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Moldova’s path towards a better future is paved with many crises

Moldova recently made headlines as the country finally achieved EU candidate status alongside neighbouring Ukraine. Despite this, the country and its pro-EU government still face a great number of internal and external challenges on the way to further socio-economic success.

July 11, 2022 - Alexandru Demianenco - Articles and Commentary

Flags of the EU and Moldova stand in EU headquarters in Brussels. Photo: Alexandros Michailidis / Shutterstock

The past year has been particularly challenging for Moldova as it faced political crises, historic decisions and significant changes in its geopolitical course. In December 2020, the people of Moldova elected their first female president, the pro-European, western-educated Maia Sandu, who won following a strong anti-corruption campaign. With the then majority pro-Russian parliament still in power, political divides became even more stark and the country entered a constitutional crisis. Backed up by popular support from the pro-European opposition, Sandu dissolved the unpopular parliament in spring 2021. This allowed the constitutional court to announce snap parliamentary elections set for July 11th. These resulted in unprecedented support for pro-European forces in Moldova, as 63 parliamentary seats out of 101 were taken by Sandu’s former Party of Action and Solidarity (PAS). The now pro-EU presidency, parliament and executive brought hope and enthusiasm for significant changes in the country. However, the government was faced with many challenges, such as a deeply divided society, a relatively weak economy and unprecedented security crises. These seemingly never-ending crises have tested the newly elected government’s capabilities to their limits.

The pandemic crisis

Like many other countries, Moldova was heavily impacted by COVID-19. With the previous pro-Russian government adopting an ineffective approach (the former President Igor Dodon even refused to wear a mask at first and referred to the virus as a “small cold”), PAS had to deal with a pandemic in full swing and near catastrophic pressure on the country’s weak medical system. It was also faced with a high level of vaccine scepticism among the population. Although the new government adopted a more robust approach towards this crisis, the measures taken to combat the virus were still mediocre at best. The appearance of Omicron in early 2022 brought a record number of COVID-19 cases and also partially affected the country’s economic activity. Even with an unprecedented level of popular support and a surplus of available vaccines, the PAS government failed to convince people to vaccinate against COVID-19 (about 40 per cent are fully vaccinated). In this instance, it appears that Chisinau lost the battle with disinformation.

The gas crisis and the challenge of negotiating with Russia

The first major crisis that truly tested the newly elected pro-European government was the gas crisis that still looms over the country today. Moldova, a country with no energy resources of its own, is fully dependent on Russian gas for keeping its industry running and its houses warm. About 60 per cent of its gas consumption is attributed to the uncontrolled Russian-backed separatist region of Transnistria, which is home to the Kuchurgan power station. The plant’s activity has resulted in a debt of 709 million US dollars that remains unrecognised by Moldova. The issue though is that the Moldovan authorities continue to buy electricity from the plant in spite of its links to Russia. Moscow has never hesitated to use this leverage to put pressure on the Moldovan government on various issues. Of course, they did not miss this opportunity last year either.

As Moldova’s running contract with Gazprom was due to expire in September 2021, the newly appointed government had only about one month left to negotiate a new agreement. Normally, in order to leave room for diplomatic manoeuvres, the negotiations would have started in early spring that year. However, the parliamentary crisis has kept the political elites occupied. It is also likely that the country’s pro-Russian forces and the Moscow administration intentionally delayed negotiations until the election results. Initially, the new Moldovan government did not attach much importance to the gas contract issue. Their stance was that this was a matter for negotiations between the private entities Gazprom and MoldovaGaz (whose majority shares are also controlled by Russia). However, as the uncertainty around the gas supply issue grew, the pressure from the pro-Russian opposition parties on Maia Sandu to negotiate a contract with the Russian president also increased. The country’s new deputy prime minister was given the responsibility of negotiating a new contract. However, after several visits to Gazprom’s headquarters in St. Petersburg, reductions of gas delivery, and a decrease of pressure in the network to a critical point, Moldova decided to not accept the Kremlin’s conditions. As the country refused to pay its unrecognised debt accumulated by Transnistria, Russia has increased the price of its gas from 149 to 790 dollars for 1000 cubic metres. This encouraged the Moldovan authorities to start looking into purchasing gas from the European market (during a 30-day state of emergency). Such a move ultimately gave the government a stronger position in negotiations with Gazprom. In this gas crisis, the government has managed to bring international attention to the bullying which Moldova is subjected to by Russia. This has helped Moldova to receive financial aid from the EU in the form of 60 million euros, as well as important humanitarian aid in the form of heavy fuel oil from Romania.

While imperfect, the new contract with Gazprom was overall a good deal for Moldova. Chisinau managed to obtain a final price of 450 dollars for 1000 cubic metres for the winter. This is three times higher than the previous price but one that is still significantly lower than the average market price (1800 dollars for 1000 cubic metres). More importantly, the newly elected government did not have to make any painful concessions like Serbia, which had to grant RT a broadcasting licence. In order to ease the pressures associated with the higher gas price, the Moldovan government has committed to control the final prices for domestic consumers. For the fragile Moldovan economy and its financially vulnerable citizens, the gas crisis resulted in a drastic hit. However, it has also presented an opportunity to diversify imports and finally end the vicious monopoly on the country’s energy.

The economic crisis: inflation and a fuel price increase

The increased cost of gas, combined with the fact that Moldova is a net importer of products, resulted in a huge spike in inflation. Between January and April the consumer price index increased by 21.1 per cent in Moldova. Moreover, the country was drastically hit by the global fuel crisis. In an attempt to tackle rising costs, the newly elected parliament changed the regulation related to the fuel price formula. However, this proved to be unhelpful. Compared to the same period in 2021, fuel prices have almost doubled. Moldovan citizens, businesses and farmers were heavily hit by this increase and this has only contributed to tensions in society. Unfortunately, an end to this crisis does not yet seem to be in sight. As of May 2022, Moldova has one of the highest inflation rates in Europe (29 per cent) and it does not show any signs of slowing down. By the end of the year, it is expected to reach 31 per cent.

The security crisis: the Russian aggression against Ukraine

With many challenges reaching boiling point, in February Moldova was hit with its largest crisis by far. The greatest security crisis on the European continent since the Second World War now appeared on its doorstep. Everything we tried to learn and do as a democracy, as a society, as a community, was to be tested. On February 24th, while Russian shelling of Ukrainian cities could be heard from Moldova’s capital, President Maia Sandu called a meeting of the Supreme Security Council to vehemently condemn the Russian aggression, immediately declare a state of emergency and promise help to Ukrainians seeking refuge in Moldova. As the war went on, Moldova’s border crossing points were soon crowded with endless queues of refugees. Since February 24th, around 500,000 Ukrainians have entered Moldova and about 70,000 have chosen to stay here. UN reports show that Moldova, along with Poland, has received the largest number of refugees per capita. Compared to Poland, however, whose GDP per capita is almost five times higher and whose security is backed up by NATO and the EU, the pressure faced by Moldova is incomparable. For the country’s already fragile and weakened economy, the refugee crisis was a painful hit. State expenditure on refugee accommodation quickly reached about one million euros a day. The breakdown of Moldova’s already strained economy was only avoided following the exemplary mobilisation of its citizens. Horrified by the war and frightened of its potential spread, the people quickly jumped in to help with transportation and accommodation. They also donated and sorted humanitarian aid and implemented various support initiatives. As the Russian aggression against Ukraine goes on and Europe prepares for a potential long-term war, Moldova continues to maintain its commitment to fleeing Ukrainians. Yet with Russian plans of territorial expansion still unclear, the country is deeply affected by a fog of uncertainty.

What is next for Moldova?

These crises have significantly affected both the economy of Moldova and the popularity of the ruling party. A solution to the inflation problem and the gas crisis still proves elusive. To a large extent, both of these issues are part of wider regional and global problems and exceed Chisinau’s ability to address them on their own. Nonetheless, the pro-European government managed to secure a symbolic win to appease the public. On March 3rd, the Moldovan president signed and handed over the country’s application to join the EU alongside Ukraine and Georgia. Clearly, this historic step was made possible by the momentum created by the war. It would probably not have been possible without the huge loss of innocent Ukrainian lives and the EU’s subsequent understanding of the need to give positive encouragement to the Associated Trio and its citizens. At the same time, the merits of the new pro-European and pro-reform government should not be overlooked. Moldova has already received positive recommendations from the EU Parliament and Commission

On June 23rd 2022, Moldova and Ukraine received the historic decision that their candidate status had been granted by the European Council. A decision that gives hope to Moldovan society and alleviates the increased tension caused by the various crises. For the ruling party, this victory (motivated by the regional situation) will provide an impetus to rally society around it in pushing for the new goal of EU membership. After defeating the oligarchs and pro-Russian parties, PAS faced the problem of once again finding a message that could unite society. With the new candidate status, this message will now most likely involve European integration. While this message is not new for Moldovan society, it has now acquired a new, more tangible meaning. This unifying message, if successfully applied, will greatly simplify the process of enacting painful reforms. These include changes to territorial administration, land issues, education and the judiciary.

Internally, however, things are not looking good for PAS. The many crises facing Moldova have resulted in the party’s popularity dropping from 52 to 23 per cent. The pandemic and war fatigue, combined with the pressure of rising inflation and uncertainty around the gas and fuel crisis, continue to pressure the country’s society. The slow-paced tempo of providing Moldova with promised foreign financial aid is not helping the situation either. The pro-Russian opposition is determined to not let this opportunity slip. In the last two months, they have repeatedly attempted to organise social protests, albeit rather unsuccessfully. Their protests have only attracted a limited number of supporters and this is probably because the majority of society understands the importance of the issues now at stake in the region. Despite this, they might find some momentum following the arrest of the former pro-Russian President Igor Dodon, who is currently accused of corruption. Dodon could be made into a symbol of protest against the PAS majority, thus weakening the government’s internal position. With social tensions expected to grow, Moldova is likely to remain tangled in its unfortunate web of crises and challenges. This time, however, it is at the very least better prepared.

Alexandru Demianenco is a graduate of the College of Europe in Natolin, currently working as a senior program associate in an international organisation accredited in Moldova. His research interests include internal politics of Moldova and Romania, geopolitics, security and defence.

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