Centre for Eastern Studies NUMBER 95 | 23.10.2012 www.osw.waw.pl

Could Transnistria block Moldova’s integration with the EU?

Wojciech Konończuk, Witold Rodkiewicz

Moldova’s progress in its negotiations on an Association Agreement with the European Union, with a Deep and Comprehensive Free Trade Area (DCFTA) as its key element, has become a source of tension between Chisinau and the breakaway Republic of Transnistria. An almost certain refusal by Transnistria to join the DCFTA, will deprive the region of the benefits it cur- rently enjoys under the EU Autonomous Trade Preferences (ATP) worsening its already preca- rious economic situation. It is to be expected that the issue will become an additional source of tension between the two sides of the Transnistrian conflict, and might also have a negative impact on the EU–Russia relationship. The signing of the Association Agreement, which is scheduled for the autumn of 2013, will be an important step towards Moldova’s integration with the EU. Both sides assign great im- portance to the speediest possible finalisation of the Agreement, and so far the negotiations have been described as progressing very smoothly. Transnistria’s highly sceptical attitude to- wards its possible accession to the DCFTA, however, is consistent with the interests of its main ally, Moscow. It is highly probable that Russia intends to thwart Moldova’s EU association process. Moscow’s objective seems to be to draw Moldova permanently into its own sphere of influence, and therefore it perceives Chisinau’s movement towards the EU as a transgression against its geopolitical interests. Consequently, in order to hinder this process, Russia may instrumentally exploit its extensive influence over Transnistria to provoke a crisis between Tiraspol and Chisinau. An apparent increase in Russian presence in the region over the last few months (including tighter control over Transnistria’s KGB and the Ministry of Information) may suggest that the Kremlin is preparing to implement such a scenario.

The current state of the EU–Moldova Agreement in the autumn of 2013. Declara- DCFTA negotiations tions coming from Brussels also suggest that this is a realistic time frame. Although the final The DCFTA negotiations between Moldova and Association Agreement will require ratifica- the European Union were launched in March tion by all EU member states (which could take 2012, and three rounds of talks have already up to two years), an interim implementation been held. The constructive attitude demon- clause is likely to be adopted for the DCFTA. strated by Moldova has allowed the negotiat- The implementation of the DCFTA will bring ing teams to quickly settle a number of diffi- about a deepening of economic integration cult issues (trade in goods, customs and trade of Moldova with the EU, and the adoption by facilitation, public procurement and energy), Moldova of part of the EU acquis, which is seen which indicates that Moldova wishes to com- as a crucial instrument in the modernisation plete the negotiations and sign the Association of the country.

OSW COMMENTARY NUMBER 95 1 DCFTA and Transnistria total exports1. However, if Chisinau signs the DCFTA agreement, the ATP regime will Currently, there are no reasons to believe be automatically discontinued. Its further that Transnistria might change its position application for Transnistria alone will not be and join the ongoing DCFTA negotiations. possible for legal reasons; since the Transnistri- This in turn means that the region will not an government lacks international recognition, be covered by the agreement. Despite en- it cannot be a party to any legally-binding agree- couragement from Brussels and Chisinau, ment with the European Union. Consequently, Tiraspol has so far refused to participate active- once the DCFTA has been implemented, ly in the talks and has merely delegated to it EU customs tariffs on Transnistrian exports a low-ranking observer. This means that Trans- will rise by 10–17%, which will have a serious nistria is de facto not taking part in negotiating impact on the region’s economy. matters that are of direct interest to Transnis- trian exporters (export quotas, customs tariffs, Russia’s position on a DCFTA for Moldova transition periods, etc). Transnistrian govern- ment officials and local experts have argued The signing and implementation of the DCFTA that accession to the DCFTA would actually be agreement will result in a high degree of eco- economically harmful to the region, and that nomic and legal integration between Moldova implementing the EU acquis would run against and the EU (through the implementation of the grain of Tiraspol’s policy of legal harmoni- large parts of the EU acquis), which in turn will sation with the Russian Federation. One gets make it impossible for Moldova to participate in the impression that Transnistria refuses to par- regional integration projects in the post-Soviet area (i.e. the Customs Union and the planned Eurasian Union), and thus frustrating the im- Currently, there are no signs suggesting plementation of Moscow’s openly declared that Transnistria could join the DCFTA ne- strategic policy goal in Moldova2. The Russian gotiations, and that it will therefore even- political elite remains convinced that Moldova tually be covered by the agreement. naturally belongs in the Eurasian integration projects. Importantly, fostering such projects is one of the main objectives of President Vladimir ticipate in DCFTA negotiations in order to argue Putin’s foreign policy. Most likely, from the later that the new trade regime has been intro- Kremlin’s perspective, it is not only the fate of duced unilaterally, without consultation with Moldova which is involved, but also prevent- Tiraspol, and without taking its interests into ing the precedent of a successful integration account. Transnistria might even hope that of a CIS state with the EU (even if temporarily as a result of its refusal to join the DCFTA, integration will remain incomplete, i.e. falling the EU will suspend the signing of the DCFTA short of EU membership). Russia is particularly agreement with Moldova. Currently, Transnistrian companies are able to 1 According to Transnistria’s official figures, 30% of the export goods to the EU market under the Auton- region’s exports reach the EU market; Moldovan and EU experts, however, have placed this figure at around omous Trade Preferences granted to Moldova 50%. Another 35% of Transnistrian exports are bought by Brussels in 2007. As a result, the EU market by Moldova. 2 absorbs as much as 30–50% of Transnistria’s For a detailed discussion of Russia’s foreign policy on Mol- dova, see Witold Rodkiewicz, ‘Russia’s strategy towards Moldova: continuation or change?’, OSW Commentary, 18 April 2012, http://www.osw.waw.pl/sites/default/ files/commentary_74.pdf

OSW COMMENTARY NUMBER 95 2 concerned about the effect such a precedent ly can be seen as a preparation for a crisis in might have on Ukraine’s future political course. the region, the aim of which would be to block Therefore one should assume that Moscow further integration between Moldova and the may use Transnistria as an instrument for EU, and to send a signal to the West that Mos- preventing closer ties between Moldova cow will not suffer Brussels to unilaterally de- and the EU, and to provoke a political cri- cide the future of countries from the so-called sis between Chisinau and Tiraspol, using as ‘shared neighbourhood’. Particularly strik- a pretext Tiraspol’s loss of trade preferences ing in this context was a statement by Sergei following Moldova’s accession to the DCFTA. Gubarev, Russian Foreign Ministry’s special en- An attempt to provoke such a crisis is all the voy, who suggested during his visit to Tiraspol more likely due to the perception, widely in mid-October that Transnistria could be al- shared in Russia, that the current geopolitical lowed into the Customs Union, and that Rus- situation and reality and the existing balance of sia might recognise the region’s independence power with the West, is favourable to Moscow, should Moldova lose its sovereignty or neutrality. due to the deepening crisis within the Europe- an Union and the serious economic plight of EU proposals for Transnistria’s member- other post-Soviet states. Therefore in Moscow’s ship of the DCFTA view this might look like a propitious moment for undertaking actions that would permanent- Both official and unofficial statements by EU ly block integration between former Soviet re- officials indicate that the European Union as- publics and the European Union. sumes that the issue could be resolved by convincing Transnistrian businesses of the benefits of joining the DCFTA, and thus re- Russia may use Transnistria to block taining their present access to the EU mar- the integration process between Moldova ket. Brussels hopes that Transnistrian compa- and the EU, provoking a crisis in relations nies will be able to put sufficient pressure on between Chisinau and Tiraspol. Yevgeny Shevchuk to persuade him to join the on-going DCFTA negotiations. In addition, Brussels also seems to believe that the DCFTA In the context of the scenario sketched out above, offers such economic opportunities that it can Russia’s tightening of control over the Trans- serve as an instrument for persuading the po- nistrian security forces (for instance, the new litical and economic elites in Tiraspol to show deputy head of Tiraspol’s KGB previously served more flexibility and to arrive at amodus vivendi as Dagestan’s deputy director of the Federal Se- with Chisinau within a framework of a single curity Service) and the Ministry of Information Moldovan state. Therefore EU officials are ap- (which controls the local media) seems particu- proaching the DCFTA as a tool for facilitating larly significant. Over the last few months, visits the reunification of Moldova – both directly in to Transnistria by high-ranking Russian officials economic terms and indirectly in political terms. have become increasingly frequent; among the However, Brussels’ approach is based on recent visitors were Dmitry Rogozin, the depu- wishful thinking and a faulty diagnosis of ty prime minister and the Russian president’s the current situation in the region. Transnis- special envoy to Transnistria (who is also re- tria depends heavily on Russian subsidies (both sponsible for the Russian defence industry) and direct ones, such as financial transfers, and in- Anatoly Serdyukov, Russia’s defence minister direct ones, such as a free supply of natural gas (a historical first). All these measures collective- from Russia), and in order not to lose this sup-

OSW COMMENTARY NUMBER 95 3 port, Shevchuk must strive to retain Moscow’s Assuming the most likely scenario, that Tiraspol favour. In addition, the Transnistrian leader re- will continue to reject the EU’s invitation to join mains in conflict with the political milieu of the the DCFTA, Brussels will be left with the follow- former president Igor Smirnov and is fighting for ing three options: extra powers with the Transnistrian parliament, which is controlled by the opposition Obnovleni- • Chisinau agrees to a customs border ye party. Moreover, he remains at loggerheads between Moldova and Transnistria with Transnistria’s largest company, Sheriff. It appears that Chisinau could potentially agree to such a solution, even at the expense of deep- ening the current division of the country and The EU believes that the issue can be re- further delaying the prospect of reunification. solved by convincing Transnistrian busi- However, this option carries the greatest risk of nesses of the benefits of DCFTA mem- serious conflict because it would require the di- bership, including continued access to vision of the so-called Security Zone, inhabited the EU market. by around 700,000 people, which until now has been controlled by trilateral peacekeeping force (Russia–Transnistria–Moldova). Attempts to set In these conditions, Shevchuk cannot afford to up Moldovan state customs checkpoints with- ignore the Kremlin’s wishes. During his visit to in this zone could be thwarted by Transnistrian Moscow in February of this year, Shevchuk de- armed formations and even lead to armed clash- clared that Transnistria was eager to participate es. On the other hand, if Chisinau decided to lo- in integration projects within the framework of cate the checkpoints outside the Security Zone, the Customs Union; while in early June, he de- this would translate into its de facto surrender clared that Eurasian integration should be taken of a significant part of its territory. Consequent- as the cornerstone of Transnistria’s national idea, ly, Chisinau’s attempts to create a customs bor- and issued directives for the official foreign poli- der could be used by Transnistria, and its ally cy conception to be re-drawn accordingly. Russia, as an excuse to provoke incidents. It is unlikely that this could turn into a full-blown Possible scenarios military conflict, but it could definitely lead to armed incidents, which would consequently It appears that the European Union does make it impossible to create a customs border, not have a contingency plan for a scenario and by extension, might prevent Moldova from in which Transnistria decides not to join the entering the DCFTA. Such incidents could be ac- DCFTA. The EU also seems to be playing down companied by Russian economic pressure in the the possibility that its actions (the offer and the form of a selective ban on the import of Moldo- signing of the DCFTA) could result in a serious van goods to Russia, and/or interruptions in the crisis both in the region and in its relations with supply of Russian gas to Moldova)3. Moscow. Neither Brussels nor the governments of the individual EU member states are pre- pared (politically or conceptually) to say wheth- 3 Signs of Moscow’s pressure on Moldova have become er the EU is willing to allow for a crisis in its rela- evident over the last several months; examples include Russia’s insistence that a new contract on gas supply to tions with Russia for the sake of pressing ahead Moldova could be signed only if Chisinau abandoned with the implementation of its policy towards its plans to implement the EU’s Third Energy Package. See Agata Wierzbowska-Miazga, ‘Russia’s energy ulti- former Soviet republics. matum to Moldova’, EASTWEEK, 19 September 2012, http://www.osw.waw.pl/en/publikacje/east- week/2012-09-19/russia-s-energy-ultimatum-to-moldova

OSW COMMENTARY NUMBER 95 4 Nonetheless, even if a customs border with give the impression that when faced with the Transnistria were successfully established, the prospect of a diplomatic crisis, Brussels is pre- significant limitations on Transnistrian exports pared to abandon its strategic goals in East- to the EU following Moldova’s adoption of the ern Europe, and (despite its rhetoric) to accept the DCFTA would almost certainly create a sit- that the countries in the region may not freely uation similar to that witnessed in 2006. Then, choose between different regional economic after Ukraine had discontinued the practice of integration projects. allowing Transnistrian goods through its bor- der without Moldovan customs seals, Tiraspol • The EU agrees to grant Transnistria all declared that it was subject to an economic the privileges afforded by the DCFTA blockade, rather than allowing its firms to reg- This solution is problematic for at least two rea- ister in Chisinau and thus to enable them to sons. First, under the DCFTA both sides should continue their export operations (even though ultimately lift all mutual customs tariffs. A de- such an option was offered by Chisinau with- cision to unilaterally cover Transnistria by the out subjecting the firms to double taxation). DCFTA rules would in effect reward Tiraspol’s At the time Tiraspol preferred to provoke a cri- obstructive attitude, since the region would sis in its relations with Moldova to a ‘pragmatic’ benefit from all the resultant privileges (includ- solution. and it is unlikely that its reaction to ing duty-free access to the EU market) but with- a new change in its export operation regime out having to incur any costs or making any will be different. commitments. For example, Transnistria would still be able to charge duty on goods imported • The EU suspends the signing of the DCFTA from both the EU and Moldova. agreement with Chisinau Second, by including Transnistria in the free trade This option, in turn, would deliver a crippling area, the EU would knowingly create a ‘hole’ in blow to the EU policy on Moldova, which dur- its customs border by opening up the possibility ing the last two years have been widely re- that goods produced outside the DCFTA could garded as a success. Brussels, and a number freely enter the EU market. This is because Chis- of individual EU member states (particularly inau would not be able to inspect Transnistrian Germany), have invested, both politically and manufacturers in order to enforce the so-called financially, in the process of drawing Moldova Rules of Origin, which are designed to prevent closer to the European Union. The idea was the re-export of goods produced outside the to make Moldova into a positive example for DCFTA area into the EU. Consequently, the EU the EU’s relations with other countries in the cannot extend DCFTA privileges to Transnistria, so-called ‘shared neighbourhood’. A decision because it would not be able to ensure that Mol- to suspend the signing of the agreement could dovan goods produced in Transnistria had not in also be perceived as a sign of weakness in the fact been produced in China or Russia, for exam- EU’s relations with Russia. Such a move could ple, and only repackaged in Transnistria.

EDITORS: Adam Eberhardt Centre for Eastern Studies Katarzyna Kazimierska, Anna Łabuszewska Koszykowa 6a, 00-564 Warszawa TRANSLATION: Maciej Kędzierski phone: +48 | 22 | 525 80 00 CO-OPERATION: Jim Todd e-mail: [email protected] DTP: Wojciech Mańkowski The views expressed by the authors of the papers do not Visit our website: www.osw.waw.pl necessarily reflect the opinion of Polish authorities

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