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Chisinau's economic dependence on Moscow
Iurie Gotisan, May 4, 2005
Statistics show that the share of Moldovan exports on eastern markets in the total of exports dropped by 1.5 percentage points on average a year from 1995 to 2004, and by two percentage points in case of Russia. However, the Russian market remains a key market for Moldovan products in spite of these declines.
Even more, according to official statistics Russia's share in Moldova's exports is increasing again after the 1998 financial crisis. The Moldovan products exported to the Russian market accounted for about 40 percent of overall exports in 2004. The exports to the European Union rose much more slowly than expected, while the share of exports to Central Europe registered a visible decline.
Moldova's foreign trade had consolidated its faulty structure and it posts again a visible unilateral dependence on eastern markets, especially on Russia, determining the latter to take hostile enough attitudes towards Moldovan products and to dictate the rules of the market alone.
Moldova lacks so far enough "space of maneuver" to balance its ties with Russia, while the latter has already started taking actions. The stoppage or better saying the refusal of Russia to accept the meat imports from Moldova is a meaningful proof in this regard. Certain experts fear that Russia's decision has rather a political than economic nature.
It is worth to recall the recent "economic sanctions" of Russian authorities against wine imports from Moldova, but they finally highlighted the importance of Russian capital in Moldovan wineries. Perhaps this is the reason why the wine producers had been left alone, but Moscow found another pretext - the meat. The cereals could become soon another object of dispute between Russia and Moldova.
Moscow press reports quoted Russian experts as saying that the Moldovan meat unfits the qualitative veterinary and sanitary security standards compared with the meat of Ukraine, a country which holds modern meat processing facilities. However, the Russian side had earlier pretended not to observe the importation of allegedly bad production, though it knew these problems.
If we consider this problem from economic viewpoint, the prohibition of meat imports cannot influence the situation of Moldovan producers. The domestic producers do not meet the national demand, while exports are as small as eventual losses could be ruled out from the very beginning.
On the other hand, the Moldovan authorities did not reach the political and economic maturity and lack the ability to negotiate with Russia from equal positions by using the legislation in effect. The bilateral commercial agreements had also been subject of a number of revisions, exceptions and derogations.
It is worth mentioning that both the Moldovan Parliament, and the Russian State Duma had ratified the protocol on annulment of exclusions from free trade between these two countries, which comprises products such as sugar, meat, alcohol products, and tobacco products. Under the protocol on annulment of exclusions, all the named products will be included in the free trade agreement in 2004-2012, while their circulation will be liberalized. Hence, the alleged "economic sanctions" of Russia would jeopardize its bids to join the World Trade Organization (WTO).
Russia often dictates the commercial relations with Moldova by using what we call "energy arm". The past years provided plenty of examples of incidents related to exports of energy resources to Moldova, particularly of natural gas, and Russia played the role of key protagonist. Even so, Chisinau could reply to Moscow, a solution would be to raise transit tariffs which can be deducted from import price.
Moldova has turned indeed into an object of Russian economic policy since it has no active stance in negotiations. If Chisinau fails to adopt a much better policy, Moldova's commercial dependence on Russia will become more visible soon.