This short report provides information and analysis on Moldova, including its
political and economic situation, foreign policy, and on U.S. policy toward Moldova.
This report will be updated as events warrant.

Political Situation

Although a small country, Moldova has been of interest to U.S. policymakers due
to its position between NATO and EU member Romania and strategic Ukraine. In
addition, some experts have expressed concern about alleged Russian efforts to extend
its hegemony over Moldova through various methods, including a troop presence,
manipulation of Moldova’s relationship with its breakaway Transnistria region, and
energy supplies and other trading links. Moldova’s political and economic weakness has
made it a source of organized criminal activity of concern to U.S. policymakers, including
trafficking in persons and weapons.

Moldova in World Fact Book

Moldova is a parliamentary democracy that has held largely free and fair elections
since achieving independence from the Soviet Union in 1991. In the most recent
parliamentary elections on March 6, 2005, the Communist Party of Moldova (CPM) won
a majority of 56 seats in the 101-seat parliament. The Democratic Moldova Bloc (DMB),
an alliance of small centrist groups, won 34 seats. The nationalist and pro-Romanian
Christian Democratic Popular Party won 11 seats. Observers from the Organization for
Security and Cooperation in Europe (OSCE) said that the vote was carried out generally
in line with international standards, but they criticized the election campaign for biased
electronic media coverage, misuse of government resources in favor of the CPM, and
harassment of opposition candidates and non-governmental organizations.

On April 4, 2005, Vladimir Voronin was reelected as President by the parliament.
Voronin gathered support not only from his own Communist Party, but also from the
center-right Christian Democratic Popular Party, and the Social Liberals, once part of the
Democratic Moldova Bloc. Local elections in June 2007 led to substantial victories for
the opposition, including the election of a 28-year-old human rights activist as mayor of
the capital, Chisinau. While support for the government appears to be declining, the Communists still retain strong support among the elderly and in rural areas. The next
parliamentary elections are scheduled for 2009.

Transnistria.

Conflict between
Moldovan forces and those of the
breakaway “Dniestr Republic” (a
separatist entity proclaimed in 1990 by
ethnic Russian local officials in the
Transnistria region of Moldova) erupted
in March 1992. Over 300 people died in
the violence. A cease-fire was declared
in July 1992 that provided for Russian,
“Dniestr Republic,” and Moldovan
peacekeepers to patrol a “security zone”
between the two regions. Each of the
peacekeeping contingents have roughly
400 personnel. They are overseen by a
Joint Control Commission, which
includes the three sides, as well as the
OSCE as an observer.
The causes of the conflict are
complex, involving ethnic factors and,
above all, maneuvering for power and
wealth among elite groups. Ethnic
Russians and Ukrainians together make
up 51% of Transnistria’s population of
about 650,000, while Moldovans are the
single largest ethnic group, at 40%.
Many analysts are convinced that a key
factor obstructing a settlement is the personal interests of the leaders of the “Dniestr
Republic” and associates in Moldova, Russia and Ukraine, who control the region’s
economy. They also allegedly profit from illegal activities that take place in Transnistria,
such as smuggling and human trafficking. The 2006 State Department human rights
report sharply criticized the “poor” human rights record of the “Dniestr Republic,” noting
its record of rigged elections, harassment of political opponents, independent media, many
religious groups, and Romanian-speakers.

Negotiations over the degree of autonomy to be accorded the Transnistria region
within Moldova have been stalled for many years.(1) The two sides have negotiated over
Transnistria’s status with the mediation of Russia, Ukraine and OSCE. In 2005, at the
urging of Ukraine and Moldova, the United States and the European Union joined the
talks as observers. This process resulted in proposals for a federal Moldova, in which
Transnistria would have great autonomy. Nevertheless, Transnistrian leaders, apparently

satisfied with the present state of affairs, blocked any agreement. In September 2006,
Transnistria held a referendum on independence and union with Russia, which passed
with 97% of the vote.

While stopping short of openly advocating independence for Transnistria, Russian
officials have pointed to the possible independence of Kosovo from Serbia as a precedent
for Transnistria. Russia has provided financial support to Transnistria, including grants
and loans as well as subsidized energy. In return, Russian firms have received stakes in
Transnistrian businesses.(2) On the other hand, analysts say Russian leaders may be
disenchanted with Transnistria “President” Igor Smirnov, particularly after he refused in
2007 to repay debts owed to the Russian state-owned natural gas firm Gazprom for
natural gas supplies. However, if Moscow moves against Smirnov, it would likely be to
substitute a more pliable replacement, not to abandon support for the separatist cause
itself.

Economy

According to the World Bank, Moldova’s per capita Gross National Income was
$960 in 2005, the lowest in Europe. Living standards are poor for the great majority of
Moldovans, particularly in rural areas. Poverty is a significant problem; 29% of the
population live in poverty, according to the World Bank. Many Moldovans are dependent
on remittances from the estimated 600,000 Moldovans working abroad, out of a total
Moldovan population (excluding Transnistria) of 3.2 million. Remittances amount to
about one-third of the country’s Gross Domestic Product. Moldova’s main natural
resource is its rich soil. Agriculture, especially fruit, wine and tobacco, plays a vital role
in Moldova’s economy. Most of Moldova’s industry is located in Transnistria, and is not
counted in Moldovan government statistics. Moldova’s lack of control over its borders
has severely hampered its ability to collect customs revenue.
Moldova has had mixed success in economic reform. It has succeeded in achieving
a measure of macroeconomic stability, including the stabilization of Moldova’s national
currency, the Leu. Moldova’s small economy is highly vulnerable to external shocks.
Moldova has privatized its small and medium-sized business sector, and it has had
success in privatizing agricultural land. The sale of large firms has been more difficult and
foreign investment in Moldova is low. Key problems include poor governance, a weak
judiciary, and corruption.

Foreign Policy

Perhaps Moldova’s most important foreign policy relationship is with Russia. Most
of Moldova’s exports go to Russia, and over 90% of its energy imports come from Russia.

Moldova has accumulated large debts to Russian energy firms. Some analysts charge that
Russia has used negotiations over Transnistria to expand its political leverage over the
country and to block any Moldovan moves toward Euro-Atlantic integration. The
Transnistria issue is complicated by the continued presence of about 1,500 Russian troops
in the breakaway region (including the approximately 400-person peacekeeping
contingent in the security zone), as well as huge stockpiles of weapons and ammunition.
Russia has flatly refused to honor commitments it made at the 1999 OSCE summit in
Istanbul to withdraw its forces from Moldova. Russian leaders have also attempted to
condition the withdrawal of Russian troops on the resolution of Transnistria’s status.
Both Moldovan and Russian officials agree that the tons of munitions in Transnistria
must be removed or destroyed before the Russian troops pull out, in order to prevent the
weapons from falling into the hands of criminals, terrorists and other undesirable groups.
However, Russian officials maintained that they could not withdraw the munitions
without the permission of the Transnistria authorities, who claim that the weaponry is
their “property.” A few trainloads of munitions were withdrawn to Russia in 2003 (under
OSCE monitoring and with the use of an OSCE trust fund), but the effort stopped in late
2003 after the collapse of Russian-mediated talks on Transnistria’s future.
Since the failure of a Russian-brokered draft agreement to solve the Transnistria
problem in 2003, President Voronin advocated reorienting Moldovan foreign policy away
from Russia and closer to the West. Moldova does not seek NATO membership but
participates in Partnership for Peace (PFP) exercises and favors increased cooperation
with NATO.

Moldova currently has a partnership and cooperation agreement with the European
Union (EU), which provides for cooperation in a wide variety of spheres and holds out
the possibility of an eventual free trade agreement. Moldova signed an Action Plan with
the EU in 2005 in the context of the EU’s European Neighborhood policy. The EU plans
to provide 209.7 Euro ($310 million) in aid to Moldova between 2007 and 2010, a
substantial sum for a small country. The EU has also granted Moldova trade preferences
that will permit it to sell more of its wine and agricultural goods to the EU, perhaps
enabling it to reduce its dependence on the Russian market. Since 2005, an EU mission
has helped to monitor Moldova’s Transnistria border with Ukraine, in an effort to deter
smuggling. Moldova hopes to become a candidate for EU membership, although the EU
is unlikely to accept Moldova as a candidate in the foreseeable future, due to Moldova’s
poverty and the EU’s own internal challenges.

On January 1, 2006, Gazprom cut off natural gas supplies to Moldova, after
Moldova rejected Gazprom’s demand for a doubling of the price Moldova pays for natural
gas. Gazprom restored supplies on January 17, in exchange for a price increase from $60
per 1,000 cubic meters to $110. Moldova also agreed to give Gazprom, already the
majority shareholder, a higher equity stake in Moldovagaz, which controls Moldova’s
natural gas pipelines and other infrastructure. Gazprom is also seeking to complete the
purchase of Transnistria’s stake in Moldovagaz. Gazprom increased the price of its gas
to Moldova to $170 in 2007. It is planned that the price will be gradually increased until
it reaches the price paid by EU member states in 2011. Some analysts charge that Russia
is using energy supplies and other trade as weapons to pressure Moldova to drop its pro-
Western orientation and to turn its energy infrastructure over to Moscow. Gazprom is
interested in securing Moldova’s domestic power plants, as payment for gas debts. In
2005, Russia also restricted wine and other agricultural imports from Moldova, allegedly
over health concerns, dealing a very heavy blow to the country’s economy. Russia finally
permitted Moldovan wine imports again in November 2007, but Moldova’s wine exports
remain sharply reduced from former levels.

Moldova’s ties with Romania are a sensitive issue in both countries. Many
Romanians consider Moldovans in fact to be Romanians, and support the eventual
unification of the two countries. Although most independent experts consider the
“Moldovan language” to be Romanian, the issue is a matter of political controversy in
Moldova. After the incorporation of Moldova into the Soviet Union during World War
II, Soviet authorities promoted the idea of a separate Moldovan language (using the
Cyrillic rather than the Latin script), as a means of countering possible secessionist ideas.
Those favoring the term “Moldovan” tend to accept the Soviet legacy in Moldova, and
favor Moldova’s independence or close ties with Russia. Many persons favoring the term
“Romanian” support union with Romania. In a 1994 referendum, over 90% of
Moldovans rejected unification with Romania. However, it is possible that more
inhabitants of this impoverished country may begin to favor union with Romania now that
Bucharest is a member of the EU. Romania’s entry into the EU led to an avalanche of
Moldovan applications to Romania for dual Romanian-Moldovan citizenship; estimates
range up to 800,000 persons.

Read more: U.S. Policy

The United States and Moldova have enjoyed good relations since the country’s
independence in 1991. The United States has supported democracy and free market
reform in Moldova, as part of a global democratization effort. In a speech in Bratislava,
Slovakia on February 24, 2005, President Bush noted that Moldova’s March 2005
parliamentary elections gave the country a chance to “place its democratic credentials
beyond doubt.” (3) After the elections, U.S. officials said that the United States agreed with
the OSCE assessment that the election was generally in line with international standards,
but with shortcomings in several areas, including media access for opposition candidates.
U.S. and other Western officials continue to be critical of some aspects of Moldova’s
democratic development, particularly its uneven record on media freedoms.
The United States has tried to support the country’s fragile sovereignty and territorial
integrity by advocating the withdrawal of Russian forces from Moldova and for
negotiating a settlement of the Transnistria issue consistent with Moldova’s territorial
integrity. The United States has worked with the European Union to put pressure on the
Transnistria leadership to end its obstructionist tactics in negotiations on the region’s
future. On February 22, 2003, the United States and the European Union announced a
visa ban against 17 top Transnistrian leaders. Other Transnistrian officials involved with
the harassment of Latin-script schools were added to this list in 2004. The United States
has refused to ratify the adapted Conventional Forces in Europe (CFE) treaty until several
conditions are met, including the withdrawal of Russian troops from Moldova. In
November 2007, Russia suspended its observance of the CFE Treaty, attributing the move
to he failure of the United States and other countries to ratify the adapted treaty.
The United States has called for continued cooperation on weapons proliferation and
trafficking in persons. In May 2003, the United States imposed missile proliferation
sanctions on two Moldovan firms for transferring equipment and technology to Iran.
Transnistria has been a center for the trafficking of small arms to world trouble spots.
The 2007 State Department Trafficking in Persons report noted that Moldova is a major
source of women and girls trafficked for commercial sexual exploitation. It said the
government made “modest” improvements in anti-trafficking law enforcement, but made
no real efforts to improve protection for trafficking victims. The report said Moldova’s
efforts at preventing trafficking were “weak.” Other problems include corrupt persons in
the government and judicial system who aid the traffickers, and the fact that part of the
trafficking takes place in Transnistria, where the government has no control.
In a June 2004 visit to Moldova, Secretary of Defense Donald Rumsfeld thanked
Moldova for its contributions to the fight against terror and its participation in the
multinational peacekeeping forces in Iraq. Twelve Moldovan soldiers, most of them
engaged in explosives disposal, are currently deployed in Iraq. At the request of the
United States, Moldova has agreed to increase its force to 20 men, due to high demand
for explosive disposal experts.

The United States has provided aid to Moldova to help meet political and economic
reform objectives. The United States provided $17.63 million in assistance to Moldova
in FY (Fiscal Year) 2007. The Administration requested $13.98 million in aid for Moldova for
FY 2008. U.S. aid is aimed at supporting independent media and non-governmental
organizations in Moldova, as well as fostering cultural and civic exchanges. U.S.
economic aid is aimed at helping Moldova’s agricultural sector, including enhancing its
export opportunities. The United States donates humanitarian aid in the form of food and
medicine to particularly vulnerable parts of Moldova’s impoverished population. U.S.
security assistance is used to help Moldova participate in Partnership for Peace exercises,
and to develop its peacekeeping capacity and interoperability with NATO. The United
States provides funding to help Moldova strengthen its border and fight trafficking.
Moldova also receives funding under the Millennium Challenge Corporation to fight
corruption, strengthen the judiciary, and advance other reform objectives.

The 109th Congress approved legislation concerning Moldova. In February 2005, the
Senate passed S.Res. 60, which expressed support for democracy in Moldova and called
for the authorities to hold free and fair elections in March 2005. In March 2005, the
Senate passed S.Res. 69, which called on Russia to honor its commitments to withdraw
its troops from Moldova. S.Res. 530, passed in July 2006, called on President Bush
during the Moscow G-8 summit to discuss frankly with President Putin a series of policies
deemed to be inconsistent with G-8 objectives, including the January 2006 energy cut-off
to Moldova.

The 110th Congress has also passed legislation concerning Moldova. S.Res. 278,
passed on July 31, 2007, strongly urged Russia to reconsider its suspension of CFE
implementation, and called on Moscow to “move speedily” to withdraw its troops and
military equipment from Moldova. A House companion resolution, S.Res. 603, was
introduced on August 1, 2007. H.Res. 457, introduced on June 5, 2007, calls on Russia
to withdraw its forces and armaments from Moldova.

Its says the current Russian- Moldovan peacekeeping force in the security zone should be replaced by a multinational one under an OSCE mandate.

1. Another potential secession issue was defused in 1994, when the Moldovan parliament adopted
a law establishing a “national-territorial autonomous unit” for the Gagauz minority. The region
has its own elected legislative and executive authorities and would be entitled to secession from
Moldova in the case of Moldova’s reunification with Romania.

2. “Moldova’s Uncertain Future,” International Crisis Group, August 17, 2006, from the ICG
website [http://www.crisisweb.org].

3. Agence France Presse wire service dispatch, February 24, 2005.

Congressional Research Service

USA Embassy – Information Resource Center

December, 2007

***

ANNEX

Calling on the Russian Federation to withdraw its military forces, armaments, and ammunition stockpiles from the sovereign territory of the Republic of Moldova. (Introduced in House)

HRES 457 IH

110th CONGRESS

1st Session

H. RES. 457

Calling on the Russian Federation to withdraw its military forces, armaments, and ammunition stockpiles from the sovereign territory of the Republic of Moldova.

IN THE HOUSE OF REPRESENTATIVES

June 5, 2007

Mr. MCCOTTER (for himself, Ms. BERKLEY, Mr. LINCOLN DIAZ-BALART of Florida, Mr. MARIO DIAZ-BALART of Florida, Mr. PETERSON of Minnesota, Mr. SHIMKUS, Mr. SHUSTER, and Mr. TANCREDO) submitted the following resolution; which was referred to the Committee on Foreign Affairs

——————————————————————————–

RESOLUTION

Calling on the Russian Federation to withdraw its military forces, armaments, and ammunition stockpiles from the sovereign territory of the Republic of Moldova.

Whereas at the 1999 Organization for Security and Cooperation in Europe (OSCE) Summit in Istanbul, Turkey, the Russian Federation committed to completely withdraw its military forces from the territory of the Republic of Moldova by the end of 2002;

Whereas at the 2002 OSCE Ministerial Council in Porto, Portugal, the Russian Federation agreed to complete the withdrawal of its military forces from the territory of Moldova by December 31, 2003;

Whereas the Russian Federation ceased its withdrawal of military forces from the Transnistrian region of Moldova on March 24, 2004, and has yet to show any intention of continuing its withdrawal process;

Whereas 1,250 Russian soldiers remain stationed in the Transnistrian region of Moldova against the will of the Moldovan people;

Whereas the presence of Russian military forces in the Transnistrian region of Moldova is a clear violation of Moldova’s territorial sovereignty;

Whereas the Russian Federation as a participating state in the OSCE is obligated to respect the territorial integrity of each of the participating States [and] refrain from making each other’s territory the object of military occupation; and

Whereas Russia’s failure to withdraw troops from the Transnistrian region of Moldova is a violation of its commitments as a member of the OSCE: Now, therefore, be it

Resolved, That the House of Representatives–

(1) calls upon the Russian Federation to fulfill its commitments and unconditionally withdraw its military forces, under OSCE observation and verification, from the Transnistrian region of the Republic of Moldova;

(2) calls upon the Russian Federation to remove or destroy all of its armaments and ammunition stockpiles in the Transnistrian region of Moldova; and

(3) declares the present armed forces stationed in the Security Zone of Moldova should be replaced with a multinational peacekeeping contingent under an OSCE mandate.

***

Expressing the sense of the Senate about the actions of Russia regarding Georgia and Moldova. (Agreed to by Senate)

SRES 69 ATS

109th CONGRESS

1st Session

S. RES. 69

Expressing the sense of the Senate about the actions of Russia regarding Georgia and Moldova.

IN THE SENATE OF THE UNITED STATES

March 3, 2005

Mr. LUGAR (for himself and Mr. Biden) submitted the following resolution; which was referred to the Committee on Foreign Relations

March 10, 2005

Committee discharged; considered and agreed to

——————————————————————————–

RESOLUTION

Expressing the sense of the Senate about the actions of Russia regarding Georgia and Moldova.

Whereas the Organization for Security and Cooperation in Europe (OSCE) evolved from the Conference on Security and Cooperation in Europe (CSCE), which was established in 1975, and the official change of its name from CSCE to OSCE became effective on January 1, 1995;

Whereas the OSCE is the largest regional security organization in the world with 55 participating States from Europe, Central Asia, and North America;

Whereas the 1975 Helsinki Final Act, the 1990 Charter of Paris, and the 1999 Charter for European Security adopted in Istanbul are the principal documents of OSCE, defining a steadily evolving and maturing set of political commitments based on a broad understanding of security;

Whereas the OSCE is active in early warning, conflict prevention, crisis management, and post-conflict rehabilitation;

Whereas Russia and Georgia agreed at the 1999 OSCE Summit in Istanbul on specific steps regarding the withdrawal from Georgia of Russian forces, including military equipment limited by the Treaty on Conventional Armed Forces in Europe (CFE), and committed to resolve other key issues relating to the status and duration of the Russian military presence in Georgia;

Whereas Russia has completed some of the withdrawal from Georgia of military equipment limited by the CFE Treaty in excess of agreed levels, but has yet to agree with Georgia on the status of Russian forces at the Gudauata base and the duration of the Russian presence at the Akhalkalaki and Batumi bases;

Whereas Russia completed the withdrawal from Moldova of its declared military equipment limited by the CFE Treaty, but has yet to withdraw all its military forces from Moldova, as Russia committed to do at the 1999 OSCE Summit in Istanbul;

Whereas Russia made virtually no progress in 2004 toward its commitment to withdraw its military forces from Moldova;

Whereas Moldova has called for a genuinely international peacekeeping force to replace the Russian forces, and insists on the implementation by Russia of its commitment to withdraw its remaining military forces from Moldova;

Whereas Secretary of State Colin Powell stated at the December 2004 OSCE Ministerial in Sofia, Bulgaria, that `Russia’s commitments to withdraw its military forces from Moldova, and to agree with Georgia on the duration of the Russian military presence there, remain unfulfilled. A core principle of the CFE Treaty is host country agreement to the stationing of forces. The United States remains committed to moving ahead with ratification of the Adapted CFE Treaty, but we will only do so after all the Istanbul commitments on Georgia and Moldova have been met. And we stand ready to assist with reasonable costs associated with the implementation of those commitments.’;

Whereas since June 2004, Russia has called for the closure of the OSCE Border Monitoring Operation (BMO), the sole source of objective reporting on border crossings along the border between Georgia and with the Russian republics of Chechnya, Dagestan, and Ingushetia;

Whereas OSCE border monitors took up their mission in Georgia in May 2000, and prior to the failure to extend the mandate for the BMO in December 2004, OSCE border monitors, who are unarmed, were deployed at nine locations along that border;

Whereas the current rotation of the BMO includes 65 border monitors from 23 countries, including Austria, Azerbaijan, Belarus, Belgium, Bulgaria, Croatia, the Czech Republic, Estonia, Finland, France, Hungary, Ireland, Lithuania, Macedonia, Moldova, Poland, Romania, Russia, Slovakia, Turkey, Ukraine, the United Kingdom, and the United States;

Whereas at the December 2004 OSCE Ministerial, Russia blocked renewal of the mandate for the BMO in Georgia;

Whereas Russia has stated that the BMO has accomplished nothing, but it has in fact accomplished a great deal, including observing 746 unarmed and 61 armed border crossings in 2004 and serving as a counterweight to inflammatory press reports;

Whereas in response to Russian complaints about the cost-effectiveness of the BMO, the OSCE agreed in December 2004 to cut the number of monitors and thereby reduce the cost of the BMO by almost half;

Whereas the BMO began shutting down on January 1, 2005;

Whereas the staff of the BMO is now dismantling facilities and is not performing its mission;

Whereas the shutdown of the BMO will become irreversible in the second half of March 2005 and is currently scheduled to be completed by May 2005;

Whereas the United States has reiterated its disappointment over the failure of the Permanent Council of the OSCE to reach consensus on renewing the mandate of the BMO, despite request of Georgia, the host country of the BMO, that the OSCE continue the border monitoring operation, and the consensus of all states but one to extend the mandate for the BMO; and

Whereas United States Ambassador to the United States Mission to the OSCE, Stephan M. Minikes, said in a statement to the OSCE Permanent Council in Vienna on January 19, 2005, that `we believe that the closure of the BMO would remove a key source of peaceful relations and of objective reporting on events at the sensitive border and increase the likelihood of heightened Russia-Georgia tensions.’: Now, therefore, be it

Resolved, That it is the sense of the Senate that the United States should–

(1) urge Russia to live up to its commitments at the 1999 Organization for Security and Cooperation in Europe (OSCE) Summit in Istanbul regarding Georgia and Moldova;

(2) in cooperation with its European allies, maintain strong diplomatic pressure to permit the OSCE Border Monitoring Operation (BMO) in Georgia to continue; and

(3) if the BMO ceases to exist, seek, in cooperation with its European allies, an international presence to monitor objectively border crossings along the border between Georgia and the Russian republics of Chechnya, Dagestan, and Ingushetia.