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Moldova (10/03)


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For the most current version of this Note, see Background Notes A-Z.

PROFILE

OFFICIAL NAME:
Republic of Moldova

Geography
Area: 33,843 sq. km. (13,000 sq. mi.); slightly larger than Maryland.
Cities: Capital--Chisinau.
Terrain: Rolling steppe, gradual slope south to Black Sea.
Climate: Moderate winters, warm summers.
Time Zone: GMT+2

People
Nationality: Noun--Moldovan(s). Adjective--Moldovan.
Population (1989 census): 4.28 million.
Population growth rate: 0.1%.
Ethnic groups (1989 est.): Moldovan/Romanian (65%), Ukrainian (13.8%), Russian (13%), Gagauz (3.5%), Jewish (1.5%), Bulgarian (2%), other (1.7%).
Main religions: Eastern Orthodox (98%), Jewish, Baptist.
Languages: Romanian (official), Russian, Gagauz.
Education: Literacy--96%.
Health: Infant mortality rate--44/1,000. Life expectancy--67 years.
Work force (2 million): Agriculture--35%; industry--20%; other--45%.

Government
Type: Republic.
Constitution: Adopted July 28, 1994.
Independence: August 27, 1991 (from Soviet Union).
Branches: Executive--President (head of state), Prime Minister (head of Government), Council of Ministers (cabinet). Legislative--unicameral Parliament. Judicial--Supreme Court.
Administrative subdivisions: 9 counties (judets), one municipality, one territorial unit and one autonomous territorial unit.
Political parties: Communist Party, Popular Christian Democratic Party, Social Alliance, Liberal Party, Democratic Party, Social Liberal Party, and Alliance of Independents.
Suffrage: Universal at 18.

Economy
GDP (2002 est.): $1.6 billion ($1.5 billion in 2001; $1.3 billion in 2000).
GDP real growth rate (January-September 2002): 5.9% (6.1% in 2001).
Per capita GDP (2002 est.): $451 ($422 in 2001).
Natural resources: Lignite, phosphorites, gypsum, arable land, limestone.
Agriculture: Products--vegetables, fruits, wine and spirits, grain, sugarbeets, sunflower seeds, meat, milk, tobacco.
Industry: Types--processed foods and beverages, including wine and refined sugar; processed fruit and vegetable products, including vegetable oil; dairy and meat products; tobacco items; metal processing and production of machinery; textiles and clothing, shoes; furniture.
Trade (2001): Exports--$570.2 million (of which 39% go to countries outside the former Soviet Union): foodstuffs, wine, tobacco, textiles and footwear, machinery, chemicals. Major markets--Russia, Belarus, Ukraine, Germany, Italy, Romania. Imports-- $897.2 million (of which 62% come from countries outside the former Soviet Union): gas, oil, coal, steel, machinery and equipment, chemical products, textiles, foodstuffs, automobiles, and other consumer durables.
Major suppliers--Ukraine, Russia, Romania, Italy, Germany.
Currency: Moldovan Leu (plural lei).
Exchange rate, Lei/US$ (2002): 13.82 (end of year), 13.57 (average); (12.87 average in 2001)

RECENT DEVELOPMENTS

Political Overview
In February 2001, the Communist Party won more than two-thirds of the seats in the Parliament and selected party chairman Vladimir Voronin as President. Of primary importance have been the government's efforts to improve relations with the IMF and the World Bank, and to comply with agreements negotiated in 2000 by the former government. Agreement in these areas is critical because large government debts must be rescheduled. The government has made concerted efforts to find ways to pay for Moldova's energy supplies. Politically, the government is committed to the reduction of poverty by allocating more resources to social safety net items such as health, education, and increasing pensions and salaries.

From January to April 2002, large demonstrations took place in opposition to several controversial government proposals, including expanded use of the Russian language in schools and designation as an official language. While the demonstrations were sometimes tense, the government did not use force, and ultimately, agreed to Council of Europe (CoE) mediation. The potential for continued protest over several contentious issues remains.

Separatist forces maintained control of the Transnistrian region, along the Ukrainian border. In July 2002, the OSCE, Russian, and Ukrainian mediators approved a document setting forth a blue print for reuniting Moldova under a federal system. The settlement process gained some momentum immediately afterwards, but by the end of the year, talks had stalled. The current government has shown increased determination to resolve the ongoing conflict but has been unable to make significant progress because of fundamental disagreements with the separatist authorities in Transnistria over the status of that region.

Russian efforts to remove the weapons and munitions of the Organized Group of Russian Forces stationed in Transnistria, all of which was to be withdrawn by the end of 2002, have been obstructed by the Transnistrian leadership. Russia thus failed to comply with the timetable set forth in the 1999 Istanbul Accords. A new timetable has been agreed to.

In late 2001, the leadership of the autonomous region of Gagauzia became more vocal in its complaints that the Moldovan Government did not respect the region's statutory-enshrined autonomy. The Governor of the autonomous region resigned in July 2002, citing pressure from the central government. In the subsequent election, a former Gagauz governor, supported by President Voronin, was elected.

Economic Overview
Moldova continues to make progress towards developing a viable free-market economy. Moldova will record its third consecutive year of positive GDP growth in 2002, with year-end real GDP growth predicted at 6 percent. This growth is impressive considering that prior to 2000 Moldova had recorded only one year of positive GDP growth since independence. Equally impressive, the 2002 inflation rate was 4.4%, and the budget deficit for 2002 is estimated to be less than 1%. The Moldovan leu depreciated 5.6% against the U.S. dollar in 2002. Imports increased more rapidly than exports during the first half of 2002; Moldova's terms of trade worsened, as higher-priced energy imports outpaced the value of Moldova's main exports -- agricultural and agro-processing goods. The debt/revenue ratio remained worrisome at 42 percent. During 2002, Moldova rescheduled an outstanding Eurobond, in the amount of USD 39.6 million, to avoid a potential default.

Privatization results were mixed: several smaller companies and two wineries were privatized in 2002, but the government was not able to privatize several larger state enterprises, notably Moldtelecom. Sporadic and ineffective enforcement of the law, combined with economic and political uncertainty, continue to discourage inflows of foreign direct investment. Moldova remains the poorest country in Europe. Despite difficult negotiations, the International Monetary Fund (IMF) and World Bank resumed lending to Moldova in July 2002.

Overview of U.S. Government Assistance
In FY 2002, the U.S. Government provided an estimated $41.68 million in assistance to Moldova, including $35.95 million in Freedom Support Act (FSA) assistance and $5.74 million in other U.S. Government assistance.

Agricultural post-land-privatization activities and energy-sector privatization continued to be the main foci of U.S. assistance. Law enforcement, anti-trafficking, border control, and non-proliferation were also emphasized in FY 2002. The Export Control and Related Border Security (EXBS) program assisted Moldovan Customs with border control projects and worked closely with the Moldovan Department of Civil Defense on continuing efforts to create a "first response unit" for weapons of mass destruction. Military-to-military cooperation remained strong based on Partnership for Peace (PFP) exercises, International Military Education and Training (IMET) programs, and Bilateral Affairs Operations collaboration with Moldova.

During FY 2002, the Western NIS Enterprise fund provided Moldova with $1.5 million in investments; the U.S. Department of Agriculture provided 28,400 metric tons of food commodities to Moldova worth $12.8 million.

U.S.-MOLDOVAN RELATIONS
The dissolution of the Soviet Union in December 1991 brought an end to the Cold War and created the opportunity to build bilateral relations with 15 new states, which had made up the former U.S.S.R., as they began a political and economic transformation. The United States recognized the independence of Moldova on December 25, 1991 and opened an embassy in its capital, Chisinau, in March 1992. U.S. ambassador to Moldova Heather M. Hodges arrived at post in October 2003.

A recent highlight in U.S.-Moldovan relations was President Voronin's visit to the U.S. in December 2002, at the invitation of President Bush. After meeting at the White House, the Presidents issued a joint statement affirming their commitment to promoting prosperity, freedom, and security in Moldova and throughout the region; underscoring their determination to bring the Transnistrian conflict to a peaceful resolution; urging Transnistrian authorities to support unconditionally the withdrawal of Russian munitions and forces from Moldovan territory; recognizing the progress made by Moldova in transforming its economy in a free market direction and agreeing that Moldova must strengthen its reform efforts; emphasizing the importance of meeting OSCE election standards and in strengthening free and independent media in Moldova; and reaffirming the importance of continued cooperation in promoting regional security, including through efforts at combating the proliferation of weapons of mass destruction, transnational crime, and trafficking in persons.

U.S.-Moldovan Economic Relations
A trade agreement providing reciprocal most-favored-nation tariff treatment became effective in July 1992. An Overseas Private Investment Corporation agreement, which encourages U.S. private investment by providing direct loans and loan guarantees, was signed in June 1992. A bilateral investment treaty was signed in April 1993. Generalized system of preferences status was granted in August 1995, and some Eximbank coverage became available in November 1995. Moldova is a member of the WTO.

U.S. Assistance to Moldova
From 1992 through September 1995, total U.S. assistance to Moldova included about $59 million in humanitarian shipments; $104 million in USDA food assistance, including about 80,000 metric tons of food aid, valued at $20 million, in FY 1994-95; and $61 million in technical assistance. In FY 2002, the U.S. Government provided an estimated $41.68 million in assistance to Moldova.

In January 1992, the U.S. initiated the Coordinating Conference on Assistance to the New Independent States in response to the humanitarian emergencies facing those countries. The resulting Operation Provide Hope provided desperately needed food, fuel, medicine, and shelter. By January 1996, the total in humanitarian medical supplies, food, and clothing provided by the U.S. to Moldova had risen to about $61 million. Initiatives included the 1993 shipment of Department of Defense excess medical supplies, the 1994 donation of a military hospital to Moldova, and the 1995 provision of U.S. equipment that allowed for mass immunization of the Moldovan population against diphtheria. The U.S. Embassy in Chisinau has continued its coordination of assistance by providing heating assistance to many Moldovan institutions during winter.

In the mid-1990s, the focus of U.S. aid shifted to technical assistance in support of Moldova's transition to a market economy and democratic society. The establishment of a Western NIS Enterprise Fund was announced by President Clinton in January 1994, to provide investment capital to privatizing firms in Ukraine, Moldova, and Belarus. The Enterprise Fund is the capstone of focusing assistance efforts on creating the institutions necessary to support market economies. The Fund's Chisinau office opened in October 1995 and, as of 2000, has committed investment capital of over $14 million to companies in Moldova.

In 1995, the U.S. provided assistance and training that played an important role in the Moldovan Parliament's passage of the Law on the Circulation of Securities and Stock Exchanges. In July 1995, U.S. advisers were placed at Moldova's Central Bank to help with the bank sector's transition to international accounting standards. The U.S. also has provided training in a variety of related areas, including entrepreneurship, agribusiness development, and international trade and investment. Technical assistance has been provided to support implementation of Moldova's privatization programs.

Training and technical assistance programs have been provided in law school curriculum reform, rule of law, law enforcement, assessment of the draft Moldovan constitution, municipal organization and staffing, political parties and elections, independent media, pluralism, protection of minority rights, and diplomacy and foreign policy. Educational exchanges play an important role in these areas. Resident advisers have worked with the executive and legislative branches of the Moldovan Government. Peace Corps volunteers have been working in Moldova since 1993, with a focus on teaching English, advising small businesses, and NGO development.

Principal U.S. Embassy Officials
Ambassador--Heather M. Hodges
Deputy Chief of Mission--Patricia Nelson-Douvelis
Political/Economic Officers--Philip Nelson, Alan Purcell
Consular Officer--Andrew Paul
Administrative Officer--Charles Eaton
Regional Security Officer--Greg Sherman
USAID Officer--John Starnes
Public Affairs Officer--Aleisha Woodward

The U.S. Embassy in Chisinau, Moldova is at Strada Alexei Mateevici #103; tel: (373-2) 40-83-00/23-37-72; fax: (373-2) 23-30-44.

HISTORICAL HIGHLIGHTS
The Republic of Moldova occupies most of what has been known as Bessarabia. Moldova's location has made it a historic passageway between Asia and southern Europe as well as the victim of frequent warfare. Greeks, Romans, Huns, and Bulgars invaded the area, which in the 13th century became part of the Mongol empire. An independent Moldovan state emerged briefly in the 14th century under celebrated leader Stefan the Great, but subsequently fell under Ottoman Turkish rule in the 16th century.

After the Russo-Turkish War of 1806-12, the eastern half of Moldova (Bessarabia) between the Prut and the Dniester Rivers was ceded to Russia, while Romanian Moldova (west of the Prut) remained with the Turks. Romania, which gained independence in 1878, took control of the Russian half of Moldova in 1918. The Soviet Union never recognized the seizure and created an autonomous Moldavian republic on the east side of the Dniester River in 1924.

In 1940, Romania was forced to cede eastern Moldova to the U.S.S.R., which established the Moldavian Soviet Socialist Republic by merging the autonomous republic east of the Dniester and the annexed Bessarabian portion. Romania sought to regain it by joining with Germany in the 1941 attack on the U.S.S.R. Moldova was ceded back to Moscow when hostilities between the U.S.S.R. and Romania ceased at the end of World War II. The present boundary between Moldova and Romania was established in 1947. Moldova declared independence from the Soviet Union on August 27, 1991.

ECONOMY
Moldova is a landlocked area bounded by Ukraine on the east and Romania to the west. It is the second smallest of the former Soviet republics and the most densely populated. Moldova's economy resembles those of the Central Asian republics, rather than those of the other states on the western edge of the former Soviet Union; industry accounts for only 20% of its labor force, while agriculture's share is more than one-third.

Moldova's proximity to the Black Sea gives it a mild and sunny climate. This makes the area ideal for agriculture, which accounts for about 40% of the country's GDP. The fertile soil supports wheat, corn, barley, tobacco, sugarbeets, and soybeans. Beef and dairy cattle are raised, and beekeeping is widespread.

Moldova's best-known product comes from its extensive and well-developed vineyards concentrated in the central and southern regions. In addition to world-class wine, Moldova produces liqueurs and champagne. It is also known for its sunflower seeds, plums, peaches, apples, and other fruits.

Like many other former Soviet republics, Moldova has experienced economic difficulties. Since its economy is highly dependent on the rest of the former Soviet Union for energy and raw materials, the breakdown in trade has had a serious effect, exacerbated at times by drought and civil conflict. After the Russian ruble devaluation of 1998, Moldova's economy underwent a prolonged recession, from which it started to emerge in 2000.

Nevertheless, Moldova has made substantial progress in economic reform. The government has liberalized most prices and has phased out subsidies on most basic consumer goods. A program begun in March 1993 has privatized 80% of all housing units and nearly 2,000 small, medium, and large enterprises. Other successes include the privatization of nearly all Moldova's agricultural land from state to private ownership, as a result of an American assistance program, "Pamint" ("land"), completed in 2000.

Inflation was brought down from over 105% in 1994 to 11% in 1997. Though inflation spiked again after Russia's 1998 currency devaluation, Moldova has made great strides in bringing it under control; 18.4% in 2000, 6.3% in 2001, and 4.4% in 2002. A stock market opened in June 1995. Moldova has International Monetary Fund standby and systemic transformation programs in effect.

GOVERNMENT AND POLITICAL CONDITIONS
In addition to state-sponsored media, there are several independent newspapers, radio and television stations, and news services. The independent media organizations, along with some that are affiliated with political parties, often criticize government policies. Peaceful assembly is allowed, though permits for demonstrations must be obtained; private organizations, including political parties, are required to register with the government. Legislation passed in 1992 codified freedom of religion but required that religious groups be recognized by the government.

A 1990 Soviet law and a 1991 Parliamentary decision authorizing formation of social organizations provide for independent trade unions. The General Federation of Trade Unions succeeded the Soviet trade union system upon Moldovan independence. In late 2000, the union split. The Trade Union Confederation of Moldova (TUCM), successor to the previous federation, retained 80% of the union members in Moldova, and primarily represents agriculture and agricultural processing sector, public services, radio electronics, medicine, education, and culture. "Solidaritate" (solidarity), a new organization, includes the remaining 20% of unionized workers from industry, transport, telecommunication, construction, and social protection. The unions have tried to influence government policy in labor issues and been critical of many economic policies. Moldovan labor law, which is based on former Soviet legislation, provides for collective bargaining rights.

Mircea Snegur was elected president of Moldova in October 1990 by the Parliament. A former Communist Party official, he endorsed independence and actively sought Western recognition. Moldova declared its independence from the Soviet Union in August 1991. However, Snegur's opposition to immediate reunification with Romania led to a split with the Moldovan Popular Front in October 1991 and to his decision to run as an independent candidate in a December 1991 presidential election. Running unopposed, he won after the Popular Front's efforts to organize a voter boycott failed.

Moldova's transition to democracy initially had been impeded by an ineffective Parliament, the lack of a new constitution, a separatist movement led by the Gagauz (Christian Turkic) minority in the south, and unrest in the Transnistria region on the left bank of the Nistru/Dniester River, where a separatist movement--assisted by uniformed Russian military forces in the region and led by supporters of the 1991 coup attempt in Moscow--declared a "Dniester republic."

Progress has been made on all these fronts. In 1992, the government negotiated a cease-fire arrangement with Russian and Transnistrian officials--although tensions continue--and negotiations are ongoing. In February 1994, new legislative elections were held, and the ineffective Parliament that had been elected in 1990 to a 5-year term was replaced. A new constitution was adopted in July 1994. The conflict with the Gagauz minority was defused by the granting of local autonomy in 1994.

The February 1994 Parliamentary elections were conducted peacefully and received good ratings from international observers for their fairness. Prime Minister Andrei Sangheli was re-elected to his post in March 1994, as was Petru Lucinschi to his post as speaker of the Parliament. Authorities in Transnistria, however, refused to allow balloting there and discouraged the local population from participating. Inhabitants of the Gagauz separatist region did participate in the elections.

In the presidential elections of 1996, Parliamentary speaker Petru Lucinschi surprised the nation with an upset victory over the incumbent, Mircea Snegur, in a second round of balloting. The elections were widely judged as free and fair by international observers, a hallmark that would come to characterize future nationwide elections in Moldova as well.

Though President Lucinschi managed to institute some very important reforms--among them the successful fight for the "Pamint" land privatization program--his tenure was marked by constant legislative struggle with Moldova's Parliament. Several times, the Parliament considered votes of no confidence in the president's government, and a succession of moderate, pro-reform prime ministers were dismissed by a Parliament increasingly dominated by the Communist Party faction.

In 2000, Parliament passed a decree declaring Moldova a Parliamentary republic, with the presidency henceforth to be decided not by popular vote, but by Parliamentary vote. However, since no single candidate was able to garner a majority of votes, Lucinschi temporarily remained president. Later that year, when Parliament failed three times to successfully elect a new president, Lucinschi exercised his right to dissolve Parliament, calling for new parliamentary elections in the hope that a new Parliament would be more open to his initiatives--and, possibly, even rescind the decree on election of the president.

Widespread popular dissatisfaction with the government and the economy, however, led to a surprise at the polls in February 2001. In elections certified by international observers as free and fair, Moldova's populace voted overwhelmingly for the communists. The communist faction, which had consisted of 40 of Parliament's 101 seats, jumped to 71--a clear majority. Communist deputies were then able to elect as president Vladimir Voronin, the leader of their faction.

Since election, President Voronin has proceeded with President Lucinschi's plans to privatize several important state-owned industries, and has even on occasion broken with his own party over important issues. Under President Voronin, relations with the United States remain strong.

In the atmosphere of heightened international sensitivity to terrorism following the events of September 11, 2001, Moldova has been a staunch supporter of American efforts to increase international cooperation in combating terrorism. Moldova has pledged to send a demining team to work in the reconstruction efforts in Afghanistan.

Transnistria
The population of the Moldovan region of Transnistria is 40% Moldovan, 28% Ukrainian, and 23% Russian. Moldova has tried to meet the Russian minority's demands by offering the region rather broad cultural and political autonomy. The dispute has strained Moldova's relations with Russia. The July 1992 cease-fire agreement established a tripartite peacekeeping force comprised of Moldovan, Russian, and Transnistrian units. Negotiations to resolve the conflict continue, and the cease-fire is still in effect. The Organization for Security and Cooperation in Europe (OSCE) also is trying to facilitate a negotiated settlement and has had an observer mission in place for several years.

Principal Government Officials
President--Vladimir Voronin
Prime Minister--Vasile Tarlev
President of Parliament--Eugenia Ostapciuc
Foreign Minister--Nicolae Dudau
Ambassador to the United States--Mihai Manoli
Ambassador to the United Nations--Vsevolod Grigore

Moldova's embassy in the U.S. is at 2101 S Street NW, Washington, DC 20008, tel (202) 667-1130, fax (202) 667-1204, URL www.moldova.org.

DEFENSE AND MILITARY ISSUES
Moldova has accepted all relevant arms control obligations of the former Soviet Union. On October 30, 1992, Moldova ratified the Conventional Armed Forces in Europe Treaty, which establishes comprehensive limits on key categories of conventional military equipment and provides for the destruction of weapons in excess of those limits. It acceded to the provisions of the nuclear Non-Proliferation Treaty in October 1994 in Washington, DC. It does not have nuclear, biological, or chemical weapons. Moldova joined the North Atlantic Treaty Organization's Partnership for Peace on March 16, 1994.

FOREIGN RELATIONS
Moldova's Parliament approved the country's membership in the Commonwealth of Independent States (CIS--a group of 12 former Soviet republics) and a CIS charter on economic union in April 1994.

In 1995, the country became the first former Soviet republic admitted to the Council of Europe. In addition to its membership in NATO's Partnership for Peace, Moldova also belongs to the United Nations, the OSCE, the North Atlantic Cooperation Council, the International Monetary Fund, the World Bank, and the European Bank for Reconstruction and Development.

In 1998, Moldova contributed to the founding of GUAM, a regional cooperative agreement made up of Georgia, Ukraine, and Azerbaijan, in addition to Moldova. In 1999, Uzbekistan also joined the group, renamed GUUAM. Although the agreement initially included a declaration of mutual defense, Moldova has since declared its disinterest in participating in any GUUAM-based mutual defense initiative.

As noted, Moldova has sought a peaceful resolution to the conflict in the Transnistria region, most recently by working with Transnistria, Ukraine, Russia, and the OSCE using an OSCE-drafted plan for a federal state as a framework for the current talks. 



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