Transnistria’s financial woes increase as Russian economy contracts

By bne IntelliNews February 13, 2015

Clare Nuttall in Bucharest -


The breakaway Moldovan republic of Transnistria remains strategically important to Russia, but the economic contraction at home has affected Moscow’s ability to extend support at a time when Transnistria’s financial needs are growing.

Reports of delayed payments from Russia to Transnistria to cover public sector wages, pensions and social security surfaced in January. According to Nezavisimaya Gazeta, Moscow turned down a request for $100mn worth of financial support.

There are also signs that Russian investors are reconsidering their presence in Transnistria. The authorities announced on January 30 that they had bought back the majority stake in integrated steel plant Moldova Steel Works (MMZ) from Russia’s Metalloinvest group.

Details of the deal were not released, but according to reports in the Russian press Metalloinvest, which is controlled by oligarch Alisher Usmanov, is believed to have sold its entire 98.83% stake in MMZ. Usmanov is reportedly also considering selling the cement plant Metalloinvest holds in Transnistria - possibly indicating a loss of confidence in Transnistria’s future.

The enclave’s eastern border has been virtually sealed since the start of the conflict in Ukraine, cutting off access to the Ukrainian market and the port of Odessa. Its economic performance therefore depends heavily on whether the peace talks between Russia, Ukraine and the EU will result in an end to the fighting in east Ukraine. 

In the meantime, the industrial companies that are the backbone of the Transnistrian economy face a loss of access to import and export routes, following an earlier blow in 2013 when they were hit by a rise in gas prices.

Transnistrian President Yevgeny Shevchuk has frequently complained of what he claims is a politically motivated blockade, bringing the issue up most recently at a meeting with OSCE officials in Tiraspol on February 9. "Moldova continues to create preconditions for the strangulation of Transnistria,” Shevchuk said according to the presidential website

Today, the economic situation in the unrecognised republic is “pretty dire”, says Paul Ivan, analyst at the European Policy Centre. “Most budget revenues come from large enterprises, many of which shut down for several months in 2014. The fall of the ruble also hit them badly.

“Meanwhile, Russia is dealing with its own economic problems, so it’s not so easy to send money to Transnistria,” Ivan added. In its Global Economic Prospects report published in January, the World Bank forecast a 2.9% contraction in Russian GDP this year. 

Transnistria’s Minister of Economic Development Alevtina Slinchenko told a government meeting on January 21 that there had been a significant decline in export-oriented industries since spring 2014. Facing a shortfall in budget revenues, authorities plan to adopt a package of measures to stabilise the economy in the near future.

There are further rumours that Moscow is losing patience with Tiraspol’s management of the economy and Schevchuk’s own spending on charter flights, and using its position as the republic’s financial backer to show its displeasure.

However, Transnistria has remained strategically important to Russia, given its position between Moldova and Ukraine. The threat of an attack on Ukraine from Russian forces in Transnistria was never realised, although a number of Transnistrian individuals joined the fighting in east Ukraine. It also gives Russia a bargaining tool in its dealings with Moldova, as Chisinau turns towards the EU.

“Russia has no interest in giving Transnistria up; if anything it is clinging on harder,” Ivan told bne IntelliNews. “It remains a Russian outpost just 90km from the EU and Nato border, allows Moscow to keep a level of influence over the Moldovan government and can also be used as a lever on Ukraine.”

Recently, Russia has appeared to have little interest in moving forward with talks on a settlement of the Transnistia conflict in the 5+2 format. After some progress in 2010 and 2011, negotiations were repeatedly postponed last year, and have been on hold since October, as a new government has not yet been appointed in Moldova since the November 30 elections. On February 12, the Moldovan parliament rejected the nomination of Iurie Leanca as prime minister, meaning a new government may not be formed before mid-March. 

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