Order Code RS21981
Updated July 27, 2005
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 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 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 headed by Chisinau mayor Serafim Urechean, won 34
seats. The nationalist and pro-Romanian Christian Democratic Popular Party, headed by
Iurie Rosca, 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 OSCE, Council
of Europe, and other international election standards. However, the OSCE and other
international organizations criticized Moldova for biased electronic media coverage,
misuse of government resources in favor of the CPM, and harassment of opposition
candidates and independent non-governmental organizations during the election
campaign.
On April 4, 2005, Voronin was re-elected as President by the new 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
Congressional Research Service ˜ The Library of Congress

---

CRS-2
Democratic Moldova Bloc. The three parties approved a list of ten goals aimed at
democratizing Moldova, including freeing media from government control; ensuring the
independence of the central electoral commission; reforming the prosecutor’s office and
judicial system; decentralizing local government; removing corrupt and Russian-
controlled persons from the intelligence and security services; reforming the constitution;
and fighting corruption. On July 22, 2005, the Moldovan parliament passed laws aimed
at implementing some of these objectives.
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 2004 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. This process has
resulted in proposals for a federal Moldova, in which Transnistria would have great
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.

---

CRS-3
autonomy. Nevertheless, Transnistrian leaders, apparently satisfied with the present state
of affairs, have blocked any agreement.

Economy
According to the World Bank, Moldova’s per capita Gross National Product was
$590 in 2003, the lowest in Europe. Living standards are poor for the great majority of
Moldovans, with an average monthly income of $30. Many are dependent on remittances
from the hundreds of thousands of Moldovans working abroad. 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
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 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. On the other hand, the Communists
have succeeded in paying pensions on time, which has been a cornerstone of the party’s
popular support.
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, as well as huge
stockpiles of weapons and ammunition. Russia has flatly refused to honor past
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.2 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.
2 Jamestown Foundation, Eurasia Daily Monitor, November 17, 2004.

---

CRS-4
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.
Since the failure of a Russian-brokered draft agreement to solve the Transnistria
problem in 2003, President Voronin has 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. Voronin has called for a
direct role by the EU and the United States in negotiations on solving the Transnistria
problem and has rejected the five-sided format as flawed. The EU has appointed a special
representative to deal with the Transnistria issue. Moldova signed a cooperation
agreement with the EU in February 2005 in the context of the EU’s new European
Neighborhood policy. Moldova even 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 many factors including Russia’s possible negative reaction, Moldova’s lack of
progress in reform, and the EU’s own internal challenges.
The victory of pro-Western and reformist Viktor Yushchenko as President of
Ukraine in December 2004 may provide a boost to Moldova’s foreign policy goals. In
May 2005, Ukraine offered a peace plan for Moldova that called for internationally
monitored elections in Transnistria and for Transnistria’s autonomy within Moldova.
Moldova welcomed Kiev’s initiative in principle but reacted cautiously to some of its
details and omissions, noting for example that it does not mention the need for the
withdrawal of Russian troops from Moldova. Moldova has also stressed the need to first
dismantle the Transnistria regime’s security apparatus in order to make free and fair
elections possible, an issue not addressed by the Ukrainian plan.
Ukraine has promised to crack down on the lucrative, often illegal, trade between
Ukraine and Transnistria. The EU has promised to assist this effort. If these plans to
tighten border controls are implemented, they could put heavy pressure on the Transnistria
leadership, perhaps making a negotiated settlement more likely. On the other hand,
powerful persons and groups in Ukraine and Russia have profited from the Transnistria
regime’s criminal activities and may try to hinder these efforts.
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.

---

CRS-5
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. The Christian Democratic Popular Party
(which won 9.7% of the vote in the March 2005 parliamentary elections) has advocated
unification with Romania, but most Moldovans oppose it. 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 after
Bucharest becomes a member of the EU, which will occur in 2007 or 2008.
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 proclaimed that “eventually, the call of
liberty comes to every mind and every soul,” and 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.

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 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 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 2005 State Department Trafficking in Persons report, trafficking in
persons “severely affects the Moldovan population.” The report says that the government
does not fully comply with minimum standards for eliminating the problem but is trying
to do so. The report criticizes the government for not spending enough of its own
resources in fighting the problem. Other problems include corruption in the government
and judicial system, and the fact that part of the trafficking takes place in Transnistria,
where the government has no control.
3 Agence France Presse wire service dispatch, February 24, 2005.

---

CRS-6
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. The most recent Moldovan contingent of 12
demining troops were withdrawn in February 2005. There are currently no Moldovan
troops in Iraq.
The United States has provided aid to Moldova to help meet political and economic
reform objectives. The United States will provide an estimated $21.7 million in
assistance to Moldova in FY2005. The Administration has requested $21.1 million in aid
for Moldova in FY2006. 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 donates humanitarian aid in the form of food and medicine to particularly
vulnerable parts of Moldova’s impoverished population. The United States also provides
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.
A few observers have questioned whether the United States is doing enough to
support Moldova’s sovereignty. They claim that U.S. support for 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.4 These observers assert that the United States has not
taken Moldova’s concerns about Ukraine’s Transnistria peace plan seriously, such as the
need to dismantle the Transnistria regime’s security apparatus before elections are held
there. 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, the war on terrorism, or the functioning of the OSCE.
4 Vladimir Socor, “The West Must Bring Moldova Into the Fold,” Moscow Times, April 19, 2004.

---