Foreign Business as a Root of Moldova’s Loss of Sovereignty

Home / Analytics / Foreign Business as a Root of Moldova’s Loss of Sovereignty
Christian RUSSU
Foreign structures and businessmen who own many key assets in Moldova are actively pushing the authorities to relinquish state control over the economy and finances
The recent news about the closure of the largest vegetable oil producer in Moldova, the Floarea Soarelui enterprise in Balti, has stirred up the entire community. The anxiety of citizens can be easily understood, keeping in mind the dramatic increase in the price of this essential commodity in 2022. The management of the factory announced the suspension of work, indicating that this was due to the internal policy of the authorities. In other words, farmer protests have not fully subsided yet, and international business is already blackmailing the government for trying to сге imports of agricultural products from Ukraine. The Trans-Oil group of companies, which belongs to a Georgian owner, has long been a de facto monopolist in the production and export of vegetable oil in Moldova. The main sunflower oil production facilities and elevators were sold to it back in 2011. Then, with money from the European Bank for Reconstruction and Development (EBRD), a Danube Oil plant and export terminals were built in the port of Giurgiulesti. The influx of cheap raw materials for oil production from Ukraine has led to a huge increase in profits for the owners of Trans-Oil. And local farmers with their demands to limit sunflower supplies are frankly impeding this boon. So, it turned out that the timid attempts of the government to finally somehow protect the interests of local producers immediately faced blatant blackmail from the foreign owners of oil business. It seems that the optimism of our agrarians from successful cases of protecting the interests of their counterparts in Europe was in vain: apparently, even the mechanism of licensing Ukrainian imports introduced in October 2023, which was recognized as insufficient, may be revised to the benefit of foreign business. For a giant like Trans-Oil, neither local raw materials nor the domestic market is particularly important, and the government regulation seems unnecessary. It would be convenient for the enterprise to limit itself to the existing regional market conditions and the Romanian legislation, without extra administrative measures of the Moldovan government. It is clear that in order to gain the support of the population before the elections, the authorities will deter transnational companies in socially important areas by limiting trade bonuses on food products. However, such regulation is already minimized in some sectors. The situation in the banking sector is a vivid example of such processes. Record profits of foreign owners from Moldovan banking assets in the last two years do not reduce their craving for profit, rather, on the contrary. If earlier the administrative measures of the authorities and the national regulator, namely the central bank, provided free conditions for the growth of banks’ income, now external investors see state control as the main obstacle to further enrichment. Yesterday, on a symbolic day for all Unionists, the second international forum “Moldova - Romania Capital Bridges”, organized by the Bucharest Stock Exchange and our leading commercial bank MAIB, was held pompously in Bucharest. Among the organizers were Raiffeisen Bank International, EBA and AmCham, but the main attention was focused on the conventionally Moldovan bank and its prospects in Romania. Moldovan Prime Minister Dorin Recean arrived in Bucharest with his wife, MAIB Vice Chair Stela Recean, and held meetings not only with businessmen but also with the leadership of the neighboring country. This gesture of openness to Romania was meant to emphasize the de facto absence of boundaries between Moldovan officials and asset managers of Moldovan commercial banks. It is hard to say who of the Recean couple yesterday promoted the interests of MAIB owners more, but it all looked like undisguised pressure on state structures and our banking regulator. No wonder as MAIB shareholders have been unable to list the bank’s assets on the Bucharest Stock Exchange for a year now, all because in the summer of 2014 the National Bank and the Financial Market Commission tightened the requirements for transactions with commercial bank shares. At the time, amidst the billion theft, such decisions (among them the demand to notify the regulator of any number of shares acquired and fixing a 1% shareholding approval threshold) seemed necessary and agreed with European partners to stop abuses and raids, including on MAIB’s shares. Now these measures of stricter control by the state have turned out to be almost “the main evil” on the path of the Moldovan banking sector’s integration into the EU. It is likely that the conservative approach of the National Bank’s former governor to changing the rules of the game on the banking market and another failure of MAIB’s plan to enter the Romanian stock exchange at the beginning of the year caused Octavian Armasu’s impudent dismissal from his post. Anca Dragu, the current NBM head, is much more flexible on this issue. At the forum, she willingly agreed with the remarks of the Romanian Prime Minister Marcel Ciolacu that it is inappropriate to hinder the desire of MAIB shareholders to shift to the Romanian jurisdiction, and it is necessary to accelerate the removal of legal restrictions in Moldova. The request to European banking structures to assess the equivalence of Moldovan legislation to European requirements will be the first step on this path. It is possible that the EU supervisory structures will consider premature the requests to lift the restrictions imposed at the time to stabilize the banking sector and prevent new embezzlement, but even they will not hinder the projects of such public-private partnership, which are promoted jointly by Chisinau and Bucharest. Everybody understands that the Moldovan stock market and our stock exchange are unpromising platforms, so the path of transferring the most valuable assets from Moldova to the jurisdiction of Romania through the Bucharest stock exchange is considered as the most acceptable. Also, it is worth mentioning the projects for the takeover of our country’s energy system implemented by Romanian structures, and the plans to privatize assets in other important sectors. It is obvious that after the autumn election campaign, Moldtelecom, the glass factory and other enterprises will be put under external control, and these deals will be promoted by officials who have a direct interest in this.