CENTER FOR STRATEGIC STUDIES AND REFORMS (CISR) Costs of Transdniestrian conflict and Benefits of its Resolution The study was realised in the framework of Project IMPACT (The Expert Think Tank For A Better Moldova-Transdniestria Peace Process) with the support of the Conflict Prevention Pool of the British Government through the Embassy of the United Kingdom of Great Britain and Northern Ireland in Moldova. Authors: Elena Gorelova, Galina Selari All opinions expressed in the present study belong solely to its authors, do not reflect any standpoints of any organisations or administrative structures and do not necessarily reflect the opinion of the British Government. Chisinau, 2009 Table of Contents Executive Summary and Recommendations ...................................................................................3 Introduction .....................................................................................................................................5 1. Methodology................................................................................................................................5 2. Costs of the armed phase of the conflict......................................................................................7 2.1. Human costs .........................................................................................................................8 2.2. Economic damage...............................................................................................................11 2.3. Costs of consequences of the armed conflict......................................................................13 3. Costs of the post-war phase of the conflict and benefits of interaction and cooperation..........19 3.1. Business and trade ..............................................................................................................19 3.2. Transport infrastructure......................................................................................................34 3.3. The Energy Industry...........................................................................................................45 3.4. Communication ..................................................................................................................54 4. Common problems of economic development of Moldova and Transdniestria and benefits of conflict settlement .........................................................................................................................64 Conclusion.....................................................................................................................................69 2 Executive Summary and Recommendations The negotiation process used as the main instrument of Transdniestrian settlement has not brought any positive results so far. Through the recent years, the official positions declared by Moldova and Transdniestria regarding a “common future” have turned into incompatible ones. Excessive “politicisation” contributed to that – being the search for a primarily political form of settlement. At the same time, there was no improvement or harmonisation of internal political conditions for the settlement of the issue. Political preferences and aspirations of the conflicting parties are getting more and more remote from each other. For example, in the recent years, Moldova has been increasingly demonstrating its aspiration for European integration and obtaining a special status from the EU, while Transdniestria – to integration with the CIS countries and with Russia. Chisinau and Tiraspol gave directly opposite assessments to the 2008 events in Georgia and its consequences. Political events in Moldova that took place after the elections of April 5, 2009 caused a wave of categorical statements by Transdniestrian officials and politicians about different historical fates and different political future of Moldova and Transdniestria. At the same time, there is no stabilisation of geopolitical conditions for the settlement of the issue. Transdniestrian settlement is especially negatively impacted by an ambiguity of political relationships between some participants of the negotiation process (EU – Russia, Ukraine – Russia, USA – Russia), which fuels the centrifugal trends of the parties to the conflict to some extent. Taking into consideration these circumstances, it is relevant to look more actively for compromises between Moldova and Transdniestria in spheres of their mutual economic interests. Account should also be taken of the fact that emergence of economic conflicts usually resulted in aggravation of political relationships between Moldova and Transdniestria. A shift in the emphasis from the political to the economic component of the settlement will allow the solving of many problems which exist, the elimination of tension in relationships between the parties in the economic sphere - in this way ensuring more sound conditions for continuation of the political dialogue. The study conducted showed that the parties incur significant costs as a result of economic pressure over each other. Often, the economy of one party would become a hostage of economic policy conducted by the other. Besides the fact that Moldova and Transdniestria are still incurring costs of the consequences of the armed conflict, they have often taken steps that resulted in the emergence of newer and newer economic costs in the spheres of mutual trade, transport, energy and communication. Such steps not only caused direct damage to economic entities, budgets, infrastructure and the population of Moldova and Transdniestria, but in a number of cases contradicted the economic interests of third parties. The wastefulness of the economic opposition of Moldova and Transdniestria is obvious – the level of economic development is the lowest, and the level of poverty is the highest among European countries including countries of the European part of the CIS. The parties do not see benefits in cooperation and interaction in the economic sphere that could be gained from normalisation of conditions of internal trade, attraction of investments, development of infrastructure sectors, use of transit potential etc. Unfortunately, through the years of parallel development, Moldova and Transdniestria only accumulated an experience of economic opposition, and not interaction. This experience is non- constructive from the point of view of ensuring a stable internal economic development and achievement of political settlement in the future. It is necessary to take steps to establish normal mechanisms and instruments for solving existing economic contradictions and for developing economic interaction between Moldova and Transdniestria for the parties to stop incurring “unreasonable” losses and to convert from economic confrontation to common work to obtain real economic benefits in the sphere of trade, infrastructure, entrepreneurial activity, and attraction of investments in the first instance. 3 Recommendations For Moldova and Transdniestria: 1. Discuss issues of economic relationships and disagreements and present to each other relevant well-argued information. 2. Attract independent thematic experts to develop options for solving existing problems and recommendations for the normalisation and development of interaction in the economic sphere. 3. Elaborate and adopt a coordinated Statute for Working Groups on confidence building measures and common socioeconomic projects - establishing their status, aims, tasks, mechanisms of activity; confirm their work plans. 4. Elaborate and adopt a coordinated action plan for elimination of economic contradictions and cooperation development. OSCE, Russia, Ukraine, EU and USA: 5. Develop general basic principles of settlement of economic contradictions between Moldova and Transdniestria. 6. Analyse economic disagreements and mutual claims of the parties and develop an action plan for facilitation of settlement of conflicts between Moldova and Transdniestria in the economic sphere. 7. Offer Moldova and Transdniestria to present materials (information and justification) on problematic economic issues that cause disagreements and prevent stable and effective development of the economies of the parties and their economic relationships. 8. Provide support to the activity of the working groups in development of proposals for elimination of economic contradictions and improvement of economic relationships of the parties. For Donors: 9. Coordinate the donors’ country programmes and action plans for the support of efforts of Moldova and Transdniestria aimed at settlement and development of economic relationships. 10. Offer Moldova and Transdniestria assistance programmes/projects, the implementation of which involves development of contacts, coordination of actions and cooperation between Moldova and Transdniestria (first of all, in the sphere of infrastructure, trade, small business, and humanitarian development etc.). 11. Create a trust-fund with a purpose of accumulating funds to implement coordinated projects promoting common economic interests of Moldova and Transdniestria and involving implementation by them of common action plans. 12. Facilitate establishment and development of cooperation between non-governmental organisations of Moldova and Transdniestria (associations of entrepreneurs, chambers of commerce and industry, trade unions etc.). 13. Increase awareness of the Transdniestrian side regarding the aims, directions and results of the activity of donors in Moldova, as well