Transnistria Continues as a Success due to the Eurasian Market
More irritating to the west, the Eurasian idea, very popular in Transnistria, argues that any entry into western markets requires success first in Eurasia. Since this unrecognized nation is sandwiched between Romania and Ukraine, her geography is unfavorable. Yet, it is only the Russian republic there that has any chance of continued development.
- The World Bank has Moldova at well below 100 in its “Doing Business” survey. They are equal to Botswana and Ghana. Moldova in 2013 alone lost 2 billion lei due to debt and trade deficits, so that all public services have been slashed.
- In Ukraine, the minimum wage is $240 a month, while Moldova lives impoverished at $85 in 2012 American dollars. In Transnistria, it is almost 300% higher even under a US enforced blockade of the country though Romania and Ukraine.
- The Marketing and Public Opinion Institute in Chisinau has 80% of the population registering contempt for the EU. In 2006, 97.1% of the eastern portion of Moldova voted for integration with Russia.
Thus, as both Moldova and Ukraine fall below Fourth World status, Transnistria, under an embargo from its two neighbors, remains prosperous and unified. Worse for the EU, her success has made her an important source of trade with the EU itself.
About 30% of this small country’s exports are to the EU, showing that profit is profit regardless of whether elites recognize the nation. As Russia has brought this tiny country into its own orbit (and hence that of China and the SCO) her budget has a surplus and her financial sector is stable. Moldova permitted about 600 Russian businesses from Transnistria to officially register in Moldova so as to circumvent EU sanctions.
Hence, the success of the Russians here have forced their enemies to accept their requests and – no doubt – register these as “Moldovan” capitalists. Today, much of the Moldovan budget comes from Russian businesses!
In the World Bank paper on Transnistrian economics, we read:
In the first half of 2003, economic activity in the region has increased again as it is reflected in GDP growth of 18.4% with investments in fixed capital increasing by 2.9%, hence reducing the trade deficit by 35.5%.
However These positive developments were combined with increased inflation. In January through August 2003 the average monthly inflation rate was 2.1% and it rose at the end of this period to 18% (in 2002, respectively 0.3 and 2.5%). Despite the commitment of the regional administration to alter the structure of the economy and the state, the economy remains in a transition stage (CISR, 2003: Translation mine).
This older study is important since it connects Transnistrian prosperity with Russian. Further, it shows that the increase in Moldovan trade has much to do with “illegal” relations with the Russian speaking east.
The study goes on to show that the rational system of Transnistria, her relatively open economy and first class labor pool have ensured its prosperity regardless of the demands of the EU. Not too long after this study was released, by 2006, Transnistria was running a 200% trade surplus with Ukraine and almost 300% with Belarus.
Privatization was done under tight state control, and slowly: the oligarchs that rule Ukraine did not develop there. Attracting Russian and Eurasian investors stabilized the economy early. Her excellent relations with Gazprom ensure cheap power. Once secure in her economic policy, this tiny country then permitted more western FDI, to the chagrin of Moldova. While still unrecognized, Transnistria has forced her recognition through economics.
The lessons here are clear:
- first, rational economic policy will create the respect that diplomacy cannot.
- Second, the EU is incapable of helping these small societies as its own society is near total economic collapse.
- Third, to plug into a massive Eurasian market with total freedom of policy development works: the IMF does not. In his analysis of Transnistria and the EU, Andrew Mospanov states:
The last 20 years are sufficient to judge the results of the western economic model. The main conclusion is that economic integration with the West strengthens the strong economy and undermines the weaker, soon to push them out of competition entirely and, finally, making them chronically dependent (Mospanov, 2013: translation mine)
Failures in 1990s Russia, today’s Ukraine, Bulgaria, and Moldova show this as the success of Putin’s Russia, China, Belarus, and the tiny state of Transnistria confirm it. The western “market” system is only for those already in control. He continues:
We know that integration [into the EU] in Latvia, Lithuania and Estonia, as well as the Czech Republic, Hungary and Poland led to significant structural changes in the economy of these countries. The changes have been very painful. Poland almost lost its coal industry and shipbuilding; Hungary, lost its well-known bus plants; Estonia and Lithuania saw their dairy industry destroyed, as well as its energy sector, mechanical engineering and other key sectors were lost to the more powerful EU states. In Latvia there are no more sugar factories (Mospanov, 2013: translation mine).
The only difference between these countries and Transnistria is the lack of formal ties with the EU. It is that union that has crippled and destroyed these countries and their significant industries. The future lies with Russia, China, and the Shanghai Cooperation Organization. Ukraine, Moldova, and Bulgaria, just to name three, should abandon the western sinking ship and focus on an area that actually wants their products.