it difficult to form governments. And Israel last week
called for new elections.
The way I see it, there's five--at least five potential outcomes to
the discussions that are taking place in Moldova today. Let me briefly
go over them. Two of those outcomes, in my mind, appear the most
likely. It's difficult to predict which one has the upper hand. One
outcome, which is the one most folks are talking about now, is the
possibility of snap elections. It's the logical outcome when the
government--when the parties can't come to an agreement on a coalition.
The main question about snap elections is to what end would these
elections be held.
It is difficult in the current political context to see how
politics will shift substantially and lead to a different kind of
outcome within a matter of months. And in several months' time Moldova
could still be in the same situation as it is now, lacking a
government. Yesterday an EU representative in Moldova suggested that
snap elections could lead to other problems, including the possibility
that the IMF might suspend its financial program with Moldova, leading
also to difficulties in terms of renewing EU assistance. But snap
elections are a very real possibility.
A second likely outcome is a coalition of what I call the parties
in power--a coalition between the Socialist Party of the president and
the PDM, the ruling party. This is a coalition that many expected would
emerge out of the elections. And it would arguably serve the immediate
political interests of both parties and reflect a recent history that
they've had of tactical cooperation. Such a coalition, however, risks
damaging the PDM's standing with the West, as there would be many
questions as to its interest and readiness to ally and turn into
government with a party that is avowedly, openly pro-Russia.
Three other possible outcomes--one that is less-often discussed,
but I think is still a possibility that needs to be considered, is that
the PDM will repeat the steps that it took to come to power last time
around. The PDM came to power in 2016 not through elections, but
instead it cobbled together a coalition within parliament after the
previous government collapsed by peeling off MPs from other parties. It
could conceivably do so again, even though it's entering on this post-
electoral timeframe in a somewhat weaker position.
A fourth possibility is what I would consider to be a quote/unquote
``pro-Western coalition.'' That would be a coalition between the ruling
PDM and the opposition ACUM alliance. From the West's point of view, a
PDM-ACUM alliance might make a lot of sense, two of the avowedly pro-
Western parties overcoming their differences, uniting to continue to
further promote Moldova's European integration. This alliance, however,
has not been politically feasible to date. The PDM has expressed a
willingness to ally with ACUM, but ACUM views the PDM as corrupt. ACUM
leaders even implied before elections that the PDM or some of its
operatives may have been guilty of poisoning them. It's not an
allegation that I can affirm or deny, of course. And ACUM also feels
that allying with the PDM would require it make a 180-degree turn in
terms of its electoral promises and its commitment to fighting
corruption and overthrowing the existing government.
The last possibility is what I would consider to be a kind of grand
east-west coalition between the Socialists and ACUM. Again, the
Socialists, like the PDM, have expressed readiness to form a coalition
with ACUM, but ACUM has rejected such a coalition. Unlike with the PDM,
ACUM has expressed interest in cooperating with the Socialists, but
they propose a very specific form of cooperation, some form of minority
or interim government which would be led by ACUM, in which ACUM and the
Socialists cooperate to the change the election rules, carry out what
they call the de-oligarchization--I practiced that word--[laughter]--of
Moldovan politics which in practice, to ACUM, means removing the PDM
from the political scene, and removing the influence of PDM party
leader Vlad Plahotniuc. And then hold early elections in which the
Socialists and the ACUM would be the main contenders. The Socialists,
however, have expressed little interest in this.
So five--at least five different possibilities. And I invite you to
come up with more. And none of them, except early elections, are really
being talked about actively publicly right now. It's difficult to know
what's going on behind the scenes. But given the kind of pressure that
the parties face and the message they've received from the outside, I
wouldn't be surprised if some kind of government is formed in the
coming days.
And finally, a few comments on the international implications. It's
a very complex postelectoral process, but the implications aren't just
domestic. Many consider that they have implications for Moldova's
geopolitical trajectory and, in particular, Russia's influence in the
country and the region. The main question is what happens if the
Socialists enter the government. The Socialists are an offshoot of
Moldova's old Communist Party, which governed Moldova in the 2000s. But
the Socialists are even closer to Russia than the Communists were in
their later years. Socialist leadership and MPs even visited Moscow
during this period of negotiations for consultations.
If the Socialists were to enter into a coalition government, it's
logical to expect that Moldova would risk tilting more toward Russia.
Two caveats, though, to keep in mind. First, that kind of tilt could
depend on how much resistance the Socialists would encounter from their
putative coalition partner, be it the PDM or ACUM. The ACUM in
particular would try to present a much firmer balance against any
excessive shift toward Russia. And second, it could depend on what the
positions the Socialists would receive in government. This is a
challenge that other countries have faced in Europe, in which parties
that were considered to be Russia-friendly were taking positions in the
security and intelligence establishments. If that were to happen in
Moldova, that might be a greater cause of concern.
If the Socialists are excluded from government, which is a very big
if--it would require ACUM and the PDM to get over some major
differences--it might enable Moldova to maintain its pro-Western
trajectory, but it would be an alliance that could be fraught with
tension and lead to internal deadlock on reforms, perhaps in some ways
similar to the kind of politics that had occurred in Ukraine for the
last several years, when Ukraine was run both by some oligarchic
interests still and reformist elements.
The EU and the U.S., to conclude, officially say, and repeatedly
have said, that they'll accept any coalition that is consistent with
Moldova's laws, although the EU is on record as saying that it doesn't
think that somebody implicated in a $1 billion bank fraud, being the
leader of the Sor Party, ought to be in government. But other than
that, the message has been that the important thing is for this process
to culminate in a democratic electoral outcome.
Thanks.
Mr. Kirchick. Thank you to the Commission for hosting us today and
for the important work that you do. Thank you all for coming.
I was in Moldova recently as a part of a delegation with the
International Republican Institute to monitor the elections. IRI's one
of the two party institutes that are part of the National Endowment of
Democracy to encourage democracy and liberal values abroad. They had a
long-term observer mission with people who were there for months in
advance to chart the progress of the electoral campaign. And then they
had a short-term observer mission with a delegation.
And we just came for about a week to make sure there was no ballot
stuffing and what not. And it's important to understand that an
election can seem perfectly above-board the day of, but there are
obviously lots of things you have to watch out for both before and
after. And I would refer you to the report put out by IRI and also the
OSCE on these matters. \1\ As for what I observed personally the day of
the election, I didn't see any irregularities.
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\1\ https://www.iri.org/resource/iri-preliminary-statement-moldovan-
parliamentary-elections; https://www.iri.org/resource/
moldova%E2%80%99s-electoral-reforms-signal-step-forward-echo-iri-
parliamentary-elections-findings; https://www.osce.org/odihr/elections/
moldova/389342
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But I would probably say the one disappointment that I witnessed--I
was in the southern region of Gagauzia, which is an interesting sort of
ethnic Turkish part of Moldova. I saw in rural areas much less
resources available in terms of ballot boxes, poll watchers, than there
were in the sort of regional urban areas or cities. Meaning that there
were long lines in rural areas, people waiting for hours to vote,
rather chaotic in some places. Meanwhile, in the largest city that we
visited, there was literally no one at all waiting in line to enter the
polling station.
This is just one anecdotal observation I can give you. It's by no
means in any way meant to describe the entire electoral process. You
know, I would agree with what Cory said. If you look at the OSCE
report, they cite that there were allegations of vote buying, and
giving of gifts of people to vote certain ways. And you particularly
heard this with the voters from Transnistria, who were being bused in.
And I think that was a pretty chaotic process.
And we received reports, certainly in the run-up to the election we
had a meeting with Mr. Nastase, who's the leader of the ACUM bloc, who
had run for mayor in 2018. And his victory was actually invalidated by
the government. So he was quite angry, understandably, because of that.
And he was certainly making the case beforehand to us that there were
lots of irregularities--the use of administrative state resources, the
sort of typical complaints that you hear in this part of the world. So
that's something to just keep in mind. But at the end of the day, the
election, I think it's fair to say, was representative of the popular
will.
As to the geopolitical questions here--why does Moldova matter--I
think it matters because the United States has been committed to a
policy of a Europe whole, free, and at peace, really since the end of
the cold war, and consolidating democracy and good government. And
Moldova is a pretty sore spot. It's the poorest country in Europe. It's
the site of very high corruption. It's the site of Russian influence.
It's the site of a lack of territorial integrity. And we've seen now
that there are three nations in this region--Georgia, Ukraine and
Moldova--that all have Russian troops stationed on them. And this is
something that should certainly concern the United States and its
democratic allies.
The political situation now seems to be frozen. There seem to be
three irreconcilable political blocs, that we just heard a pretty fair
description of them. I mean there is a Socialist Party that is
basically the kind of, you know, dregs of the former Communist Party,
very pro-Russian. President Dodon has already been to Moscow several
times in the past couple months.
Along with, I believe, every deputy who's a member of the Socialist
Party has also visited Moscow since the election. Then you have the
PDM, the Democratic Party, which claim to be pro-Western.
I'm not really sure what that means. They seem to be more what a
colleague, a scholar at the University of Pennsylvania, Mitchell
Orenstein--he refers to Mr. Plahotniuc as a flexible oligarch, who can
go either way. He doesn't seem particularly committed to Western
values, I think, in the same way that other leaders, certainly Mr.
Nastase, are, which brings us to the third party, ACUM, which I think
is really genuinely a pro-Western party. It's driven by anti-corruption
which is, I think, just judging by the popular polling that's been done
by IRI, 49 percent of Moldovans consider corruption to be the major
issue. And that's, by far, the most important issue in Moldova--
fighting corruption.
So you have this party which is basically a pro-Russian, post-
Communist Party. You have a party that's controlled by an oligarch,
who's not even elected to anything. It reminds me of Bidzina
Ivanishvili, the former prime minister of Georgia, who similarly is not
elected to any position, yet is the most powerful man in that country.
And I think that's not really a good sign in terms of the country's
democratic development and Westward path, when the important, powerful
person in the country is not elected to anything. That's a bad sign.
And so it's hard for me to see how this political stalemate gets
resolved. I would personally think that the most likely one would be
some sort of alliance between the PDM and the Socialist Party, just
because the PDM seems to be more opportunistic in this regard. And that
seems like more of a natural fit than any other potential alliance. I
also think it is important to look at Moldova as a potentially negative
example of where Ukraine could go. Ukraine is a much larger country.
It's one of the largest countries by population in Europe, the largest
country by landmass in Europe. It's a place that the EU and United
States have been investing a lot in. I think there are more
geopolitical considerations in Ukraine than there are in Moldova.
There's a serious push and pull in Ukraine about joining the EU or
not, about moving toward NATO. There's actually real NATO cooperation
there. And I think--you know, looking at Moldova and looking at the
control of oligarchs in Moldova, I think that that is something that
those of us who are concerned about Ukraine--if things don't go well in
Ukraine then they could move in that direction, in having more
oligarchic control. And I don't think that the Russian goal here is
necessarily to bring the country back into its fold, to necessarily
have it join the Eurasian Union and to completely forgo any possibility
or intent of moving westward. I think it's to create failed states on
the periphery of Europe, to create countries that are basically, black
holes of corruption and human trafficking, and drug running, and arms
dealing, and all that.
And that is what I fear the direction that Ukraine could be moving
in. But ultimately, I think we shouldn't sort of obsess or make these
things out to be more geopolitical than they are.
And I don't think the average Moldovan who went to the polls in
February, certainly not the ones that we've talked to--NATO membership
wasn't the main thing on their mind. Even EU membership I don't think
was the main thing on their mind. I think just having a decent life.
I mean, as I said, this is the poorest country. And I was traveling
out into rural areas, and these places are really poor. I mean, the
living standards remind one of parts of the Middle East or sub-Saharan
Africa in some places. So, you know, day-to-day living is the most
important thing. And I think, What's Putin's game here? Those sorts of
questions are ultimately not what's driving most Moldovans. What
American policymakers, I think, should be concerned about is how we can
help this country progress forward into becoming a more prosperous,
liberal, democratic country.
So, thank you.
Amb. Balan. Dear colleagues, thank you very much for your interest
in my country, the Republic of Moldova. And thanks a lot to the
Helsinki Commission for keeping the focus on our region and on all the
challenges that Moldova is going through.
It's pretty difficult for a small country like Moldova to be always
on the radar for the U.S. stakeholders, as the world is on fire right
now, there are so many events going on in the United States and abroad.
And of course, what's going on in our country is not as important. But
it is very important for the 4 million people that are living in my
country. And it's also important for the region in which we live. As
you know, Moldova is at the border with a NATO country, with Romania.
And it is also a member--Romania is a member of the European Union.
Back in 2014, we signed an Association Agreement with the European
Union, and we are following a road map of reforms to align our legal
framework to the European Union's.
We have been also proving throughout the last years that we are a
reliable partner and ally to the United States. We have confirmed that
in many ways. Even though Moldova is a small country, but just to give
an example, we are supporting the U.S. initiatives in international
fora, I'd cite just the U.N. We've been supporting several resolutions
of the United States in the United Nations despite the trends of the
European Union even.
We also have demonstrated that we are supporting the Jewish
community in the Republic of Moldova and worldwide, and we were not
indifferent to the United States' calls to action by adopting an
international definition of anti-Semitism. And now we are teaching
young students in schools and universities about the horrors of the
Holocaust. And a lot has been done in this respect during the last
years.
Also I'd like to mention that Moldova has marked 20 years during
this year of a special partnership with North Carolina. Thousands of
citizens from North Carolina have been involved in a variety of social,
economic, educational, cultural, and military programs in Moldova. And
our country has enjoyed, of course, the support of a caucus in the
House of Representatives, co-chaired by David Price and Pete Olson, who
introduced the resolution in support of our country's independence and
Western integration last year.
So this is just a general outline, and then I would not bother you
with many other details because my distinguished co-panelists have
pretty accurately described to you the situation in the Republic of
Moldova. Probably what's most interesting is what is going on in
Moldova right now. It's been 3 months since we had our general
elections. A year ago, when I arrived to Washington, D.C. in my
capacity of an ambassador of the Republic of Moldova, the situation was
pretty difficult. And while looking to the polls, we were seeing that
the Socialist Party was enjoying much larger popularity than right now,
than it proved to be after the elections.
The polls were showing that the Socialist Party would take about 46
percent. And that would make their mission pretty easy to form a
majority coalition and to get Moldova closer to the Russian Federation.
But after the elections we have seen that the Socialist Party took 35
seats only in the Parliament. And this is--according to some analysts,
because they've been promising and not delivering, despite the fact
that the President Dodon, who is a member of the Socialist Party, is
traveling on a monthly basis to Russia, if not more often, and having
pictures with Mr. Putin. And Mr. Putin, according to the polls, is
still a very popular person in the Republic of Moldova due to the
multiple TV channels that are directly and freely broadcasting to
Moldova and showing how great is life in the Russian Federation and how
great is its leadership.
So they are falling down because they haven't been delivering. They
have been promising, the president has limited capacities, and they've
been promising and not delivering. The Democratic Party, which is the
ruling party right now, has 30 seats in the Parliament, and the bloc of
two pro-European parties, ACUM, has 26 seats. And there is the Sor
Party, which has seven seats in the Parliament, after the elections,
which have been recognized as free and fair by international parties--
my colleagues already cited allegations, but we are talking about
official reports.
After these elections, the parties which ascended in the Parliament
have been trying to form a coalition. And it's been 3 months now. The
deadline for forming the coalition is June 9th. Basically, it's the end
of this week. If the parties will not achieve an understanding, then
the Parliament will be dissolved, and the president of our country will
name another date for early elections. And most probably it will be in
October or November this year.
What would this mean for Moldova? We'll go through the first
scenario of early elections. Basically, if you think about the fact
that we started the year of 2019 with an election campaign, okay, so
everything stopped basically and we had an election campaign. In
February, we had elections, then 3 months of negotiations. Then if
there will be no agreement, then, again, we'll have a campaign, then
again elections, and then again negotiations. Basically 2019 is a lost
year for Moldova. It's a lost year for our reforms, for our economic
growth that we have registered throughout the years, and many other
commitments that Moldova assumed by signing the EU Association
Agreement.
And as my colleague also mentioned, the IMF agreement is due. It
expires in November this year. And I just had recently discussions with
the IMF mission here. And they said: We need a government--fully any
potential government to be able to discuss the problem. If there will
be no government, then of course there will be no IMF program.
What does it mean for a country like Moldova not to have an IMF
program? The loans which are coming from IMF are not that big compared
to the total amount of loans that we are taking, but it's very
important for the country rating. If the country rating goes down, it
means that the interest rates for the other loans go up. It means that
our economy will be suffering. It means that prices will go up. It
means that the social crisis will increase. There will be more unhappy
people. And we already can anticipate how will be the mood if there
will be early elections.
Unfortunately, Moldova has been developing not as successfully and
wasn't as successful as the Baltic States, for example, probably
because there is more political maturity in the political class. And
there is more responsibility among the citizens of those countries.
However, Moldova is striving toward the West. It is, together with
Ukraine and Georgia, very bold about its aspirations, even though there
is a considerable part of people--older generation, probably--who are
still looking with nostalgia toward Russia. It's all right. It's
something that we have inherited. But the younger generation really
aspires toward the West.
The early elections will definitely not do any good to our country.
And just the fact that we haven't been developing so much, it's also
because we are in a very tough neighborhood. And all this political
instability and continuous economic crisis and social crisis, it really
probably was also facilitated by some of our neighbors which operate
the best in conditions of instability.
There are several scenarios, of course, that the current political
parties might form a coalition. The ACUM bloc is actively trying to
negotiate with the Socialist Party. On Monday, we had EU Commissioner
Hahn, who visited Moldova. And he discussed with all the political
leaders--and he emphasized the fact that the European Union will work
with whatever coalition, which will be formed according to the law.
He also drew our attention to the fact that early elections are not
good for the country. Because of the IMF, but also if there is no IMF
program then the European Union cannot provide macrofinancial
assistance, which is also very important for Moldova. And he also
expressed his hope that the EU Association Agreement will be
implemented and all the reforms that have been undertaken within the
framework of this agreement will be continued. Also on Monday we had
Dmitry Kozak, who is the deputy prime minister of Russia, who visited
Moldova after over a 10-year break. He wasn't in Moldova for over 10
years, and now he came. And he also made some statements. He said that
the position of the Russian Federation is that the Socialist Party
should form a coalition with the ACUM, a temporary coalition, and
prepare for inevitable early elections. I'm just quoting him.
What does it mean? It means that the parties' minds should form a
temporary coalition just to make sure that the Democratic Party and its
chairman Vlad Plahotniuc is not any more in power and change the voting
system from mixed to the proportional, and then go for early elections.
There are many debates about this voting system. One of the reasons
why the voting system has been changed is because if we are looking at
the proportional voting system, the society was very much polarized,
and the messaging was very much polarized. And so the country has been
literally divided into one which is looking pro-West, pro-EU, another
one which is looking toward Russia.
But having people voting in the constituencies, people were allowed
to elect those who would address their local issues, their own needs.
And as my colleague said, people are tired of geopolitical debates.
They want better roads. They want better living standards. They want
good health care, good schools. And all they care is normal, you know?
They care about their lives, their living standards, and they care
about the future of their children. So why did the Russian Federation,
for example, suggest to change the voting system back to the
proportional one? Probably because then this narrative of--or this
division, or this polarization, will be back. You know, you choose
either pro-West or pro-East.
So this is what happened in Moldova yesterday. We also had the
director of the Eurasia Department from the State Department. But it
was a planned visit. It wasn't a political visit. So luckily we had
representatives from the U.S. Government who were also witnessing there
on the ground what's going on in our country. Of course, Moldovans
should assume the responsibility and not wait for foreign partners to
tell them or to indicate which kind of coalition to do. We definitely
hope that the political class will find the maturity and reach an
agreement. We hope that the political parties will realistically assess
the situation in the Republic of Moldova. It's not easy. It's not at
all a perfect or ideal situation. And whatever scenario is not good. I
mean, we need to understand which brings the least damages and risks
for the country, for the region, and for the rest of the world.
So in any of these cases or scenarios that have been outlined,
there are pros and cons. None of them is perfect. But we just hope that
everything that has been done by the pro-Western coalitions throughout
the last 10 years, we registered many tremendous results. And of
course, there is so much more work to be done, including addressing
corruption issues, including increasing our national defense
capability, including resolving the Transnistrian conflict, and many
others. There is a lot of work to be done. And you all have to get
together, work on a team, and just make Moldova become a rightful
member of the Western family of nations.
Thank you very much. [Applause.]
Ms. Bauman. Okay. Thank you, everyone on the panel. I'm going to
try to speak a little loudly so we don't have to keep going up to the
microphone. But I wanted to start with some question and answer and
discussion. And I'll start by asking--I'm not sure who wants to take
this question--but how dependent is Moldova's economy--we didn't talk
too much about the economy--but how dependent is the economy on good
relations with Russia? And is Moldova diversifying its economy away
from Russia in preparation for greater European integration? I know
there's been some issues with trade with Russia in the past, and I'm
interested in knowing a little bit about how Moldova's diversifying its
economy. Anyone want to take that?
Amb. Balan. Thank you very much. I don't know, I had some
intuition--today I asked for from the minister of economy our trade
balance with the Russian Federation, with the European Union, and with
the United States. So I'll just tell you the facts and you judge, okay?
[Laughs.]
So looking at the exports of the Republic of Moldova to the United
States of America--and let's take 2018: $21.77 million. Exports of
Moldova to the Russian Federation: $218 million, in 2018. And if we are
talking about the exports of Moldova to the EU, it's $1,862 million,
okay? So 70 percent of our products are now exported to the European
Union. The situation has changed from 2014. Before 2014, we've been
traditionally dependent on the Russian Federation market. As a former
part of the Soviet Union, if you know history probably you know that
Moldova has been considered as a breadbasket of the Russian Federation.
We are mainly, predominantly, an agricultural country. And we've been
exporting most of our products to Russia.
In 2014, when we signed the Association Agreement with the European
Union, Russia imposed embargos on all of our products, which of course
led to an economic crisis in the country. Many companies, wineries and
agricultural producers, suffered a lot. We had companies who witnessed
companies which would go bankrupt. But this was probably a blessing in
disguise, because we are in 2019 now, right, and we have 70 percent of
our products already exported to the European countries--European Union
countries. This is great, because we increased it. Of course, we had to
adapt our products. We had to increase the quality of our products. Our
producers had to invest in better technologies. But now we are in good
shape.
Okay, it doesn't mean that we are neglecting the Russian market. We
would like if the Russian Federation would be able to open the market
for our agricultural producers.
There are discussions about this. We'll see how it goes. As of now,
we have basically embargos on all of the products to the Russian
Federation.
Ms. Bauman. All right. I will take the questions to the audience
now. Are there any audience questions? Just speak up and state your
name and affiliation for the transcript.
Questioner. Sure, of course. My name is Justine Nuncio [ph]. I'm
from Congressman Alcee Hastings' office.
I actually was in Moldova for the Fulbright, and so I actually have
a domestic question. When I was there, I got to see a lot of villages--
Comrat, Cantemir, Balti, all these cities and municipalities. What I
noticed and what I spoke to a lot of people there is that there tends
to be a very young population--little children, babies--and then
elderly populations. So there seems to be a very large labor drain and
brain drain from people getting Romanian citizenship and going to the
EU to work abroad. What is the Moldovan Government doing to bring back
these people to stay in Moldova and bring their ideas, bring their jobs
to stay in Moldova?
Amb. Balan. Anyone from my colleagues want to answer that?
[Laughs.] Okay, I will answer, and maybe my colleagues would like to
add something.
Yes, indeed. This is a phenomenon that we are facing right now. Out
of--we'll just talk roughly figures. Out of 4 million people, about one
million are abroad--works abroad. Basically, it's 3.5 and 800, looking
at it proportionally. Half of this--so, about 400,000 people work in
the Russian Federation in construction sites, and half works in the
European Union, as domestic workers, mainly. Well, of course, we have a
brain drain as well. Young specialists, especially IT engineers,
immediately after graduating the university are finding jobs in the
European Union. You know, there is a high demand for this--in this
specific industry.
And also, we have many IT engineers who find jobs here in the
United States. And we have many Moldovans who live on the West Coast
and in San Francisco, where the high-tech companies are. We need to
understand also that this is a phenomenon which is not specific only
for Moldova. This is something that even Poland is facing, or other
countries which have a more developed economy. And of course, many
people who receive their Romanian passport and are EU members, they can
easily find jobs anywhere in the European Union.
This is a sad statistic for Moldova. People have been flooding out
of the country throughout the last probably 20-something years. So it's
not that unique. It's true that the government is seriously looking at
these issues. How to address this issue?
First of all, we understand that we have to improve something in
our country, right? What's the first problem we're talking about? The
poorest country in Europe, means that we need to improve our economy.
And we've been showing that during the last years our economic growth
has been stabilized. And back in 2015, our economic growth was minus
0.5. Now every year we will be enjoying an economic growth of 3.5 to 4
percent.
It's not bad for the region. It's not bad for the country, given
the entire situation. I'm not sure how our economic performance will be
during 2019, given all this political turmoil. There are specific
programs which are aimed to retain especially the most qualified
specialists in the country. For example, the government of the Republic
of Moldova has created a legal framework for virtual IT parks in
Moldova. Basically, any company from anywhere in the world which would
register virtually in the Republic of Moldova, become a resident--
virtual resident of an IT park--can enjoy a flat rate--tax rate of 7
percent. So they do not pay any taxes, any wage taxes, anything else.
You just pay 7 percent and you can hire the IT specialists from Moldova
and perform and produce high-tech products in Moldova.
This is one of the problems that we are working on. We developed
the legal framework. We already are witnessing the inflow of IT
companies which are registering, that are willing to benefit from this
legal frame or these taxation facilities. And we as an investor here in
the United States and we have the entire program to promote this cause.
And we are planning to organize some events, especially on the West
Coast. And they would attract U.S. companies to Moldova.
Dr. Welt. Can I add?
Ms. Bauman. Oh, yes. Of course.
Dr. Welt. Just one quick point. I think one underappreciated fact
that speaks to the importance of Moldova's trade relations with the EU,
is the fact that even Transnistria, which is controlled, propped up by
Russia, more than half of Transnistria's trade is with the European
Union as well, not with Russia. And then overall, just to complement
the figure of 70 percent of Moldova's exports to the EU, Moldova's
total trade with Russia is around 10-11 percent. So it is relatively--
it is quite small, and it's substantially less than it used to be.
The question of remittances is another issue, and the importance of
the Russian labor market to Moldova is critical, but so is the European
market as well.
Ms. Bauman. Yes.
Questioner. Phil Sloberg [sp]. I'm with Congressman Ben Cline's
office.
My mom is Romanian. I spent some time in Moldova, in Chisinau. Most
of the people that I interacted with there believed that ultimately
unification with Romania is the only path to a stable Moldova.
Obviously that's a minority opinion in the country now. Ambassador,
specifically to you, what is your position on that, due to the
longstanding cultural, linguistic, ethnic unification between Romania
and Moldova? Do you think that that's a possibility sometime in the
future?
Amb. Balan. I cannot express my personal opinion--[laughter]--
because I am here in the capacity of a representative of Moldova. So I
speak on behalf of the people of the country of Moldova. And I do not
only speak on behalf of the government, but in general on behalf of all
the people.
I'll just give you some statistics. I'm an economist, so just to
give my background--that's why I always give figures, you know? So
according to the polls--I don't know, I haven't looked at the recent
polls to measure how many people from Moldova are supporting
unification between Romania and Moldova. I know that the figure was
about 11 percent. But when we are looking at the Parliament, at the
parties which end up in the Parliament, we don't have a party in the
Parliament which is supporting or promoting this cause, okay? So this
is the level.
I know personally many people who really believe that this might be
a solution, because Romania is already in the European Union, it enjoys
a lot of support. And, you know, it's much easier for a small country
like ours to be a part of something bigger, you know? And so therefore
it becomes more resilient to all the challenges that it is overcoming.
However, this is statistics. Most of the people of Moldova believe that
Moldova should develop as an independent and sovereign and neutral
state--neutral country.
Questioner. Thank you.
Mr. Kirchick. I would just also add that Romania is a member of the
European Union and NATO, and so it wouldn't be able to just absorb
another country without----
Amb. Balan. Consultations.
Mr. Kirchick. Yes. [Laughter.] You could say that. The United
States and other members of NATO would have concerns about how having
new territory to defend, particularly territory part of which is
disputed or controlled by Russia.
Ms. Bauman. Yes.
Questioner. Yes. I'm Draz Iascu [ph] from Congressman Meeks'
office.
And so my question is, it's hard for me to decipher which Romanian
channels are actually not kind of pumping out propaganda. In Moldova,
what Moldovan language, let's say, outlets, are more reputable than
other ones? Is there a list of outlets that you would say that are
probably more factually accurate, instead of just, like, spreading
George Soros propaganda, or something?
Amb. Balan. Well, propaganda in general is a very interesting
subject in Moldova. And we're talking about different, you know,
opinion flows. Soros propaganda is one thing that is happening in
Romania and in other countries, and also in Moldova too. But the
biggest concern is the Russian propaganda, because we used to have over
26 TV channels which were directly broadcasting to Moldova from the
Russian Federation. Recently, during the last year, the Parliament of
Moldova adopted a law to counter the Russian propaganda. And it
provides that the Russian channels can--or any foreign channels can
directly broadcast to Moldova. However, the news or the political
content has to be produced in Moldova. So this is a way to address this
issue.
If we are talking about independent media, or objective media
outlets, I also have a question to you in the United States, which are
the independent and the objective media outlets.
Questioner. Say, some are more adherent to journalistic standards
than others. So I'll leave it at that. [Laughter.]
Amb. Balan. It's just a rhetorical question. I'm not looking for an
answer.
Questioner. Yes. You know----
Amb. Balan. I think it's a general phenomenon, you know? And of
course, this is what we are living with.
Ms. Bauman. Anyone else have anything to add? Yes. Oh, you want to
add something?
Dr. Welt. I wanted to--if folks were interested in talking about
Transnistria a little bit.
Ms. Bauman. Oh, yes. Actually, that was one of my questions as
well, so, anyone? Let's talk about Transnistria. [Laughter.]
Mr. Kirchick. Go ahead.
Dr. Welt. Sure.
Amb. Balan. Go ahead. [Laughter.]
Dr. Welt. Okay, I'll start, and then I'll turn it over.
So of all the so-called frozen conflicts--and I think frozen is a
terrible word, particularly in the context of Ukraine--but all the
territorial conflicts in the post-Soviet region, what has been striking
about the Transnistrian conflict is how advanced the conflict
resolution process is--if not conflict resolution, the conflict
management process. And unlike certainly Nagorno-Karabakh, between
Armenia and Azerbaijan, or Abkhazia and South Ossetia, the territories
in Georgia occupied by Russia, there are regular negotiations,
discussions, and resolutions to the problems--very practical problems
that residents of Transnistria and residents around the region face in
terms of transportation, agriculture, education.
And it's frankly remarkable, from an observer's perspective, how
many specific problems Moldovan authorities have been able to resolve
with the de facto authorities in Transnistria, with the support of a
very interesting cast of characters--the OSCE, the EU, the United
States, and the Russian Federation. So it is a rather unique situation.
One of the questions that I've always had--if I'm able to ask questions
as well--is why the Russian authorities have been seemingly so
supportive of a process by which Transnistria works together with the
rest of Moldova.
But it is striking.
Amb. Balan. Okay. Thank you very much for acknowledging the
progress in Moldova, which has been registered 2 years ago. Before
that, nothing has been done. And this has been done under the
leadership of the government, which is led by the Democratic Party. I
was in Moldova by that time, when all this progress was been done, and
I was a part of the process. So you can find out firsthand of how this
progress has been registered.
So there was a status quo. Nothing was going on. However, there
were several issues that both Moldovans and Transnistrians were facing
at the time. And they were simple issues. You know, these were issues
related to their human rights. There were some of the cultural lands
which Moldovans could not access. There were some schools in
Transnistria teaching in Romanian, which also had to be supported,
things like this. The government of Moldova had discussions with the
Transnistrian authorities directly, without the involvement of the
Russian Federation.
OSCE was a part of this process. I'd been meeting with the
ambassador of OSCE at that time--who was an American, by the way. So
we've been discussing and we've been working on this. And when the
protocols have been signed, basically the Russian Federation found out
about this a day before that signing.
Okay, and so this is how this progress has been achieved. Again,
for those who don't know much about Transnistria, to just give you some
facts. Transnistria is about 12 percent of Moldovan territory. It also
consists of about 7 percent of Moldova's population. Moldova's national
defense capacity, its military and others, is about 8,800 troops. The
Transnistrian military capacity is 15,000 troops--almost double. Out of
which, 2.5 thousand Russian troops.
These are facts and numbers which speak for themselves. We indeed
achieved remarkable progress, and undoubtably the Transnistrian
authorities, and probably also even the Russian Federation would like
to register some progress. They also need probably some success stories
in the region, just to be able to advance in their relationship with
the international community. This is my feeling from the discussions
that I'm having here.
These results were, first of all, to bring our people together by
just integrating the Transnistrians into Moldovan life, by giving them
all the benefits that Moldovans are enjoying right now. We also think
about the future of the integration of the Transnistrian region.
However, the final solution of this conflict, frozen conflict, of
course, depends, again, on Russia's willingness to give up a source of
regional pressure. And of course, we count on the support of the United
States and the European Union in the settlement of this process.
Ms. Bauman. So I think we're about out of time. I'm going to cut it
off there. But I want to thank all of you for coming today, and for the
panelists, and for an interesting discussion.
And thanks again. [Applause.]
[Whereupon, at 11:14 a.m., the briefing ended.]
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