Order Code RS22577
January 23, 2007
Romania: Background and Current Issues
Carl Ek
Specialist in International Relations
Foreign Affairs, Defense, and Trade Division
Summary
On January 1, 2007, Romania was formally admitted into the European Union. The
accession marked a major milestone for the country, which has been struggling through
a difficult, lengthy transition from communism and the 24-year era of oppressive rule
under Nicolae Ceausescu. In 2004 national elections, the center-right captured a
majority in parliament along with the presidency. Over the past two years, however,
there has been a great deal of infighting among the governing coalition partners.
Observers believe that the parties have held together out of a common desire to achieve
EU membership. Now that EU entry is an accomplished fact, some believe Romania’s
governing coalition may unravel, prompting early elections. Relations between
Romania and the United States have been close. Bucharest has cooperated with the
Bush Administration in the war on terrorism, and is providing troops in both
Afghanistan and Iraq. In December 2005, the two countries signed an agreement
granting the United States permission to establish military bases in Romania. This
report will not be updated.
Political Situation1
The former communist-dominated Party of Social Democracy of Romania (since
renamed the Social Democratic Party, or PSD) ruled Romania from the country’s bloody
revolution in late 1989 until 1996, and from 2000-2004. Its leading figure, Ion Iliescu,
served as president during the same two periods. Romanian voters ousted the PSD in
parliamentary and presidential elections in the late fall of 2004. In an upset victory,
Democratic Party (PD) presidential candidate Traian Basescu, an oil tanker captain before
becoming the popular mayor of Bucharest, defeated PSD Prime Minister Adrian Nastase
(Iliescu was term-limited). President Basescu tapped as premier Liberal Party (PNL)
leader Calin Popescu-Tariceanu, who formed an alliance consisting of the PNL and the
1 Research assistance for this report was provided by Mari-Jana Oboroceanu, Knowledge
Services Group, CRS. Background information and economic data are drawn from U.S.
Department of State. Background Note: Romania. September 2006; recent issues of Economist
Intelligence Unit; and articles from various newspapers and wire services.

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PD, supported by the Democratic Union of Hungarians in Romania (UDMR) and the tiny
Conservative Party.
The PNL-PD alliance has been an uneasy one at times, in part reflecting the fact that
no single party won a majority in the parliamentary elections. Since taking office, the
governing coalition has suffered from continual infighting. In addition to a reported
personal animus between Basescu and Tariceanu, tensions have arisen as a result of
differences over social and fiscal policy. Generally, the center-right PNL is more oriented
toward free markets and smaller government, while the center-left PD favors a traditional
European social democratic “social model.” In addition, the two leaders crossed swords
over the issue of Iraq. Citing “human and financial costs,” Tariceanu on June 29, 2006
called for Romania to withdraw its troops from Iraq. The government’s Supreme Council
on National Defense, which must approve such a move, denied the proposal the following
day. Observers speculate that the plan for withdrawal, put forward shortly before
Basescu’s July 2006 trip to Washington, D.C., may have been intended to embarrass the
Romanian president during his visit.2
Some believe that the coalition will not hold together until the next elections,
scheduled for late 2008. In the fall of 2006, Basescu called for a snap ballot in the hope
of capitalizing on his party’s rising popularity. Until recently, the PNL argued that early
elections would only divert attention and energies from efforts to institute reforms
directed at joining the EU in January 2007; the hope of accession had been the glue
holding the coalition together. However, now that Romania is in the European Union
(EU — see below), the government may be more susceptible to collapse. The likelihood
increased on December 3, 2006, when the small Conservative Party, citing disagreements
over tax policy, withdrew its members of the Chamber of Deputies from the coalition and
joined the opposition PSD. The defection leaves the coalition in a minority position in
parliament. A few days later, several members of the PNL, expressing dissatisfaction
with Tariceanu’s leadership, split off to form another political grouping — but remained
a part of the coalition. The PSD also favors an early vote, and has suggested that one
might occur soon after Romania’s first European Parliament elections on May 18, 2007.
National elections, however, might not result in a realignment of the parties. A recent
survey gave the PD 31% support, as opposed to 15% for the PNL and 20% for the PSD;
another poll gave Basescu a 49% approval rating.3 In addition, public opinion polls show
dwindling support for the minor political parties, leading some analysts to believe that
Romania may be evolving toward a system of two political groupings, likely dominated
by the PSD on one side, and the PNL and PD on the other.
Economic Conditions
Romania’s post-1989 stop-and-go approach to economic reform resulted in a decade
of economic stagnation, while the economies of other post-communist neighboring states
grew rapidly. Key indicators for the current decade have shown signs of improvement,
however. GDP, which declined sharply during 1997-1999, began to rebound in 2000.
2 “Romania: Iraq Debacle Highlights Government Failings.” Oxford Analytica. July 19, 2006.
3 “Romania Democrats Well Ahead of Liberals — Poll.” Reuters. Nov. 19, 2006. “Romania
Politics: The End Of the Road?” Economist Intelligence Unit. Dec. 4, 2006. “President Basescu
Has the Approval Of 49% Of Romanians.” Rompres. Dec. 6, 2006.

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The economy grew at a robust 8.3% in 2004, but only by half that in 2005 when the
agricultural sector was ravaged by record flooding. Economic growth is forecast to
recover to the 6%-7% range in 2006 and beyond. Inflation, which averaged 45% in 1999
— 2000, stood at 4.7% in November 2006, the lowest level in 16 years. Average incomes
have risen rapidly, but remain among the lowest in Europe. In 2005, the government
introduced a 16% flat tax on incomes and profits. About two-thirds of the economy is in
private hands. Romania is rich in natural resources; analysts believe that it will prosper
if the government can improve transparency, permit the growth of private financial
institutions, and ease barriers to foreign investors.
Corruption, pervasive in both public and private sectors, continues to be one of
Romania’s most serious problems. Transparency International’s most recent Corruption
Perceptions Index ranked Romania 84th out of 163 rankings worldwide. For more than
a decade, officials from the International Monetary Fund, NATO, the U.S. government,
and others have urged Romania to root out corruption, especially in the upper reaches of
government.
Romania does appear to be making much progress in this key area. Significant
changes have been made in the judicial system; for example, cases are now assigned
randomly, rather than being directed toward specific judges and prosecutors, and training
programs and infrastructure have been improved with World Bank assistance. In
addition, several high-profile corruption cases finally emerged in 2005 when the National
Prosecution Office launched investigations of a number of prominent politicians,
including former Prime Minister — and then-head of the opposition PSD — Adrian
Nastase. Popular attention has focused on the one million euros worth of real estate and
other assets that Nastase claimed he had acquired using an inheritance his wife had
received from a 97 year-old aunt — who had lived in a small Bucharest apartment.
Nastase, who asserts that he is the victim of a political vendetta, nevertheless stepped
down as the head of his party in January 2006. He was charged with corruption in
February 2006, and his accounts were frozen. Preliminary Supreme Court hearings on the
case are set to begin in January 2007. Others under investigation include a deputy prime
minister and former ministers of trade and industry. There has been some serious
resistance in parliament to the probes.4
Romania has a diversified energy base; it has significant oil and coal reserves, and
also utilizes nuclear energy. The Economist Intelligence Unit has noted that “Romania
is closer to energy self-sufficiency than any other country in the region, with the exception
of Russia.” Like other European countries, Romania has been looking for ways to
broaden its sources of natural gas after Russia’s January 2006 temporary cutoff of
supplies to Ukraine, which disrupted deliveries to Europe. In November 2006, Basescu
stated that “Romania ... will orient its energy policy toward developing alternative energy
sources, including coal, hydroelectric and nuclear energy, Basescu said.”5
4 “Netting the Untouchables.” The Economist. Feb. 4, 2006. “PSD Wants Graft-Busters Back
Under Control.” Oxford Analytica. Feb. 22, 2006. “Romania Ex-PM Denies Corruption Charges,
Has Accts Frozen.” Dow Jones International News. Nov. 15, 2006.
5 “Romania Risk: Infrastructure Risk.” EIU. Nov. 20, 2006. “Romania Calls On EU To Cut
Dependence on Russian Energy.” Agence France-Presse. Nov. 11, 2006.

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Foreign and Security Policy Issues
Romania’s foreign policy was dominated for years by its efforts to become a member
of NATO and the EU. In March 2004, Romania achieved the first goal when it was
formally admitted into the Atlantic alliance. Romania has been restructuring and
modernizing its military, and has consistently met or exceeded NATO’s recommended
defense expenditure guideline of 2% of GDP — it is one of only seven allies that spend
this amount or more on defense. It has significantly reduced the size of its armed forces
(currently around 100,000), and ended military conscription in October 2006. Romania
also has been developing “niche capabilities” to offer NATO, including airlift,
minesweeping, UAVs, counter-NBC warfare, mountain combat troops, and special forces.
There are nearly 2,000 Romanian troops serving in international peacekeeping and peace
support missions in Iraq, Afghanistan, the Balkans, and several African countries.
Romania is reportedly the fifth largest contributor of troops to NATO missions.6 The
United States has endorsed Romania’s offer to host the 2008 NATO summit.
Romania’s other main foreign policy priority was to join the EU. In April 2005,
Romania, along with Bulgaria, signed an accession treaty to join the EU. Although the
two countries were set to join on January 1, 2007, the treaty contained “safeguard clauses”
that would delay entry for one year if they did not make sufficient progress in completing
reforms in certain areas, including competition, border security, corruption,
administration, and judicial reform. In September 2006, the European Commission issued
its assessment of the preparedness of the two countries. While it gave a qualified green
light for admittance, it also identified several areas of concern in Romania, including food
safety, industrial pollution, and the effective use of EU structural funds.7 Romania and
Bulgaria were formally admitted on January 1, 2007, but will be required to report to the
EU at six-month intervals on progress in such matters as the judiciary, food safety and the
management of EU subsidies. Failure to meet commitments could result in some loss of
EU assistance funds. As with the EU’s previous enlargement in 2004, several members
have placed temporary restrictions on laborers from the two acceding countries. EU
membership will likely entail further difficult adjustments, as Romanian firms will be
pitted in competition with much more efficient EU-25 industries.8
Another issue involving Romania and the EU — and Romania and the United States
— was that of international adoptions. At the urging of the EU to improve child welfare
and curtail abuses and corruption in the adoption system, the Romanian government
imposed a partial moratorium on international adoptions of Romanian children in 2001,
pending approval of the legislature. In June 2004, parliament passed a child welfare law
that went into effect on January 1, 2005. Among other provisions, the statute bans —
with the exception of grandparents — international adoptions. The law left in limbo
hundreds of pending cases — adoptions that were being processed but were halted when
the law went into effect. At a September 2005 hearing of the U.S. Helsinki Commission,
6 The Military Balance. International Institute for Strategic Studies. London. May 2006.
7 Monitoring Report On the State of Preparedness For EU Membership Of Bulgaria and Romania.
website of the European Commission. Sept. 29, 2006. [http://ec.europa.eu/enlargement/pdf/
key_documents/2006/sept/report_bg_ro_2006_en.pdf]
8 “Romania Under Pressure To Reform.” Financial Times. Dec. 14, 2006.

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several Members of Congress argued that the new policy was contrary to the best interests
of Romania’s thousands of abandoned children, and criticized Bucharest for bowing to
pressure from the EU. However, in December 2005, Tariceanu stated that Romanian law
was “perfectly suited to European requirements,” and that “[t]hose who made applications
after the moratorium came into effect should have known they were taking a risk.”
Nevertheless, in January 2006, U.S. Ambassador to Romania Nicholas Taubman
addressed the pending cases, saying that “Bucharest has made promises on the adoption
of Romanian children by American families.” Many Romanians have expressed
frustration by the continuing — and sometimes contradictory — international pressure on
the issue.9
Relations with the United States
In recent years, Romania has cooperated closely with the United States in a number
of areas. In one of his first speeches after taking office, President Basescu declared that
he wanted to maintain a special relationship with the United States. In March 2005 and
July 2006 he made official visits to Washington, DC, where he met with President Bush
and cabinet officials. Issues under discussion included military cooperation in Iraq,
Afghanistan, the status of Moldova, the Black Sea region, and U.S. visa policy.10
Romania has participated actively in the global war on terrorism. Among other
actions, it contributed transport aircraft and troops to the war in Afghanistan, where 850
Romanian soldiers are now serving in the NATO ISAF mission. In April 2006, a
Romanian contingent assumed command of the Kabul airport. Bucharest answered
NATO’s recent call for more troops by pledging to send an additional battalion. In
addition, Romania permitted the use of its territory — land, airspace and seaports — for
the U.S.-led military action against Iraq, and U.S. troops were stationed at a base near
ConstanÛa, which acted as an “air bridge” to the Gulf. Romania currently has 605 troops
in Iraq. In December 2006, Romania’s defense minister pledged to keep Romanian
soldiers in Iraq and Afghanistan in 2007.11
In December 2005, Secretary of State Condoleezza Rice traveled to Bucharest, where
she and Romanian Foreign Minister Razvan Ungureanu signed a 10-year agreement
permitting the United States to establish military bases in the country. The move is part
of a global realignment of U.S. military forces. The bases will not be large-scale facilities
with the usual amenities, such as housing for dependents, but rather will be “flexible” or
“lily pad” bases, intended for a relatively small number of crisis-response troops to be
stationed temporarily, with regular rotations. The first of 1,500 soldiers are scheduled to
9 “‘Good Impulses’ Strand Romanian Orphans.” International Herald Tribune. June 21, 2005.
“Helsinki Commission Members Blast Romanian Adoption Policies.” Helsinki Commission
News. Sept. 14, 2005. “Romania Hails Orphanage Success Story: Controversial Adoption Ban
Ends Baby-Trafficking But Angers US Lobbyists.” The Guardian. Dec. 3, 2005. “US Repeats
Demand For Romanian Child Adoptions.” Agence France-Presse. Jan. 17, 2006.
10 “Romanian President ... Wants ‘Special Relations’ With United States....” RFE/RL Newsline.
Jan. 19, 2005. “Bush, Romanian Leader Discuss Iraq, Visas.” Associated Press. July 27, 2006.
11 “NATO Brass Struggle To Find Afghan Reinforcements.” Agence France-Presse. Sept. 13,
2006. “Romania To Maintain Its troops In Iraq, Afghanistan In 2007.” Agence France-Presse.
Dec. 17, 2006.

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be deployed there in April 2007. Also, more than a dozen U.S. fighter aircraft reportedly
will be stationed in Romania. Analysts say that Romania was chosen for its strategic
location, in close proximity to the Balkans, the Caucasus, the Middle East, and the Black
Sea region. Russia apparently does not view the announced deployment favorably.12
In September 2006, President Bush publicly acknowledged the existence of a secret
CIA program to detain international terror suspects worldwide. Earlier media reports
alleged that Poland and Romania were among the countries that had hosted secret CIA
prisons, although officials of both governments have denied these allegations. A
European Parliament probe conducted throughout 2006 cited no clear proof of prison sites
in Europe, but could not rule out the possibility that Romania had hosted detention
operations by U.S. secret services.13
The United States has been providing various forms of assistance to Romania since
the overthrow of communism in 1989. The largest share by far of U.S. aid has been
provided through the Support for East European Democracy (SEED) program. However,
SEED aid diminished as Romania progressed in its transition to democracy. Other forms
of U.S. assistance include the Peace Corps; International Military Education and Training
(IMET); Foreign Military Financing (FMF); and two accounts under Nonproliferation,
Anti-Terrorism, De-mining, and Related Programs. In addition, Romania in FY2005
became eligible to receive U.S. Department of Defense grants of Excess Defense Articles
(EDA). Total aid to Romania was $49.124 million in FY2005 and is estimated at $37.189
million in FY2006. The Bush Administration has requested $19.530 million for FY2007.
On March 6, 2006, Ambassador Taubman announced that the United States would
provide $1.25 million to Romania to help it cope with avian influenza. Bird flu was first
detected in Romania in September 2005; the region is considered a high-risk area because
of wild bird migratory patterns. The United States is also planning to provide funds for
hospital and school reconstruction in the area where U.S. troops are to be deployed, and
would spend $34 million renovating barracks.14
12 “US Signs Deal For First Permanent Military Base In Ex-Soviet Bloc.” Agence France-Presse.
Dec. 6, 2006. “Deployment Of American Military Bases On the Territory Of Romania Is Not
Beneficial For Russia.” WPS. Russian Media Monitoring Agency. Dec. 18, 2006.
13 “Reports of Secret U.S. Prisons In Europe Draw Ire and Otherwise Red Faces.” New York
Times. Dec. 1, 2005. “European Parliament Presses Romania On CIA Transfers.” Agence
France-Presse. Oct. 19, 2006.
14 U.S. State Department. FY 2007 Congressional Budget Justification for Foreign Operations.
Feb. 13, 2006. “US Sending Romania $1.25 Million To Help Battle Bird Flu.” Agence France-
Presse. Mar. 6, 2006. “US To Finance Two Hospitals and School In Romania.” Rompres. Dec.
11, 2006.

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