Order Code RS21981
Updated December 17, 2004
CRS Report for Congress
Received through the CRS Web
Moldova: Background and U.S. Policy
Steven Woehrel
Specialist in European Affairs
Foreign Affairs, Defense, and Trade Division
Summary
This short report provides information and analysis on Moldova, including its
political and economic situation, foreign policy, and on U.S. policy toward Moldova.
For more background on Moldova, see CRS Report 95-403, Moldova: Basic Facts, by
Steven Woehrel. This report will be updated as events warrant.
Political Situation
Although a relatively small country, Moldova has been of interest to U.S.
policymakers due to its position between NATO 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. 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 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 February 25, 2001, the Communist Party of Moldova (CPM)
won a decisive victory, the first such victory by a communist party in the countries of the
former Soviet Union. The CPM holds 71seats in the 101-seat parliament. An alliance of
small center-right groups headed by outgoing Prime Minister Dumitru Braghis won 19
seats and the nationalist and pro-Romanian Christian Democratic Popular Party won 11
seats. Analysts attributed the CPM’s success to public frustration with political gridlock,
corruption and low living standards under preceding center-right governments. In April
2001, the new parliament elected CPM leader Vladimir Voronin as President and
approved a new government led by businessman Vasile Tarlev.
Public support for the Communists has declined over the past few years, but
opposition prospects for next parliamentary elections (due in February 2005) are clouded
by uncertainty over whether the often fractious opposition can present a unified front.
The picture has been complicated by the deterioration of relations between the
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Communist government and Russia in 2004. Some of the “centrist” parties in the
opposition are reportedly looking to Moscow for support, other opposition parties remain
strongly anti-Russian, and the government has been increasingly pro-Western.
The 2003 State Department human rights report says that Moldova generally respects
the human rights of its citizens, but notes that the judiciary is susceptible to bribery and
official pressure. The report says the government also pressures critics in the media, but
that an active and independent media exists. However, in October 2004, U.S.
Ambassador to Moldova Heather Hodges warned that it could difficult for the
international community to view the 2005 elections as free and fair, if broadcast media
remain heavily biased in favor of the government. Hodges also noted a 2003 report by the
Organization for Security and Cooperation in Europe that criticized the harassment of
opposition politicians by the authorities.
Transnistria. Conflict between
Figure 1. Transnistria and Gagauz Regions
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
and Moldovan peacekeepers to patrol a
“security zone” between the two regions.
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 profit
from illegal activities that take place in
Transnistria. These activities include
illicit arms sales, human trafficking and smuggling. The 2003 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.

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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 the Organization for
Security and Cooperation in Europe (OSCE). This process has 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, have blocked
any agreement. In 2003, frustrated by the impasse, Moldova and Russia bypassed the
five-sided talks and produced a draft agreement in November 2003 that made large
concessions to the “Dniestr Republic.” The draft contained “transitional provisions” that
would have allowed the “Dniestr Republic” to veto federal laws and international treaties
through 2015. Moldovan leaders appeared ready to accept the agreement, reportedly
because of alleged Russian assurances that the Transnistrian leadership would be
replaced. However, Moldovan President Vladimir Voronin decided not to sign the accord
due to heavy pressure from officials from the OSCE, the United States and the European
Union, who warned him that the proposal would threaten Moldova’s sovereignty and
would hurt future efforts toward European integration. The Russian plan collapsed, and
there has been little progress toward a resolution since then.2
In summer 2004, tensions rose between the Moldovan government and the
Transnistria authorities. Transnistrian leaders harassed and closed Moldovan-language
schools in their area that use the Latin (as opposed to the Cyrillic) script. Moldova has
blocked export certificates for the legal export of goods from Transnistria. Transnistrian
leaders briefly threatened to mobilize their forces, claiming the threat of an invasion by
Moldovan troops, which the Moldovan government denied. In September, Transnistrian
troops took over the Moldovan-controlled rail station at Bendery, on the border between
Transnistria and the rest of Moldova. In October 2004, Transnistrian leaders threatened
to hold a referendum on independence for the “Dniestr Republic.”
Economy
Moldova’s per capita Gross National Product was $460 in 2002, the lowest in
Europe. Living standards are very poor for the great majority of Moldovans, with an
average monthly income of $30. Moldova’s main natural resource is its rich soil.
Agriculture, especially fruit, wine and tobacco, plays an important 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. After independence, output
declined sharply and inflation soared, but Moldova pursued an IMF-supported program
of tough fiscal and monetary policies. It succeeded in achieving a measure of
macroeconomic stability, including the stabilization of Moldova’s national currency, the
1 Another potential secession issue was defused in July 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 International Crisis Group, “Moldova: Regional Tensions over Transdniestria,” June 17, 2004,
from the ICG website [http://www.icg.org].

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leu. However, 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. The International Monetary Fund and other
international organizations have criticized the current, Communist, Moldovan government
for a lack of commitment to free market reform, especially its slow pace in privatization
and its failure to create a suitable business environment, including through reducing
corruption.3
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’s behavior in negotiations over Transnistria have shown that Russia, while
nominally supporting Moldova’s sovereignty, has in reality used the issue to expand its
political leverage over the country. The Transnistria issue is complicated by the continued
presence of about 1,500 Russian troops in the breakaway region (not including several
hundred Russian peacekeepers in the security zone, who are there with Moldova’s
consent), as well as huge stockpiles of weapons and ammunition. Russia has flatly refused
to honor commitments it has made to the OSCE 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.4 Moldovan officials have termed the Russian
conditions on troop withdrawal as “blackmail.” Russia has responded with bitter verbal
attacks on Moldova’s leadership.
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 positive development was the conclusion of an agreement in May
2001 between the OSCE and Russia on OSCE monitoring and assistance for the troop
withdrawal, including the use of an OSCE trust fund to help dispose of the Russian
munitions. Several trainloads of munitions were withdrawn to Russia in 2003. However,
in late 2003, after the collapse of Russian-mediated talks on the Transnistria’s future,
OSCE officials complained that Transnistria officials began to block their efforts to verify
equipment further withdrawals. Russia supported the action of the Transnistria authorities.
After failure of the 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
3 Economist Intelligence Unit Country Report: Moldova, August 12, 2004.
4 Jamestown Foundation, Eurasia Daily Monitor, November 17, 2004.

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holds out the possibility of an eventual free trade agreement. Voronin has called for a
direct role by the EU and the United States in solving the Transnistria problem, viewing
the current, five-sided format as flawed. Moldova is looking forward to signing a new
cooperation agreement with the EU in December 2004 or early 2005 in the context of the
EU’s new European Neighborhood policy. Moldova even hopes to become a candidate
for EU membership as early as 2007, although the EU is very reluctant to accept Moldova
as a candidate in the foreseeable future.
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. Those persons favoring the term
“Romanian” support union with Romania and reject the legacy of the Soviet past. The
Christian Democratic Popular Party (which has 11 seats in parliament) and a few other
right-of-center groups advocate unification with Romania, which they feel would cement
closer ties with the West, but the CPM-led government and many Moldovans oppose it.
In a 1994 referendum, over 90% of Moldovans rejected unification with Romania.
However, more inhabitants of this impoverished country may begin to favor union with
Bucharest as Romania approaches EU membership, which could occur as soon as 2007.
U.S. Policy
The United States and Moldova have enjoyed good relations since the country’s
independence in 1991. The United States has attempted to support democracy and free
market reform in Moldova. It has also 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 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. According to the 2004 State Department Trafficking in Persons report, trafficking
in persons is a “grave” problem in Moldova. The report says that the government does
not fully comply with minimum standards for eliminating the problem, but is trying to do
so. One problem is that part of trafficking takes place in Transnistria, where the
government has no control.
In a June 26, 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. Currently, there are 12 Moldovan troops in
Iraq, engaged in demining work. They replaced a previous contingent of 42 deminers and
army medics.
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

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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 Conventional Forces in Europe (CFE) treaty until several
conditions are met, including the withdrawal of Russian troops from Moldova. The
United States has committed up to $14 million to the OSCE trust fund to facilitate the
withdrawal of Russian troops from Moldova.
The United States has provided aid to Moldova to help meet political and economic
reform objectives. The United States provided an estimated $21.9 million in Freedom
Support Act (FSA) assistance to Moldova in FY2004. The conference report to the
FY2005 foreign operations appropriation bill (P.L. 108-447) allocated $17.5 million for
Moldova in FY2005. 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 has played a key role in Moldova’s land reform program. The United
States also provides humanitarian aid in the form of food and medicine to particularly
vulnerable parts of Moldova’s impoverished population. The United States allocated
$2.168 million in Peace Corps assistance for Moldova in FY2004. The Administration
requested $2.795 million in Peace Corps funding in FY2005.
The United States has also provided security assistance to Moldova, including
Excess Defense Articles. 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 provided an estimated $1 million in
Foreign Military Financing (FMF) aid to Moldova in FY2004, and another $1 million in
IMET military training funds. The Administration requested $0.8 million in FMF for
FY2005 and $0.9 million in IMET. The United States is providing non-proliferation and
border control aid to Moldova. In FY2004, $0.64 million was allocated. The
Administration requested $0.495 million for these purposes in FY2005.
A few observers have questioned whether the United States is doing enough to
support Moldova’s sovereignty. They claim that U.S. support for current plans to solve
the Transnistria problem by federalizing Moldova will serve to weaken Moldova’s
sovereignty, make it more dependent on Russia and hinder its European integration. They
view Russia’s policy in Moldova as part of a larger strategy to reestablish control over the
countries of the former Soviet Union. They also say that the United States should take
a stronger stand against the Russian troop presence in Moldova, giving it a higher priority
in the U.S.-Russian relationship.5 U.S. support for Moldova will be all the more
important, they say, because a victory for pro-Western forces in Ukraine’s December 26
presidential elections could cause Russia, angered by its setback in Kiev, to increase
pressure on Moldova. However, other observers believe that U.S. officials may view
“federalization” as the best result that Moldova can realistically expect, and that the
United States might not want to jeopardize U.S. ties with Russia on possibly more
important issues such as energy cooperation or the war on terrorism.
5 Vladimir Socor, “The West Must Bring Moldova Into the Fold,” Moscow Times, April 19, 2004.

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