Moldova: Basic Facts

CRS Report for Congress
Received through the CRS Web
Moldova: Basic Facts
Steven Woehrel
Specialist in European Affairs
Foreign Affairs, Defense, and Trade Division
This short report provides information and analysis on Moldova, including its
history, political and economic situation, foreign policy, and U.S. policy toward
Moldova. This report will be updated as events warrant.
Moldova at a Glance History
Land Area: 33,371 sq. km., about the size ofMoldova is a part of the area
Maryland. known historically as Bessarabia,geographically delineated by the Prut
Population: 4.4 million (2000 estimate)River on the west, the Dniestr Riveron the north and east, the Black Sea
Gross Domestic Product (GDP): $1.41 billionon the southeast, and the Kiliya(Chilia) arm of the Danube delta on
in 2000.the south. The Republic of Moldova
Ethnic Composition: 64.5% Moldovan,approximately coincides with theeastern half of the Romanian

13.8% Ukrainian, 12.8% Russian, 3.5%principality of Moldavia (1359-

Gagauz (Turkic-speaking Orthodox Christians),1859). In 1812 it was ceded to

2.0% Bulgarian (1989 census).Russia by the Ottoman Empire.

Political Leaders: President: VladimirMost of this area remained underRussian control until 1918. At that
Voronin; Prime Minister: Vasile Tarlev;time the whole of Bessarabia became
Foreign Minister: Nicolae Chernomaz;part of Romania. This reintegration
Parliament Chairman: Yevgenia Ostapchukwith Romania was never recognized
Sources: 2000 CIA Factbook, Economistby the Soviet Union which, inOctober 1924, established the
Intelligence Unit, International Monetary FundMoldavian Autonomous Soviet
Socialist Republic (ASSR) on the
east bank of the Dniestr (in Ukraine).

Congressional Research Service ˜ The Library of Congress

Bessarabia was among the territories assigned to the Soviet Union under the terms
of the secret Soviet-German nonaggression pact of 1939. The Soviet Union forced
Romania to cede Bessarabia in June 1940, and, in August, assigned one-third of the area
to Ukraine, merging the remainder with the Moldavian ASSR to form a new Moldavian
Soviet Socialist Republic (SSR). In the wake of Germany’s July 1941 attack on the USSR,
the Soviet Union once again lost the bulk of Bessarabia to Romania, with the exception
of the territory east of the Dniestr. Romanian occupation forces committed large-scale
atrocities against the local population, especially Jews and Gypsies. The territory was
recaptured by Soviet troops in 1944 and the Moldavian SSR reestablished. Reincorporation
into the Soviet Union entailed rigorous Russification, the imposition of the Cyrillic alphabet,
large-scale immigration of Russians and Ukrainians as well as isolation from Romania.
Moldova declared its sovereignty on June 23, 1990. Following the failed August 1991 coup
in Moscow, Moldova declared its independence on August 27, 1991.
Conflict between
Moldovan forces and those
of the "Dniestr Republic" (a
separatist entity proclaimed
by ethnic Russian local
officials in 1990) erupted in
March 1992. Over 150
people died in the violence.
A cease-fire was declared in
July 1992 which provided for
Russian and Moldovan
peacekeepers to patrol a
"security zone" between the
two regions. Although a
cessation of hostilities was
achieved, the core issue of
the degree of autonomy to be
accorded the Dniestr region
remains difficult.
The Gagauz minority,
Source: Map from Magellan© adapted by CRSwhich had also proclaimed its
own republic in 1990, did not
resort to the use of force, choosing, instead, to hold extensive discussions with Moldovan
authorities about the future of the region. On July 28, 1994, the Moldovan Parliament
adopted an organic law, negotiated with Gagauz officials, establishing a “national-territorial
autonomous unit” for the Gagauz. The region has its own elected legislative and executive
authorities and will be entitled to secession from Moldova in the case of Moldova’s
reunification with Romania.
Political Situation
Moldova is a parliamentary democracy that has held largely free and fair elections since
achieving independence in 1991. In the most recent parliamentary elections on February
25, 2001, the Communist Party of Moldova won a decisive victory, the first such victory
by a communist party in the countries of the former Soviet Union since that country’s

breakup in 1991. 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.
On April 4, 2001, the new parliament elected CPM leader Vladimir Voronin as
President. The formal powers of the Presidency are weak (ironically due to a successful
CPM-led effort in parliament in 2000 to reduce them), but as CPM leader Voronin is in
fact the most powerful political figure in the country. On April 19, the parliament approved
a new government led by businessman Vasile Tarlev, who is a political neophyte and not
a CPM member. The CPM has billed Tarlev’s government as a non-partisan government
of experts; only two of its members are members of the CPM, while six are from the
previous, center-right reformist government. Nevertheless, the government is entirely
dependent on the CPM for support.
Like its predecessors, the new leadership in Moldova faces the thorny issue of the
status of the “Dniestr Republic.” Dniestr leaders want a confederated structure for
Moldova, under which Dniestr would be an independent state. They demand control over
foreign affairs, internal security and defense. Moldovan authorities are willing to give
Dniestr an autonomous “special status” within Moldova that would devolve significant
powers to the region, but not ones that would relinquish Moldova’s sovereignty there.
The causes of the conflict over Dniestr are complex, involving ethnic and ideological
factors, as well as maneuvering for power and wealth among elite groups. Ethnic Russians
and Ukrainians together make up 54% of Dniestr’s population of about 650,000, while
Moldovans are the single largest ethnic group, at 39%. Until recently, pro-Western,
moderate nationalist governments in Chisinau faced nominally leftist, Soviet-style, pro-
Russia forces in Dniestr. However, many Moldovan analysts are convinced that the key
factor obstructing a settlement is the personal interests of the leaders of Dniestr regime,
including Dniestr “President” Igor Smirnov, who they claim is heavily supported by
organized crime groups. Early efforts by President Voronin to reach agreement with the
Dniestr leaders have failed, despite the fact that CPM’s views on many issues appear to
be closer to those of the Dniestr leadership than those of the previous center-right
governments had been.
Moldova is one of the poorest countries in Europe. According to the World Bank,
its per capita Gross National Product was $410 in 1999, which is also the average for
countries the Bank terms “low income countries.” Per capita GNP for Europe and Central
Asia averages $2150. 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 the Dniestr republic, and is not counted in Moldovan
government statistics. 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, and Moldova suffered a severe setback during the 1998 Russian economic crisis.

It has since staged a partial recovery, due in part to a government effort to cut spending
and accelerate reforms.
Moldova has privatized its small and medium-sized business sector, and unlike other
countries in the region, it has had remarkable success in privatizing agricultural land.
However, the sale of large firms has been more difficult. Foreign investment in Moldova
is low; cumulative foreign direct investment since independence through 1999 amounted
to only $339 million. The situation improved in 2000, with the sale of Moldovan energy
distributors to the Spanish firm Union Fenosa. A key test of the intentions of the new
government will be whether it interferes with Union Fenosa’s efforts to make the energy
sector profitable, and whether Moldova will privatize the rest of the energy sector, as well
as its telecommunications sector. Another key test will be how (or whether) it privatizes
the key tobacco and wine industries. Some of the CPM’s strongest support comes from
the directors of these sectors.
The Moldovan government has acknowledged that its room for maneuver over such
issues as increasing government spending or slowing privatization is limited. Given the
country’s poverty and its weak financial situation, Moldova is heavily dependent upon loans
from the IMF, World Bank and other international financial institutions. In December 2000,
the IMF approved a $142 million Poverty Reduction and Growth Facility loan for Moldova.
The IMF suspended disbursements of the loan in May 2001, waiting to see whether the
CPM-supported government will continue economic reforms. The resumption of IMF
funding is critical if Moldova is achieve a critically necessary rescheduling of its substantial
foreign debt burden. In April 2001, Moldova owed over $1.3 billion, over 100% of the
country’s GDP. Moldova joined the World Trade Organization in June 2001.
Foreign Policy
According to the Moldovan constitution, Moldovan foreign policy is based on
neutrality. 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. It has ceded control
of its natural gas distribution system to the Russian energy giant Gazprom to pay part of
the debt.
Relations with Russia are complicated by the continued presence of about 2,500
Russian troops in the Dniestr Republic, as well as huge stockpiles of weapons and
ammunition. (This figure does not include several hundred Russian troops deployed in the
security zone between the Dniestr Republic and the rest of Moldova with the Moldovan
government's consent.) Since Moldova’s independence, Russia has repeatedly failed to
honor commitments it has made to withdraw its forces from Moldova.
At the November 1999 Organization for Security and Cooperation in Europe (OSCE)
summit in Istanbul, Russia pledged to complete the withdrawal of its troops from Moldova
by the end of 2002. Both Moldovan and Russian officials agree that the huge stocks of
munitions in Dniestr 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
undesirable groups. However, Russian officials say that they cannot withdraw the munitions
without the permission of the Dniestr authorities, who claim that the weaponry is their
“property.” As a result, the OSCE has noted that very little progress has been made toward

the implementation of Russia’s pledge to withdraw its troops from Moldova. One 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.
Russia officially supports the view, held by the rest of the international community,
that Moldova should remain a single, sovereign state. Russia formally rejects Dniestr’s
demands for recognition as an independent state in confederation with Moldova. An OSCE
mission in Moldova is charged with helping to solve the Dniestr issue, as well as supporting
the Russian troop withdrawal from Moldova. However, some Moldovans charge that
Russia has in reality backed the Dniestr leadership in order to retain political leverage over
Moldova, while publicly supporting OSCE efforts to avoid international pressure over the
issue. Russian leaders have at times attempted to tie the withdrawal of Russian troops to
the resolution of Dniestr’s status.
Moldova is a member of the Commonwealth of Independent States (CIS). However,
until the CPM’s victory in 2001, Moldova resisted Russia's desire for closer integration
within the CIS under Russia's leadership, declaring that it would not participate in political
and/or military integration within the CIS. Moldova participates in a loose group of former
Soviet republics known as GUUAM, after the initial letter of each member – Georgia,
Ukraine, Uzbekistan, Azerbaijan and Moldova. GUUAM countries have tried to enhance
cooperation between membership of the group to enhance their independence and to ward
of Russian efforts to dominate them. After his election in April 2001, President Voronin
has stressed the need for Moldova to seek closer ties with Russia, including by eventually
joining the Russia-Belarus Union. However, some observers question whether Voronin
will be able to fulfill this pledge, given the difficulties the Russia-Belarus Union is having
at present. President Voronin has said that Moldova will continue to participate in the
GUUAM group, but warned that it sees the group as a forum for economic issues, not
political ones.
Moldovan officials stress that they wish to expand ties with Western countries.
Moldova does not seek NATO membership, but favors cooperation with NATO, and
participates in Partnership for Peace (PFP) exercises. In February 2001, NATO announced
the establishment of a PFP trust fund to help Moldova destroy the large stockpile of anti-
personnel mines on its territory, as required by the Ottawa Convention on the elimination
of these weapons. On November 28, 1994, Moldova signed an agreement for partnership
and cooperation 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. From
1991 until 1999, Moldova received 70 million Euros ($60.4 million) in EU aid for political
and economic reform. Moldova has also received EU humanitarian aid, as well as assistance
for food security and poverty reduction and balance of payment support. Moldova joined
the Stability Pact for Southeastern Europe in June 2001.
One of the most sensitive issues in the republic’s foreign relations is relations with
Romania. The question has implications for the identity of the country. Most 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. Those favoring
the term "Moldovan" tend to favor Moldova's independence or close ties with Russia, while
those favoring "Romanian" tend to favor union with Romania. The Christian Democratic

Popular Party (which has only 11 seats in parliament) and a few other right-of-center groups
favor unification with Romania, but the CPM-led government and the overwhelming
majority of Moldovans oppose it. In a 1994 referendum, over 90% of Moldovans rejected
unification with Romania.
U.S. Policy
From FY 1992 through FY 2000, the United States obligated $422.26 million in aid
to Moldova. Moldova will receive an estimated $47.7 million in U.S. aid in FY 2001. The
Administration has requested $48.23 million in aid for Moldova for FY 2002. Of this
amount, $43.7 million of FY 2001 funds and $44 million of FY 2002 is in Freedom Support
Act assistance for political and economic reform. U.S. aid is aimed at supporting
independent media and non-governmental organizations in Moldova, as well as fostering
exchanges. U.S. economic aid has played a key role in Moldova’s successful land reform
program. U.S. aid has also played an important role in energy sector privatization. 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 has also provided security assistance to Moldova, including Excess
Defense Articles. The United States provided $1.225 million in Foreign Military Financing
in FY 2000, and will provide an estimated $1.493 million in FY 2001. The Administration
has requested $1.8 million in FMF for Moldova in FY 2002. Moldova received $0.717
million in IMET military training aid in FY 2000, and is expected to receive $0.6 million
in FY 2001. The Administration has requested $0.85 million in IMET for Moldova in FY
2002. U.S. security assistance is used to help Moldova participate in Partnership for Peace
exercises, and develop its peacekeeping capacity and interoperability with NATO.
The United States has provided Moldova with help in preventing the proliferation of
technologies of mass destruction. In October 1997, the United States purchased 21 MiG-29
fighters (14 of them nuclear-capable) from Moldova, using Nunn-Lugar Cooperative Threat
Reduction funds, after Moldova informed U.S. officials that Iran was one of several
countries interested in buying the aircraft. Secretary of Defense William Cohen said the
deal marked an improvement in U.S.-Moldovan ties. The United States has also provided
aid to help Moldova fight organized crime, including trafficking in women and children,
which is a severe problem in Moldova.
The United States has supported Moldova’s efforts to bolster its sovereignty and in-
dependence by securing the withdrawal of Russian forces from Moldova and negotiating
a settlement of the Dniestr issue consistent with Moldova's territorial integrity. The United
States has contributed funding to an OSCE trust fund to assist the withdrawal of Russian
troops from Moldova by assisting in the destruction of the huge store of munitions in
Dniestr. On September 26, 1996, the House passed H.Con.Res. 145, which called on
Russia to withdraw its troops from Moldova, by a vote of 425-0.