Fwd: Moldova

Macdonald Stainsby mstainsby at SPAMhotmail.com
Wed Nov 10 03:46:47 MST 1999

Intelligence Update
>November 10, 1999
>Moldova Calls IMF's Bluff
>Another former Soviet state is suffering political upheaval because
>its leaders have failed to agree on an issue of strategic
>significance: whether the country should tilt to the West or to the
>east toward Russia. In a vote of no confidence, the parliament of
>Moldova dismissed the government Nov. 9 after a dispute over
>economic reforms needed for a new round of International Monetary
>Fund (IMF) loans. Moldova now joins Lithuania in blanching at the
>cost of joining the West - an increasingly common reaction in the
>former Soviet states.
>Moldova’s parliament voted no confidence in Prime Minister Ion
>Sturza and his government on Nov. 9 in a disagreement over economic
>policy. The International Monetary Fund (IMF) had conditioned
>future loans on a series of Western-style reforms, including
>government divestiture of the country’s tobacco and wine industries
>- two of the country’s three chief industries. Though relatively
>isolated in southeastern Europe, Moldova is now engaged in a
>struggle that has larger strategic implications for the region.
>The parliament voted 58-42 to oust Sturza’s government. The
>Alliance for Democracy and Reforms, which created the Sturza
>Cabinet just nine months ago, abstained from the vote. The
>Communists and the Popular Front will now form a coalition to
>choose a new government, which will be appointed by President Petru
>Lucinschi within 10 days.
>Essentially, the government fell because of Western demands. With
>its economy and currency in decline, the country has been due to
>receive a $35 million installment of funds from the IMF. However
>the transfer has been contingent on the government meeting certain
>demands. It must amend its 1999 budget, approve the 2000 budget and
>privatize the wine and tobacco industries.
>The IMF played hardball, insisting that these conditions be met
>quickly and that the reformist Sturza government remain in place.
>Richard Haass, the IMF mission chief, said Nov. 5 that the
>government needed to meet all three requirements by early December
>and that efforts to dismiss the current reformist government would
>only interfere with loan approval. Sturza’s government tried to
>push through privatization legislation and the 1999 budget
>amendments last week. Sturza said he would resign if the bills were
>not adopted.
>The parliament quickly took him up on his offer. It rejected the
>bills Nov. 5, and the IMF indefinitely suspended all loans to
>Moldova. Since IMF funds are delayed, other loans are now in
>jeopardy. Financing from the World Bank, the European Bank for
>Reconstruction Development and the European Union - totaling $150
>million, alongside the IMF funds - could all be postponed.
>Moldova’s economy is in dire straits. The value of the leu,
>Moldova’s national currency, has dropped by 50 percent against the
>dollar in the past year. The external debt is $235 million, with a
>heavy amount owed to the Russian oil giant, Gazprom. Perhaps worst
>of all, Moldova’s economy rests on the success of Russia’s economy.
>Moldova’s economy is now in an even more precarious position. In
>fact, Parliament Chairman Dumitru Diacov said recently that the
>failure to receive the IMF tranche and its associated World Bank
>credits will lead to a collapse of the Moldovan budget system. As
>in Lithuania, Moldova’s national administration is dealing with
>issues of incredible domestic significance and is opting to risk
>relative economic stability.
>Nearly a decade to the day after the fall of the Berlin wall,
>former Soviet states along Russia’s western periphery are
>struggling through a deep crisis. Should they orient themselves to
>the West or back to the East? The West has charged a high price for
>entry: imposing wrenching economic reforms that in turn threaten
>the rigid social and political structures of the former Soviet
>states. When put to the test, many of these states find that they
>simply lack the will and wherewithal to continue down the hard path
>to the West.
>Just last month, Lithuania’s government split over a similar
>economic choice [ http://www.stratfor.com/SERVICES/GIU/102299.ASP ].
>Now, Moldova is also struggling with the decision of whether to
>orient itself towards Russia or the West. Alexander Moshanu, head
>of the ruling coalition in Chisinau, told ITAR-Tass that the
>"resignation of the pro-Western Cabinet of Ion Sturza signifies
>Moldova’s refusal to integrate into Europe and its turn to the CIS
>and Russia." Russia could exploit the opportunity in Moldova by
>offering aid, but so far has not.
>A disease is taking root in some of the former Soviet states, from
>the Baltics down into Eastern Europe. The cause is the same but the
>patient reacts in different ways. Georgia’s parliamentary elections
>led to victory for the pro-Western faction while Ukraine’s
>presidential contest has turned into a runoff between the Communist
>candidate and pro-Western President Leonid Kuchma. In Lithuania,
>the prime minister and two key ministers resigned rather than take
>part in spending the country’s treasury on modernizing the oil
>industry for a western company.
>In Moldova, the situation is reversed. The president has remained
>in power while the pro-Western Cabinet has resigned after a losing
>battle. It seems that neither Western aid nor approval is worth the
>cost to Moldova.
>(c) 1999, Stratfor, Inc.

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