Bankruptcy Looms For Moldova
.......The massive expansion of bank lending was funded with heavy borrowing from – among other things – Russian companies. The banks failed when this funding was abruptly withdrawn. Concurrently, there was also a retail bank run triggered by politicians. The timing of the funding withdrawal and bank run does not appear to me to be coincidental, coming as it did less than a week before the parliamentary election. The pro-EU government lost the election: the largest party, with 21.5% of the vote, was the Socialist Party, which is opposed to EU membership and favors Moldova joining Russia’s “Eurasian Union”. An unstable pro-EU coalition government was eventually formed. But it did not last long. The new Prime Minister, Chiril Gaburici, resigned in June after the authenticity of his college diplomas was challenged. Moldova is currently without a government.
It is disingenuous of Jatras to imply that private sector investors “rescued” these banks from a corrupt public sector and were then shafted by politicians. In Moldova, as in Bulgaria, there is no clear distinction between public and private sectors. The country is run by powerful business interests – we in the West like to call them “oligarchs” – who dominate government either directly, by being elected, or indirectly through patronage. They go into politics in order to further their business interests: they gain control of institutions such as central banks and the judiciary in order to protect their business interests: and they take over media channels in order to promote their businesses and discredit their rivals. Ilan Shor is one of them: he was elected mayor of the city of Orhei in June despite being under house arrest. There are no innocent parties in this fraud.
But even more importantly, Moldova is a house divided. A significant part of Moldova’s population is Russian-speaking and/or pro-Russia: an estimated 75% of its banking sector is Russian-owned, as are many of its businesses. Support for EU membership has declined significantly in the last year, partly due to heavy promotion of the Eurasian Union by Russian sympathisers, and is now at best marginal. The enclave of Transnistria openly faces East: Russia has military bases there and in March held military exercises along its border with Ukraine, escalating tensions. Ukraine has now denied Russia access to its Transnistrian military bases. But while the EU is distracted with the Greek crisis, Russia has been distributing Russian passports to Transnistrians.
So although I think Kroll’s report is flawed, I believe it is correct to highlight the involvement of Russians, not only the companies that funded the banks but their shareholders too. What Kroll missed was the geopolitical dimension. Bringing down pro-EU governments fits all too well with Russia’s ambitions in the region. In which case the EU’s denial of budgetary support to Moldova is political suicide. Without that support, Moldova will collapse. And a failed state sandwiched between the unstable Ukraine and fragile Balkans – and featuring a pro-Kremlin enclave described by the FT as a “flashpoint – is the last thing the EU needs. It should think again.