Clare Nuttall in Tiraspol -

On a sunny afternoon in June, Tiraspol, the capital of Moldova’s breakaway Transnistria republic, doesn’t look like a hotspot in the new cold war between east and west. Groups of youths stroll through the city centre in swimming trunks and flip flops, with bottles of beer dangling from their fingers, heading for the Dniester river, where many of the town’s 144,000 population are swimming or sunbathing. But businesses are struggling as the closure of the Ukrainian border has coincided with Moldova’s move towards the EU, which threatens to cut off existing export markets.

Transnistria’s president, Yevgeny Shevchuk, has complained of the dual pressures being put on the Transnistrian economy. "Politically-motivated decisions are still affecting Transnistria and having negative implications for its economy,” Shevchuk said June 10, Interfax reported. Other officials have previously claimed that Transnistria (also known as Transdniestria) is the victim of a “blockade”, and that it risks a slump of up to 65% in exports after Moldova signed its EU free trade and association pact on June 27.

“Since the Association Agreement ignores the interests of Transnistria, experts predict a significant deterioration in the economic situation in Transnistria after its signing,” said an April date statement from the Ministry of Foreign Affairs. “In particular… Transnistrian exports may be completely closed off from the European, Moldovan and Ukrainian [markets]," it added, referring to the fact that Ukraine too signed a similar EU deal on June 27.

This could potentially destabilize the region further, where Russia has been using its position as Transnistria’s patron to put pressure on Chisinau. Since the early 1990s, when Tiraspol declared its independence from the newly created Moldovan state, the sliver of land between the Dniester and the Ukrainian border has been de-facto independent, its stagnating and corrupt economy shored up by handouts from Moscow. The authorities stepped up their efforts to achieve sovereign recognition in April after Russia annexed Crimea, when the Transnistrian parliament voted to appeal to Moscow for official recognition, followed by entry to the Russian Federation. 

Food for thought

However, while the authorities are looking to the Soviet past – the republic’s flag bears a hammer and sickle – private businesses have increasingly been looking westwards to Europe. European markets now absorb more than half Transnistria’s exports, which are mostly food and agricultural products, textiles and cement.

Perhaps surprisingly, Chisinau has maintained a relatively relaxed policy towards Transistrian businesses – many of which have registered in Moldova in order to gain access to European markets on the same terms as their Moldovan counterparts.

Anatolie Triteace, president of MMD Group, which started out as a meat importer and recently moved into processed fruit and vegetable production, says that while the company’s main operations are in Transnistria, it exports the bulk of its production to European countries such as Bulgaria, Greece and Turkey. The company has not so far encountered obstacles to exporting its products to Europe. “We operate in Transnistria, but I think that Transnistria is also Moldova,” he tells bne.

However, for MMD and other businesses, the situation could change now that Moldova has signed its EU deal. While the Deep and Comprehensive Free Trade Area (DCFTA) – the main pillar in the Association Agreement – will open up European markets to Moldovan exporters, the flipside is that Moldovan producers will have to raise standards and submit to more rigorous quality and safety inspections. Since Tiraspol does not recognise Chisinau’s authority, it will be impossible to carry out similar checks on Transnistrian-based producers, potentially blocking them from EU markets.

Further adding to the breakaway republic’s troubles, its eastern border has been virtually closed since the start of the conflict within Ukraine, since Kyiv’s new government considers the Moscow-backed enclave to be unfriendly. This has cut off access to both the Ukrainian market and the crucial Ukrainian port of Odessa on the Black Sea.

It is not yet clear what impact this double blow will have on Transnistria’s economy. Until recently, living standards in Transnistria were seen as higher than in Moldova proper thanks to support from Russia. In particular, Transnistrian companies and consumers receive Russian natural gas at highly subsidised prices, while Tiraspol has refused for several years to pay for the gas it imports at all, claiming the bill is Chisinau’s responsibility.

“The economy of breakaway Transnistria is a peculiar combination of the command-and-distribution model inherited from the USSR with elements of a free-market economy which is heavily dependent on Russian energy and financial subsidies,” says a report from the Office for Eastern Studies (OSW). Four huge industrial companies inherited from the Soviet Union contribute more than half of its GDP, while Sheriff, owned by local oligarch Viktor Gushan, dominates the local consumer market from retail to telecommunications.