In late January, the first Moldovan goods arrived in Russia through Ukraine. This was agreed last year between Putin and Dodon, but the decision is emphasized to be temporary and is valid only until July 1, 2019. Moscow does not hide the fact that the future of trade with Moldova depends on the outcome of the parliamentary elections. RTA expert Marina Dragalin has studied whether there are real prospects for Moldovan exports to Russia.
Dodon’s Victory?
Igor Dodon agreed with Vladimir Putin on the abolition of Russian duties on some types of Moldovan goods
last October. Back then Dodon brought from Moscow a whole package of agreements – on the export of Moldovan goods, investments, migration amnesty and even 2019 was declared as the year of Moldova in Russia.
It should be reminded that the Russian Federation imposed restrictions on the import of Moldovan goods after Moldova signed the Association Agreement and the free trade area agreement with the European Union. European preferences and Russian duties predictably lead to export of Moldovan goods to the West. As a result, in just a few years, Moldovan exports to Russia
have halved.
Recent agreements between Putin and Dodon were to re-open the way for Moldovan goods in Russia. But something went wrong: simultaneously with the abolition of import duties on some commodity items (vegetables, some fruits, canned food, grapes, wines and brandy), the ban of the Russian government on the supply of goods in transit through Ukraine came into force, including canned food and wine from Moldova. It is interesting that Russia-controlled Trandsniestria also got affected, which goods also faced problems at export to the Russian Federation through Ukraine.
After a month of manual operation, the presidents at the next personal meeting announced that the awkward situation was overcome. “To date, all the prerequisites have been created in order to bring the Moldovan-Russian relations to a qualitatively new level this year,” Igor Dodon
summed up.
Trade with Russia is a political issue
If we study the statistics close to the “five commodity positions of Dodon”, the optimistic figures will be easily found. For example, in 2018, the volume of deliveries of Moldovan berries to the Russian market
increased by 88 %, and sales of Moldovan apples in Russia
tripled in 2017.
However, the total share of Moldova in the Russian fruit market dropped from 6.3 % in 2017 to 5% in 2018. According to the results of 2018, Moldova moved to the eighth place in the list of the largest suppliers, although a year earlier it ranked fourth. The vast majority of Moldovan exports – more than 70% – go to the EU, and only 16% go to the CIS countries, including Russia.
In fact, Moldova is trying to develop two export directions in parallel, as the Free Trade Area with the European Union and the observer status in the Eurasian Economic Union allow it. At the same time, the figures say that exports to Russia are more about politics than trade. Therefore, the opinions of experts on the prospects of trade and economic cooperation between Moldova and Russia mainly vary depending on belonging to a particular political camp.
So, for example, member of the parliament from the Party of Socialists, economist Vladimir Golovatyuk believes that
there is no alternative to the Russian market for the Moldavian wine. “Before the first prohibitive measures taken by Russia 12‑13 years ago, we supplied wine products to Russia for 250 million dollars, we had a great rating in the wine market of Russia. Now Moldova supplies wine products to the EU for less than $ 50 million,” the socialist stresses.
At the same time, Moldovan Prime Minister
Pavel Filip shrugs off the EAEU, expressing dissatisfaction with the “strict conditions” for Moldova and saying that Moldova “cannot physically be a member of the Eurasian Union”. “Observer status was granted at the request of President Igor Dodon. This status means nothing, Moldova does not participate in the EAEU, the government does not finance and will not finance activities within the framework of this organization,” the Moldovan Prime Minister said.
Russian market as a springboard for exports to the EU
While Moldovan exports are looking for ways to Russia, Europe opens up new prospects for it. Last November, the European Parliament
decided to include Moldova in the list of countries which can export seeds to Europe. This gives a chance to develop at least two new areas – to supply the EU with their own seeds, as well as to export European seeds produced in Moldova. There are already all the conditions for such productions in the country – the legislation has been amended to allow farmers to work with European hybrid varieties.
Moscow traditionally links its international initiatives and agreements with specific political forces. Given the unpredictability of the Moldovan reality, Russian preferences are quickly replaced by sanctions, as, indeed, the regimes in some post-Soviet countries. This is openly hinted at by the First Deputy Chairman of the Federation Council Committee on International Affairs
Vladimir Dzhabarov. According to him, Russia is interested in the development of relations with Moldova in the trade and economic sphere, but “if Moldova is in the wake of Russophobic policy, it will be difficult to build such relations”.
How both parties can build long-term trust-based business cooperation in these environment is unclear. Moscow wants predictable political partners, Moldova wants predictable terms of trade. This was mentioned at the Moldovan Wine Salon organized by the Black Sea Winemaking Forum, first held in Moscow on February 9. Leading researcher of the Moldovan National Institute for Economic Research Mikhail Poysik fears that customs exemptions will disappear if anti-Russian factions win on 24 February, and
calls on the Moldovan businessmen to wait: “In order to import wine to Russia, there must be contracts, it takes time. Moldovan wine is not standing and waiting for the go-ahead right on the border! And what’s the point of signing a contract if in two weeks everything may sink into oblivion?”
Such questions are now being asked by almost all Moldovan producers. Unfortunately, it is difficult to judge how useful the agreements reached by Igor Dodon on duty-free exports to Russia will ultimately be for the Moldovan economy. At the same time, it is obvious that the information hype accompanying this decision has little to do with the real development of trade “with the West and the East”. This is the paradox of all decisions made during the election period: in these months, there are many fundamental and even breakthrough solutions, but their sustainability is always in question. Moldovan producers have survived more than one trade war between Russia and Moldova and mostly settled in the EU to keep their business. For most of them, export to Russia is increasingly becoming, at best, a springboard to finally enter the capacious and high-priced European market. Unfortunately, this is the reality of 2019.
