Alaco

15.12.2015 | The roots of Moldovan corruption

Moldovans are still struggling to come to terms with last year’s massive banking fraud that almost bankrupted the tiny European country. The scandal has been blamed on venal politicians, but what has led to corruption becoming so endemic?

It was the biggest known fraud in Moldova’s history.  In late 2014, the equivalent of one-eighth of the country’s GDP – a billion dollars – disappeared from three of the country’s banks.  The fraud sparked huge street protests, culminating in October with the fall of the government and the arrest of the former Prime Minister Vlad Filat in connection with the case.

But the roots of the current crisis can be traced back to 2009, when a coalition of parties that described themselves as pro-European came to power.  They pledged to reform state institutions and steer the country closer to the European Union.  The new foreign policy direction was seen as a break with previous governments’ leaning towards closer ties with Russia.

Brussels welcomed the shift.  In the same year, Moldova joined five other ex-Soviet states in the Eastern Partnership, which aimed to promote democratic reforms amongst the member countries as well as closer economic and political cooperation.  Over the last five years, Moldova has received over €800 million worth of EU grants to reform its institutions and develop its infrastructure.  But there has been little to show for the funding.

In 2013 the Eastern Partnership Community, an independent think-tank covering the region, raised concerns over Chisinau’s management of EU funds.  It wrote: "The EU is devoting considerable sums to Moldova for very little return in terms of progress in the country's reform process.  It begs the question: why is the EU throwing money like this at a black hole of corruption, when there is so much to do in the EU's own member states?"

Despite the criticism, the following year Brussels signed an association agreement with Moldova and granted its citizens visa-free travel in the Schengen Area.  However, dangling the carrot of European integration does not appear to have spurred Moldovan politicians into action.

This year, Brussels is said to have repeatedly drawn attention to the very slow pace of reforms.  In a recent interview with Radio Free Europe’s Moldovan service Europa Libera, Pirrka Tapiola, the head of the EU delegation to Moldova, expressed his frustration with Moldovan leaders, “You cannot try to join the EU only by speaking about reforms – you have to implement them.” 

Brussels seemingly ran out of patience in the wake of the banking scandal.  In July, after the collapse of the government, it announced a funding freeze until a new administration was formed.  The EU, it appears, was taken in by the ruling elite’s pro-European rhetoric and didn’t do enough to hold them to account.  It realised too late that offering unconditional support in exchange for promises of reform was doomed to fail.

Rather like other post-Soviet states, many of Moldova’s politicians are closely associated with corrupt oligarchs – serving the latter’s interests, not those of the electorate.  Some politicians are themselves powerful oligarchs.  Political parties may call themselves pro-European or pro-Russian, but mostly these are just labels used by MPs to control state institutions – the courts, assemblies and prosecutors – for personal financial gain.

The pro-European politicians have maintained their hold on power by exaggerating the threat posed by Russia.  They have manipulated fears that Moscow might intervene in Moldova as it did in eastern Ukraine and Crimea.  In a recent example of the tactic, TV channels run by the ruling elite broadcast images of Moldovan security forces detaining what they described as pro-Russian rebels planning to take over state institutions. 

Although no one can categorically rule out that Russia could invade Moldova, the prospect seems unlikely.  The Kremlin can exert pressure on Chisinau in other ways.  The very presence of Russian troops in the breakaway Moldovan region of Transnistria is a constant menace.  Russia is also an important trading partner; it supplies 95% of Moldova’s energy needs; and is the main destination for Moldovan migrant workers.

But while the threat of military action appears remote, criminal networks in Russia and Moldova have contributed to the sorry state of affairs in the country.  The weakness of Moldovan institutions has over the years been exacerbated by international organised crime groups, predominantly with Russian roots.  Between 2010 and 2014, in one of the biggest reported money-laundering schemes, corrupt politicians and mafia gangs in Russia allegedly colluded with some Moldovan judges and businessmen in the transfer of $20 billion through Moldova to Latvia, then on to various shell companies.

Having invested so heavily in Moldova, the EU must be more robust in its policy towards the country.  But it cannot afford to get its tactics wrong again.  The current crop of corrupt politicians will not be easily excluded from the political scene because their interests are so deeply-rooted.  What Brussels can do is to use targeted sanctions against corrupt officials while actively supporting moderate politicians who have made an effort to distance themselves from discredited colleagues.

Even with targeted sanctions, some of the country’s long-suffering population – 80 per cent of whom live below the poverty line – might be inadvertently affected.  But while the tactic has its risks, it would send a clear signal of Europe’s determination to help Moldova reform its institutions.