Indomitable Moldova—Punching Above Its Weight

Indomitable Moldova—Punching Above Its Weight

Despite failed Russian efforts to destabilize the country, Moldova’s continued resilience helps uphold the rules-based international order.

In a world of great power competition, the interests of the power players naturally fare the centers of gravity in the international system. While this may be the natural order of things, it is important to recognize the small power players making positive contributions to the global rules-based order.

Moldova is a perfect case in point. Since its independence, it has been trying to escape its post-Soviet legacy in the face of never-ending Russian destabilization activities. The good news is that Moldova’s current leadership is serious and committed to advancing the country’s best interests for the benefit of its people—a foreign concept for Russia and many of Moldova’s previous corrupt politicians.   

Moldova’s President Maia Sandu and Prime Minister Dorin Recean, both economists, are at the helm, steering the ship of state in this direction. The vision and strategy are straightforward: to pursue a democratic path in partnership with the world’s most advanced and prosperous democracies to benefit the citizens of Moldova. Both have been serious about taking the hard decisions to lift the country out of its past and put it on the road to becoming a high-performing country and, ultimately, a member of the European Union by 2030. 

Sandu, a professional economist who has served lengthy stints at the World Bank and in government, and Recean, a successful businessman, complement one another by keeping the legislative focus on making long-neglected structural changes. To the chagrin of many of her detractors, Sandu has been unrelenting and unapologetic in her determination and has successfully guided the country towards this goal, but it hasn’t been easy. 

Moldova never really captured the attention of the West until recently. At about 2.6 million people, it is a small and economically challenged country. At independence, Moldova was a severely weakened state that proved a perfect playground for corrupt leaders and a retinue of thuggish and criminally proficient oligarchs who aligned with Russia. Support for needed reforms to establish effective rule of law, good governance, and strong institutions was an anathema to the privileged criminal oligarchs and corrupt beneficiaries in successive governments. As a result, these deficiencies proved an unfriendly environment for private businesses and a disincentive to attracting foreign direct investment (FDI).

An economic growth model reliant on consumption fostered by remittances has generated some growth and reduced poverty over the years, but it is not sustainable long term. Since 2007, the Moldovan economy has suffered five consequential crises, heavily affected by the pandemic and Ukraine conflict. With an economy of only $16 billion, Moldova is the third poorest country in Europe, with $6,410 per capita (after Ukraine and Kosovo), just fourteen percent of the Eurozone GDP per capita.

The country has not been able to develop sufficiently for two primary reasons: poor progress on fixing long-neglected structural problems passed down from previous governments and malign Russian interference to keep the country weak.

In fact, no other European country, outside of Ukraine, has experienced the same degree of Russian vitriol and hostility. Russia’s attempts to destabilize the current government by raising energy prices was a classic example of Moscow’s imperious policy toward Moldova. However, despite Russia’s actions, Moldova’s leadership, coupled with the national resilience of its people and Western support, has proved to be a game changer. Backed by the EU’s €250-million support package to help the country overcome the acute winter, Moldova demonstrated that it could endure and would develop new sources of energy supplies.

Having failed in using energy prices to topple the government, Russia continues to be unrelenting in its efforts to destabilize the country. It continues in its relentless disinformation campaigns, cyber-attacks, using Transnistria as a proxy, and active measures aimed at disrupting elections and toppling the government. The Kremlin’s obsession with Moldova is clear and echoed officially by Russian Foreign Minister Sergei Lavrov at the annual meeting of the Organization for Security and Cooperation in Europe (OSCE) in Skopje—when he said, “Moldova is destined to fall the next victim in the West-unleashed hybrid war against Russia.” Like Ukraine, Russia’s obsession with Moldova is real and cannot be ignored.

Despite Russia’s interference and maligned activities, there is a bright spot on the horizon. Moldova is experiencing positive economic change. New policies to improve the ease of doing business and support from the Western governments have resulted in new foreign direct investment (FDI). In fact, FDI has increased almost four times from $150 million in 2020 to $587 million in 2022, despite the risky security situation. An example of the pro-business focus is the government’s recently passed law promoting the Moldova Information Technology Parks (MITP) initiative, which aims to build the country’s technology sector. Moldova is becoming an attractive technology hub with over 1600 IT companies, including 230 foreign capital firms.

Once exporting most of its goods to Russia, Moldova now exports over eighty percent of its goods to other markets in Europe, North America, and elsewhere. The relationship with the West continues to strengthen. In this last year alone, the EU nearly doubled its financial assistance to Moldova to almost Euro €295 million (€220 million in loans and €75 million in grants). Likewise, since February 2022, the United States has pledged $320 million in emergency support to help Moldova address the economic, energy, security, and humanitarian impacts of Putin’s war against Ukraine.

Western support has focused on improving infrastructure and investment in trade and supported sectors to help small and medium enterprises. Examples include the European Investment Bank’s investment in the rehabilitation of key sections of Moldovan railways that will support exports by providing businesses with reliable access to the Danube. Investments by USAID related to the Moldova Competitiveness Project (MCP) have been dedicated to improving Moldova’s efforts to promote a strong, diverse, and export-oriented economy by improving competitiveness and efficiency in key industries. Significant focus areas for these investments include information and communications technology, creative services, precision engineering, wine production, tourism, and light industries such as textiles, apparel, and footwear. The project has been designed to promote a level of maturity that creates sustainability and competitiveness in these sectors and ultimately creates well-paying employment.

Efforts to reform the justice system and target corruption are also gaining traction. A forward movement to create a new anticorruption court is progressing and growing public confidence in the government’s seriousness. The historic decision to open EU accession negotiations for Moldova came after Moldova had shown serious reform efforts to strengthen democracy and the rule of law. Chisinau has fulfilled six out of nine recommendations and is committed to meeting all conditions.

U.S. development assistance to Moldova since 1992 has reached $1.7 billion. There are no examples of Russian development assistance to be found anywhere in the country—except for its investments in promoting election fraud, carrying out disinformation campaigns, and other nefarious and destabilizing activities. Russia claims to be a large investor in the country, but much of this “investment” takes the form of debt. In fact, Moldova purportedly owes more than $700 million to Russian-owned energy conglomerate Gazprom in 2022. Top official development and aid (ODA) donors are the EU, the World Bank, the United States, Sweden, and Germany.

What is clear is that Moldova is moving forward and on a path to success and is at the beginning of a great story. Ensuring Moldova’s continued success is essential not only for Moldova but also for the West and the good of the rules-based international order.

Joseph Vann is a National Security consultant and former professor of national security studies at the George C. Marshall European Center for Security Studies.

Dr. Valbona Zeneli is a Senior Fellow at the Atlantic Council, a Visiting Scholar at the Minda de Gunzburg Center of European Studies at Harvard University, and a former professor of national security studies at the George C. Marshall European Center for Security Studies.