Commission on Security and Cooperation in Europe

Testimony :: Ambassador Steven Pifer
Deputy Assistant Secretary of State - Bureau of European & Eurasian Affairs, DOS

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Mr. Chairman, I am pleased to appear before you today to discuss the Republic of Moldova. Moldova offers an encouraging picture of a state coping with difficult circumstances but nevertheless committed to responsible participation in Europe and the international community. Only ten years after the breakup of the Soviet Union, Moldova has made considerable progress in consolidating its nationhood and integrating into the broader community.

In general, Moldova’s record with regard to political reform, democracy and human rights is impressive. Economics present a stark contrast of progressive reforms and serious problems. Regional security issues overshadow both political and economic developments, for Moldova remains a country divided by the secessionist regime in Transnistria. Until this conflict is resolved and Moldova reunified, ultimate success in political and economic reform will remain elusive.

I would briefly note the sympathy expressed by Moldovans in the aftermath of the September 11 terrorist attacks in New York and the Pentagon. President Voronin himself visited our Embassy to express his condolences. In his kind message of condolence to President Bush, President Voronin called for all countries to unite their efforts in the fight against terrorism. We are grateful for this support.

Political Change

Moldova’s record on political reform, democracy, and human rights is one of the brighter among the states of the former Soviet Union. The February 25 parliamentary election that gave the Communist Party a large majority and paved the way for the election of President Voronin captured international attention because of who won. But the election was also noteworthy for the way in which it met international standards. The election was labeled by international observers as free and fair, and it produced peaceful change in government, is a welcome event in the former Soviet space.

Let me frankly admit that the U.S. Government greeted the Communist victory with some trepidation, given our hope for Moldova’s development as a democratic, market economy. But the new authorities in Chisinau have affirmed their adherence to OSCE principles of democracy and human rights, and their performance to date has reflected this pledge. There are ways in which Moldova must continue to make progress, such as strengthening the independence of the judiciary and other aspects of civil society. We are assisting in that process by providing training for legal professionals and advice in drafting legislation. But it is fair to say that Moldova’s actions make it a leader and example to others in the former Soviet Union.

Economic Performance

Economic performance and reform give us a stark picture of contrasts. In some ways, Moldova is a leader here too. No other country in the former Soviet Union has so thoroughly privatized agricultural land. In this predominantly agricultural country, Moldova’s most precious economic resource belongs to individual farmers, with a title of full ownership. Moldova has an independent central bank and, largely for that reason, a sound and stable currency. A transparent privatization process put two-thirds of the electricity distribution network in the hands of a major Western company, virtually eliminating previously common power outages, and an independent regulatory agency is in place.

Yet the economy is still suffering from the Soviet legacy and there is dire need for continued growth and additional reform. Moldova is one of the poorest countries in Europe. The government’s inability to generate sustained economic growth and share the benefits of that growth with the broader population largely explains the Communist victory of last February.

Today, however, the difficult but necessary reforms that Moldova has thus far enacted are beginning to bear some fruit. GDP grew by 1.9 percent in 2000. It is expected to grow five percent this year. To solidify and accelerate these gains, we believe that much work remains to be done in “post-privatization” in the agricultural sector, which we see as the engine for growth. We are ready to help create conditions for the newly-empowered private farmers to operate at a profit, for example by assisting Moldova to develop viable input supply and agricultural processing systems.

Here the intentions of President Voronin and the Communist Party are crucial, for that party opposed the economic reform steps undertaken by previous governments. The IMF and World Bank suspended their loan programs, pending clarification of the new government’s economic policy. We, like other donors, are focussed on what the leadership does, not on its party label.

President Voronin and Prime Minister Tarlev state that they will continue the path of reform and privatization. Privatization of wineries and tobacco industries, in the pipeline for some months, must go forward. The IMF is considering resumption of its loan program, essential for Moldova to manage its external debt. Privatization of telecommunications should also go forward. In agriculture -- Moldova’s key economic sector -- the government states that it wants to encourage cooperatives. This may be workable in developing a modern private agricultural sector, provided that the cooperatives are voluntary and do not indirectly restore the old, inefficient collective farms.

Foreign and Security Policy

Moldova’s foreign and security policy features a strong desire for European integration, good relations with Russia, and a high priority attached to resolving the Transnistria conflict. The assumption of power by President Voronin and the Communists has not fundamentally altered these priorities.

In terms of outreach to the West, Moldova was already a member of the Southeast Europe Cooperative Initiative (SECI) and continues to participate in that useful framework. Moldova has joined the Southeast Europe Stability Pact and the World Trade Organization -- both of these after President Voronin took office. Moldova is an active participant in Partnership for Peace, and we are working to help Moldova field a peacekeeping battalion. President Voronin and other leaders affirm their country’s desire for eventual membership in the European Union. And while there were some initial questions about the new government’s intentions with regard to GUUAM, an association of former Soviet states exploring ways of cooperation, Moldova continues to participate actively in that body.

Close relations with Russia are another foreign policy priority. This is neither new nor unwelcome to the United States Government. We assume that Moldova will maintain close ties to Moscow. Russia is Moldova’s largest trading partner, and such key Moldovan products as wine and cognac find most of their customers in Russia. The Russian minority, officially thirteen percent of the total, has an economic influence far beyond its numbers, and ethnic Ukrainians, officially fourteen percent, double the Slavic component of Moldovan society. Russian, already the “language of interethnic communication” before the Communists came to power, is the street language of Chisinau.

Russia recognizes Moldovan sovereignty and does not object to Moldova’s desire for European integration. Two difficult issues, however, dominate Russian-Moldovan relations. The first is energy -- specifically Moldova’s debt to Gazprom, the Russian supplier of natural gas. Moldova’s dependence upon Russia for natural gas, and the country’s chronic inability to pay for these supplies, have created a broader dependence upon Russia and have generated recurrent high-level negotiations on the gas debt. The Moldovans understand that energy sector privatization and reform, producing full and current payment for energy imports, is the only way out of this problem. We are working closely with Moldova to help make this happen.

Transnistria and CFE

The second special issue is Transnistria, which divides Moldova and where thousands of Russian troops and thousands of tons of Russian munitions are present. In addressing Transnistrian secession, let me first emphasize that this is not one of Europe’s ethnic conflicts. Moldovans constitute the largest ethnic group in Transnistria, and there are many more Ukrainians and Russians in mainstream Moldova than there are in Transnistria. Rather, a coterie of Sovietized elite under Igor Smirnov chose secession to preserve their corrupt system. No country recognizes the Transnistria regime, which is distinguished by its lack of democracy and human rights and by uncontrolled trade, so that smuggling and trafficking flourish.

The questions of Russian military withdrawal from Moldova and reunification of the country are separate issues, but they frequently intersect, as in the Transnistrian demand that the munitions really belong to them, and that no weaponry can be removed or eliminated without their permission. In principle, the issue of Russian withdrawal is solved: Russia agreed at the 1999 OSCE Summit in Istanbul to remove or destroy all CFE Treaty-limited equipment (TLE) - tanks, artillery and armored combat vehicles -- by the end of 2001, and all forces and equipment by the end of 2002.

Russia consistently states that it will carry out these commitments. With regard to CFE TLE, despite Tiraspol’s continued objections, Russia is moving forward with the withdrawal and destruction process. With financial assistance from the U.S. Government and other donors to a voluntary fund established by the OSCE to facilitate the Russian withdrawal, over 70 tanks and armored combat vehicles have already been verifiably destroyed -- and the process observed by OSCE international teams, including CFE Treaty experts.

The Russians have established an aggressive schedule for destruction or withdrawal of tanks, artillery, and ACV's, which, if adhered to, will result in the destruction or withdrawal of 364 pieces of CFE Treaty-limited equipment, and fulfillment of the December 31, 2001 Istanbul deadline on schedule. OSCE Head of Mission Bill Hill can describe some of the challenges associated with this process so far, and the role U.S. assistance has played in achieving progress.

Concrete results have been more difficult to achieve regarding the second Istanbul Summit commitment -- withdrawal of all Russian forces from Moldova by December 31, 2002. Since Istanbul, only one trainload of equipment has been withdrawn. The Russians blame the lack of progress on Transnistrian obstructionism. But the fact is that this commitment is Russia's to fulfill. We have stressed this with Moscow. Through the OSCE, the United States and many other nations have offered to assist with the costs of Russian withdrawal. But we have consistently underscored that we expect Russia to meet its obligations, and urged them not to allow the regime in Tiraspol to exercise any veto over fulfillment of the international obligations undertaken by the Russian Federation.

In recent months there have been some positive steps, including the establishment of an OSCE-Transnistrian-Russian expert group to develop technical options for the disposal (whether through reprocessing, destruction, or removal) of some 42,000 tons of Soviet-vintage munitions stored in the Transnistrian region. OSCE has also worked with Russia to develop modalities for removal or elimination of more than 25,000 small arms. Safe destruction or removal from the region of these munitions and armaments is obviously a critical aspect of the Russian withdrawal, and the U.S. Government has again indicated a readiness to help with costs and technical assistance. Indeed, American experts are in Moldova right now. With Congress's continued support, we will continue to be prepared to assist in this important effort. In the end, however, this is Russia's commitment to fulfill.

The Transnistria Problem

As we work with Russia and through the OSCE on removal of Russian forces, the process of negotiating a political solution to the conflict continues among Moldova, the Transnistrian regime, and the mediators: OSCE, Russia and Ukraine. The United States is not a mediator, but works closely through the OSCE and is in direct contact with key governments to promote a solution.

This conflict is often labeled “intractable,” but it should not be. There has not been any fighting between the two sides since 1992. The OSCE unanimously considers Moldova one country, does not recognize Transnistrian secession, and seeks to promote reunification of the country through a political settlement.

The mediators and parties have discussed a political settlement providing substantial autonomy for Transnistria -- a feature that the Moldovan government has indicated that it is prepared to accept. Tiraspol however, has refused to engage in substantive negotiations. The Smirnov regime continues to insist that Transnistria is an independent state and that it can only join Chisinau in some arrangement that will accord Tiraspol international legal status. The key task is to persuade Mr. Smirnov and his regime that their basic position is untenable. Russia is uniquely situated to make that point.

We will continue to work hard to promote an agreement that will reunify Moldova and to bring about the withdrawal of all foreign forces. We do not accept a situation in which part of Moldova fails to support democracy and human rights, rejects a market economy, and conducts non-transparent trade across uncontrolled borders. The U.S. Government’s efforts are aimed at promoting reunification of Moldova and assisting it to move down the path of democratic and economic reform and to integrate with Europe.

Thank you.