Moldova has struggled since independence arrived, with the breakup of the Soviet Union, at the end of the Cold War in 1991. The country remains Europe’s poorest country, due to lack of economic development and rampant corruption.
A massive banking theft has left the country near insolvent. The long term survival of Moldova, with a population of just 3.5 million, still remains in doubt.
The economy of Moldova remains heavily reliant on agriculture. Structural reforms will be needed to promote sustainable growth and attract more foreign investment.
Economic growth in contrast to the 1990’s, had been substantial in the 21st century, until the financial fiasco that came to light in 2014. The full effects of this fiscal debacle, are still not known.
The most industrialized part of the country to the east of the Dniester River, unilaterally declared independence in 1990. Despite a destructive military conflict, to retake the territory of Trans-Dniester, the effort has been unsuccessful.
The situation involving the Dniester region east of the river, is unlikely to be resolved. Whereas two thirds of the populace of Moldova is Romanian, the people on the other side of the Dniester are mainly Russians and Ukrainians.
The country is further politically divided on the issue of foreign policy. There are some who have determined, that the future of Moldova lies with a resurgent Russia. The opposing side, wants to further link the country, to the institutions of the European Union.
Recent elections in November of 2016, demonstrate this division quite clearly. The pro-Russian candidate Igor Dodon, won the presidency with 55% of the vote. His opponent was Maia Sandu, who advocated closer ties with Western Europe.
President Dodon based his election campaign on a platform, of steering the country’s foreign policy back towards Russia. He pledged to end the 7 year dalliance, with the European Union.
It is important to note, that the November elections marked the first time in 16 years, that the president was elected directly by the people and not the legislature.
At the same time Prime Minister Pavel Filip in office since January 2016, represent the pro-European three-party coalition, that has dominated the parliament of the country since 2009.
Although since the 2014 elections, the Socialists have become the largest single party in the legislature, replacing the Communists.
This split in governmental control, is preventing a decision on the direction Moldova will take, both economically and politically. It mirrors the division of opinion among the populace, who have become tired of empty promises and massive corruption.
President Dodon has led the Socialist Party since 2011. As a former economics minister, he has determined that Moldova has more to gain, by participating in the Russian dominated Eurasian Customs Union.
Of course if Moldova is to move in this new direction, it will necessarily mean the abandonment of the 2014 association agreement, for closer political ties and trade arrangements with the European Union.
One result of the move towards a closer relationship with Europe, was the decision by Russia to impose restrictions on the importation of agricultural products from Moldova.
Since produce comprises the largest share of Moldovan exports, the Russian action had a substantial detrimental effect on the domestic economy.
Near the end of 2014, the National Bank announced the embezzlement of the equivalent of $1 billion USD (United States dollar) and official inaction, in attempting to recover the funds.
The theft of this sizable sum of money was equal to 12.5%, of the annual Moldovan GDP (Gross Domestic Product). The effect on the banking system was devastating. It resulted in a domestic credit crunch, that dealt a substantial blow to the domestic economy.
What followed was a political crisis. Two successive Prime Ministers would fall from power in 2015, mostly as a result of the banking scandal. Mass public protests, led to the ouster of the second one in October of that year.
Adding to the chaos and political instability, former Prime Minister Vlad Filat was arrested in September of 2015. The charges centered on corruption and the ongoing banking scandal. He would later be sentenced to 9 years imprisonment, for accepting $260 million USD in bribes.
Prime Minister Pavel Filip himself of the Union Democratic Party, took office as activists from both pro-European and pro-Russian, demonstrated against him. These protesters stormed the Parliament building, because of his ties to the disputable businessman and fellow party member Vlad Plahotniuc.
Large public crowds of anti-government enthusiasts in the capital of Chisinau, finally forced the issue of early elections, at the beginning of 2016.
In March the Constitution Court at length, ruled that presidential elections to be held later in 2016, would be decided by a popular vote. This would help pave the way, for the electoral victory of Igor Dodon.
Moldovan politics have been quite divisive and heavily contested since independence.
Although Moldova became a member of the Commonwealth of Independent States, the successor to the Soviet Union in 1991, relations with Russia have not been smooth.
Russian peacekeepers had been sent into the Trans-Dniester following intense fighting in 1992, once a new ceasefire agreement had been reached. By 1999, the Moldovan government at a summit in Istanbul, Turkey, was asking for the removal of Russian forces.
Despite the opposition of officials in the Trans-Dniester, an understanding was arrived upon at the Istanbul meeting. It called for the withdrawal of all Russian troops and ammunition by the end of 2002. The deadline would be extended twice, once for 2003 and then 2004.
Finally, Russia announced that its military presence would remain, until the resolution of the political impasse, between the leadership in Trans-Dniester and the authorities in Moldova proper.
A 2006 referendum in the Trans-Dniester region, overwhelmingly backed full independence from Moldova and a later plan, for becoming part of Russia. Of course, government officials in Chisinau, declare the plebiscite to be illegal and therefore invalid.
Over the years, Russia has used natural gas sales, in its pursuit of political objectives in Moldova. Russian officials have manipulated price and supply, in the effort to put pressure on the Moldovan government. Moldova needs the importation of this source of fuel, to meet their energy needs.
At the beginning of 2009 for example, the dispute left the country without new supplies for several weeks. During this time, a number of towns throughout the country, were without a heat source in the dead of winter.
In 2012, Russia would issue an ultimatum to the Moldovan government. Russian officials were insisting, that Moldova withdraw from the energy agreements, made with the European Union. If they failed to do so, they would lose the favorable pricing regime then in place. Moldova had originally met with European officials in an attempt to break free, from the Russian monopoly on energy inside the country.
The unresolved issue concerning the autonomous region of Trans-Dniester, reached a new level level of tension in 2014. The Moldovan President Timofti, warned the Russian government against any attempt to annex the Trans-Dniester region, in the same way Crimea was taken away from Ukraine.
The illegal financial transactions and general corruption, go far beyond the political arena. In September of 2016, a total of 15 judges were detained, on the charges of participating in a criminal scheme. The plan allowed the laundering of the equivalent near $20 billion USD.
Between 2010 to 2014, the judges are being accused of authorizing repayment of nonexistent debts, through some 50 legal rulings.
Several bankers and the former deputy governor of the central bank himself, have become ensnared in the ongoing investigation.
The main reason for the long standing crisis in Moldova, both economically and politically, is the now total lack of confidence by the citizenry in state institutions. It has been totally eroded by the multiple corruption scandals.
In addition, the recent Moldovan government decision, to consider the theft of the $1 billion USD that was discovered in 2014 as a public debt, does not inspire any confidence by the citizenry at large.
The lack of overall results in dealing with massive fraud and corruption, transcends the political division of Moldova between pro-European and pro-Russian groups.
The halfhearted attempt by the Moldovan government in fighting corruption, is quite evident. The same can be said for the sporadic crackdowns on financial criminality, meant mainly to impress European and Western governments so they will continue assistance.
At this juncture, the future of the country remains very much in doubt. A possible solution for the part of the population that is predominately Romanian, is to become part their neighbor to the west. Most of Moldova, was once although controversially, a region of Romania known as Bessarabia.
Given the small population of Moldova and that the industrialized portion of the country, has declared de facto independence, economic stability may be difficult. Per capita GDP, is still below $2,000 USD. If this landlocked nation had good governance and was financially stable, it would be an entirely different story.