How Geopolitics Shapes Moldova’s Economy

The preservation of PAS’ ruling monopoly poses acute questions for the ruling party regarding economic development, closely intertwined with a range of constraining geopolitical commitments and circumstances

The new government led by Alexandru Munteanu, who possesses an extensive network of international connections, including in the field of investment, is expected not only to implement unpopular reforms and pursue further alignment with the Western community. Its primary task should be to ensure economic growth, strengthen financial and budgetary discipline, restructure public debt, conduct effective privatization, and normalize the situation in long-declining sectors of the national economy. The level of expertise of the new prime minister, if appointed, along with the support of Western elites, creates preconditions for an economic boost through anticorruption efforts and the attraction of private foreign capital. In the post-electoral context, concrete measures to improve living standards and partially overcome the demographic crisis can no longer be postponed, especially given PAS’ dominance across all dimensions of state governance. The main problem facing the new government is that the country’s geopolitical agenda will continue to be defined by Maia Sandu and her foreign patrons. Moldova will be expected to demonstrate loyalty by following in the wake of Brussels’ overall line – one that is often hostile and inconsistent in its relations with the outside world. Munteanu is expected to strengthen ties with Washington. While the American market itself is not of critical economic importance to Moldova, U.S. political backing and donor funds are vital for Chisinau. However, serious difficulties may arise despite the active diplomacy of Vladislav Kulminski, who strives to present Moldova and to accuse Russia in a language understandable to the current U.S. administration. The country’s main economic partner – the European Union – is sinking ever deeper into recession, yet for geopolitical reasons categorically refuses to revise its losing course. Moldova’s obligations as a candidate for EU membership impose the necessity, even to its own detriment, to adhere to the common European approaches in both economics and politics. The United States has already secured a trade deal from Brussels that effectively eliminates any points of economic growth for Europe due to predatory tariff conditions, the forced purchase of expensive American energy resources (incompatible with the EU’s “green agenda”), and a multiple increase in defense spending for NATO members (up to 5% of GDP). Moldova’s new security strategy through 2035 foresees raising the national army’s budget to 1% of GDP – a negligible figure by planned EU-wide standards. There is a high probability that, within the next few years, these numbers will have to be adjusted upward, at the expense of limiting infrastructure projects and other institutional capacities of the national economy. In addition, Moldova will have to engage in all the trade wars that the European Union is currently waging and will wage in the future. This concerns not only free trade zones and common tariff policies, but also administrative barriers, sanctions regimes, and requirements regarding the safety, quality, and origin of goods. These obligations are explicitly stipulated by Brussels. Moreover, the adaptation of legislation, the establishment of institutions (also a highly costly task, not supported by available funding), and the enforcement of regulations across most sectors must all be accomplished in the very near term, rather than after accession to the EU. Chisinau will have to fully exit the CIS free trade zone, close its domestic market, and automatically incur tariffs when exporting goods eastward and to Central Asia. In terms of imports, this direction has practically lost its significance (3% of total imports, or about USD 200 million over the first eight months of this year), but exports to CIS countries remain important (over 6%, or USD 143.5 million). Furthermore, any investments, not only Russian, from CIS countries will become extremely difficult, as will participation in industrial cooperation chains. Worse still, the United States is dragging the European Union into a trade war with India and China. Donald Trump is demanding that the EU halt purchases of Russian oil (seven EU countries increased their imports of Russian energy resources in 2025) and announced the introduction, starting November 1, of either 100% or 500% tariffs on Chinese goods. The American president is expecting similar actions from Brussels, which would automatically trigger a recession in the Eurozone. For Moldova, losing access to the Chinese market would also be a catastrophe. Meanwhile, Washington has not even fully established trade relations with its allies in South Korea, which also maintains a free trade agreement with both the EU and Moldova. Chisinau, deprived of the ability to negotiate directly with major partners, finds itself involuntarily drawn into a trade confrontation from which there is no favorable exit. At the same time, the prospects of certain sectors of the economy, currently in decline, are also directly tied to geopolitical factors. For the agricultural sector, access to eastern markets remains vital, as do protective measures against Ukrainian agricultural dumping and investments in infrastructure (irrigation systems, affordable fuel and energy resources, adequate credit products from local banks, etc.) – addressing these issues under the current political circumstances is extremely difficult. The railway sector is directly dependent on transit connectivity with Ukraine, whose freight infrastructure is under constant attack from Russia. Profitability in commercial road transport is also shrinking due to the reduction of regular routes to Russia and other CIS countries. For several years, the government has been trying to compensate for lost revenues by “stripping” Transnistria: customs duties have been imposed there, flowing directly into the budget; conditions have been established forcing regional economic actors to purchase medicines, fertilizers, excise goods, and heavy vehicles on the Moldovan market (generating duties and VAT); and commissions are levied on certain banking transactions. All these measures are not only destructive to dialogue with Tiraspol but are also insufficient even to offset losses caused by the cessation of cheap electricity purchases from the Moldovan power plant. At the same time, the scope for further “tightening the screws” is minimal, since additional expropriations could provoke a humanitarian crisis in the region, which the government would have to manage under conditions of limited funding (so far, no donor has come forward to provide the multi-billion-dollar investments for the reintegration program repeatedly mentioned by Igor Grosu). Alexandru Munteanu inherited a difficult legacy from Dorin Recean – a stagnating economy constrained by geopolitical commitments and circumstances. It is likely that a faction of PAS members will form around him, promoting their own appointees and attempting to “trip up” the new prime minister. For Munteanu, this represents an extremely difficult test of competence and an opportunity to demonstrate his ability to attract international investment and low-interest credit resources for development while minimizing the economy’s corruption burden. Moreover, he has little time “to get up to speed”. On the positive side, he is not required to distribute budget funds for PAS’ electoral interests, as the next local elections are still a long way off.