Clare Nuttall in Chisinau -

Moldova has no intention of turning its back on plans to sign an EU free trade and association agreement later this month, Prime Minister Iurie Leanca told an investment conference on June 12. Both Leanca and European Commission President Jose Manuel Barroso sent out a strong message to “enemies” of change, after Moldova has come under months of pressure from Russia to back away from closer EU integration.

Both Moldova and Georgia are due to sign an Association Agreement and Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU on June 27. The deal is an important step on Moldova’s road to integration with the EU and its ultimate goal of EU accession. While the agreements cover primarily economic and technical issues, politically the signing is a decisive move by Chisniau towards Europe and away from Russia’s sphere of influence, and is seen by Leanca’s government as a pivotal moment for the country. “We are certain [signing the agreement] is for the good of the country, the economy and the people,” Leanca told the conference. “Europe is in our history, our culture, our language and our values – but most importantly it is where we see our future.”

Barroso also emphasised the importance of the move for Moldova’s future. “It is our conclusion and our determination that Europe is the best future for Moldova. It is the best way to guarantee a united, modern and prosperous Moldova. There is no doubt that Moldova is a European country,” he said.

Pressure

Moldova and Georgia defied heavy pressure from Russia to initial their EU association agreements at the Vilnius summit in November 2013. The decision by now-ousted Ukrainian president Viktor Yanukovych not to sign a similar agreement sparked mass protests in Kyiv and several months of violence, which is still continuing in parts of the country. Yanukovych was ousted in February, and the new government under President Petro Poroshenko had hoped to sign the deal on June 27, though on June 11 this was suspended on technical grounds. Meanwhile in Armenia, two months before the Vilnius summit, President Serzh Sargsyan abruptly announced that the country would join Vladimir Putin’s rival Customs Union – effectively ruling out the signing of an EU deal.

With less than two weeks to go, it is unlikely now that Moldova will be deterred from its course towards EU integration. However, both Leanca and Barroso alluded to the pressures Chisinau is still facing. “We combat resistance to change both here and abroad. Change has many enemies,” said Leanca. “This is not just a choice between different visions. It is a choice between the forces of modernisation and those who want to take us back to stagnation, isolation and authoritarian politics. We will not draw back from EU integration, we will take the country forward.”

Barroso noted “spurious and... irrational objections” to Moldova’s ambitions to sign the agreement. “We say to Russia that the association agreement is compatible with Moldova’s free trade agreement with the [Commonwealth of Independent States]. A stable and prosperous Moldova will benefit Russian exporters and investors. We call on Russia not to take further measures around the signature of the agreement as there is no economic reason or legal justification for this.”

Russia has considerable scope to put economic pressure on Moldova. Immediately before the Vilnius summit, Russia banned imports of Moldovan wine, citing several batches of contaminated brandy. Russia’s Gazprom is also Moldova’s sole gas supplier, though construction of the Iasi-Ungheni gas interconnector pipeline will allow Moldova to start imports from Romania when it comes online.

Politically, Moscow wields leverage through its financial and military support for Transnistria (also known as Transdniestria), a tiny self-declared republic between the east bank of the Dniester river and Moldova’s border with Ukraine. Encouraged by Russia's annexation of Crimea in April, Transnistria has stepped up its efforts to secede from Moldova. Its parliament voted on April 16 to appeal to Moscow for official recognition, followed by entry to the Russian Federation.

New markets

However, Moldova, Europe’s poorest country, is keenly aware of the economic benefits of integration with the EU, as well as the political factors. The International Monetary Fund (IMF) expects Moldova’s economy to grow by 3.5% in 2014, but its future growth is highly dependent on growth within the EU, its main trading partner, and on regional stability.

Signing the DCFTA is expected to benefit Moldova by opening up EU markets and to encourage investment by EU firms. Over half of Moldova’s investments already go to the EU, and Chisinau is eager to increase this total. Barroso told the conference that studies have shown Moldova’s GDP will grow by an additional 5.4% in the medium term after signing the agreement. On April 29, Moldovans were also granted visa-free travel to most countries in the EU.

Complying with the DCFTA will, however, require considerable effort on the part of the Moldovan authorities and private companies to bring production, quality checks and other activities into line with EU standards.

Currently, Moldova’s most pressing problems include a lack of job opportunities, especially for young people, which has resulted in a high level of emigration. In 2012, remittances from migrant workers abroad accounted for 25% of GDP, putting the country in joint third place worldwide in terms of the contribution of remittances to GDP, according to a World Bank report.

Leanca told the conference that “even more important than access to the EU market is creating the legal institutions and economic environment to attract more investment”. “FDI is critical to our economy, and the DCTFA is imperative for Moldovan policy – first for job creation and second for innovation,” he said. “We have massive emigration because there are not local employment opportunities, and therefore job creation is a key priority. More investments are a pre-condition for more jobs here and bringing back migrants.”

After the deal is signed on June 27, Chisinau is expected to continue to pursue its long-term goal of EU membership. Speaking on April 30, the day after Moldovans were allowed to travel visa-free to most EU countries, Leanca said that Moldova has set itself a target of entry to the EU within five years and will do "everything possible" to achieve the goal.