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Transnistria Economy: Regional Dimension
Galina Selari, July 29, 2005

The new challenges, events and decisions of the last years (2000-2005) that brought about worsening economic relations between Moldova and Transnistria (so-called "economic blockade", boosting privatization process and its legitimacy, autonomy of the region's infrastructure), highlight the economic component of the "Transdnistrian issue". And this is the very component which confers Transdnistrian conflict a regional dimension.

Noteworthy, in the last 15 years that is after 1990 Moldovan-Transdniestrian relations have tittered between two extremes - from "do whatever you want and trade with whoever you want" (including the use of customs stamps of the Republic of Moldova for legalization of TMR's external trade) to continuous pressing and barriers to the export-import of Transdnistrian enterprises. The economic confrontation between Moldova-Transdnistria commenced with Moldova joining WTO in 2001, followed by withdrawal of customs stamps. On the other hand, prospective adherence to the same organisation in 2005 of Russia and Ukraine - both guarantor states and Moldova's and Transdnistria's main trade partners - is considered to be a factor that might speed up reaching a reasonable consensus in settling Transdnistrian conflict. Another important aspect is that Moldova, Russia and Ukraine are included in the EU "new neighbourhood policy" and are member states of regional organizations such as Black Sea Economic Cooperation, Central European Initiative (Moldova and Ukraine).

That is why not only Republic of Moldova and Transnistria, but also Ukraine, Russia, European Union and USA should be interested in a faster and constructive resolution of the "Transdnistrian issue". Another evidence is the fact that currently Transdnistria trades with almost all CIS countries, the majority of European Union countries and even with Australia and New Zealand, and African countries (Algeria, Egypt, Tunisia, Morocco, and South Africa). The "secessionist" region succeeded in establishing quite stable and reliable relations not only with partners from CIS, but also with European countries (Germany, Italy and Romania). At the same time they came up with such mechanisms that foreign factors or barriers practically does not affect the bilateral relations with those countries.

In the last five years Transdniestria made a "breakthrough" in exports to Europe, primarily EU, which account for a big share of Transdnistria's exports: 2000 - 19.3%, 2001 - 23.4%, 2002 - 34.0%, 2003 - 32.2% and 2004 - 33.3%. Whereas Moldovan export to EU countries was smaller over the same period: 2000 - 21.7%, 2001 - 21.3%, 2002 - 22.3%, 2003 - 26.7% and 2004 - 30.1%. Of course, one should take into account the differences in the structure of Moldova's export (70% - foodstuffs and light industry goods) compared to Transnistria's one (metal-roll - about 60%, machinery and equipment, textile).

Geopolitical position of Transdniestria (closeness to the Balkans, Danube and Odessa - Ilyichevsk, the largest commercial port of the Black Sea) sets it as a transit region, and all countries of the region have their own interest in this transit corridor, its economic component: Russia - to use advantages of transit through the region of natural gas and electricity (including the one produced by Moldovan power station, now owned by "Nordic Oy/RAO EES), Ukraine - highly profitable and export-oriented production of metal-roll (from 2004 the Austrian-Ukrainian Hares Group is the owner of Moldovan Metallurgical Works - MMZ); the European Union - IX Trans-European transportation corridor is scheduled to run via Dubasari and Chisinau.

Yet another sensitive issue, both economically and politically is the privatisation process in Transdniestria as more and more foreign and domestic (Transdniestrian) investors are attracted.

The growing number of foreign companies - the new owners of enterprises in Transnistria - introduces a new and quite important element in the diversity of Transdnistrian situation, and its importance would only grow in time. Currently it is the foreign investors who contribute to restoring economic unity of the two sub-regions of Moldova, namely "Aroma" Trade House (Russia), "Saliut" company (Russia) - instrument-making industry and WJ Group of companies (USA) - production of vegetable oil.

Note: in Transnistria out of 37 enterprises - "large-scale" privatisation - 11 are owned by external investors, out of which Russia (4), EU Member-States (4) and USA (2)1.

For reasons far from economic ones, Moldovan business society officially does not take part in this privatization and is "satisfied" with status of an observer 2. Meanwhile, participation in privatisation processes by businesses from the right bank of Dniestr might boost economic reintegration since it can:

  • promote free circulation of capital,
  • make Moldova more attractive both for Transdnistrian population (Moldova invests rather than set its hands on the most profitable enterprises of the left bank3) and for foreign investors,
  • opportunity for the return of Moldovan business and goods to Transdnistrian market,
  • areas where shadow and criminal business schemes might be used are shrinking as is the scale of shadow economy as whole.

Noteworthy, presence of foreign investors in Transnistria takes the "customs conflict" out of the local context: difficult export-import affect all the businesses from the left of Dniester.

Another important aspect, Transnistria's attempts to divide and form an infrastructure "of its own", independent from that of RM: transportation, including railways, telecommunications, natural gas supply, etc.

That approach is mutually inefficient for both parties: extremely limited financial resources (Moldova is the poorest country of Europe) are used to "neutralize" the losses of mutual estrangement. Moldova is urgently reconstructing the railway link Revaca - Cainari, while Transnistria tries to restore traffic along "its" part of the railroad and intends to include the railway in the state privatization programme. Meanwhile, state company "Railways of Moldova" ended 2004 with losses, and plans to adjust to the new situation by the end of this year. The national railway company of Ukraine, in its turn, loses millions of USD due to impossibility to use the border railway station Cuciurgan (Ukraine invested more than USD 2 million into its reconstruction). It is estimated that Transdnistrian budget would also incur losses of USD 2 million.

Besides those "local losses", most importantly is that traditional transit corridors are affected. Redirecting goods and passengers flows around Transdniestria not only make transit time longer (additional 500 km.) but could have a negative influence on transit potential of Moldova as whole. And the first step is already done: starting from March 1, 2004 the Kiev-Chernovti train won't enter the Moldovan territory. And one may also expect that other trains from CIS countries will go to Danube-Carpathians region and Balkans through Chop to Trans-Carpathian rather than Tiraspol-Djurdjulesti.

It is our belief that too a large extend at this crucial stage in the settlement of "Transdnistrian issue" neglecting its economic component would only further postpone finding a mutually acceptable political settlement of the problem. That is why it will be vitally important to take into account economic interests both of the Republic of Moldova and Transnistria, as well as of their partners while formulating and making political decisions. International experts are reaching the same conclusion: "A reconstruction program for Transdniestria to be implemented after an agreement on final settlement is concluded, should be elaborated in detail and put forward for public debates. Moreover, Transdniestrians should be confident that they would continue their legal business operations and that the region would keep its property and a fair share of the revenues collected on its territory."4

1 Newspaper "Приднестровье", 03.06.2005

2 According to "Olvia-Press" (16.11.2004) 100% of the company shares of meat factory (Tiraspol) amounted to 456 thousand rub. TMR were sold to foreign investor JSC "Lendergroup" and there is an information that it is registered in the Republic of Moldova

3 Moldova: No Quick Fix, International Crisis Group Europe Report #147, Brussels 12.08.2003, p. 28

4 Ibidem, p. 27






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