U.S. Department of State Background Note

Moldova

PEOPLE AND HISTORY

Ethnic groups represented in Moldova include Moldovan/Romanian, Ukrainian, Russian, Gagauz, and Bulgarian. Romanian (officially known as Moldovan) is the official language; Russian, Ukrainian, and Gagauz also are spoken. The great majority of Moldova's population is Christian Orthodox -- 90% of the population nominally belongs to one of the two main Orthodox denominations. The Moldovan Orthodox Church, an autonomous diocese of the Russian Orthodox Church and loyal to the Patriarch of Moscow, has 1,194 parishes; the Bessarabian Orthodox Church, affiliated with the Romanian Orthodox Patriarchate in Bucharest, has 124 parishes. In addition, followers of the Old Rite Russian Orthodox Church (Old Believers) make up approximately 3.6% of the population.

The Republic of Moldova occupies most of what has been known as Bessarabia. Moldova's location has made it a historic passageway between Asia and southern Europe, as well as the victim of frequent warfare. Greeks, Romans, Huns, and Bulgars invaded the area, which in the 13th century became part of the Mongol empire. An independent Moldovan state emerged briefly in the 14th century under celebrated leader Stefan the Great but subsequently fell under Ottoman Turkish rule in the 16th century.

After the Russo-Turkish War of 1806-12, the eastern half of Moldova (Bessarabia) between the Prut and the Dniester Rivers was ceded to Russia, while Romanian Moldavia (west of the Prut) remained with the Turks. Romania, which gained independence in 1878, took control of Russian-ruled Bessarabia in 1918. The Soviet Union never recognized the action and created an autonomous Moldavian republic on the east side of the Dniester River in 1924.

In 1940, Romania was forced to cede Bessarabia to the Union of Soviet Socialist Republics (U.S.S.R.), which established the Moldavian Soviet Socialist Republic by merging the autonomous republic east of the Dniester and the annexed Bessarabian portion. Stalin also stripped the three southern counties along the Black Sea coast from Moldova and incorporated them in the Ukrainian Soviet Socialist Republic. Romania sought to regain Bessarabia by joining with Germany in the 1941 attack on the Soviet Union. On June 22, 1941, German and Romanian troops crossed the border and deportations of the Jews from Bessarabia began immediately. By September 1941, most of the Jews of Bessarabia and Bukovina had been transported in convoys and force marched to concentration camps in Transnistria. About 185,000 Jews were in the Transnistria area in concentration camps by 1942 in abysmal conditions. Very few were left alive in these camps when the Soviets reoccupied Bessarabia in 1944.

In September 1990, the Supreme Soviet elected Mircea Snegur as President of the Soviet Socialist Republic of Moldova. A former Communist Party official, he endorsed independence from the Soviet Union and actively sought Western recognition. On May 23, 1991, the Supreme Soviet renamed itself the Parliament of the Republic of Moldova, which subsequently declared its independence from the U.S.S.R.

In August 1991, Moldova's transition to democracy initially had been impeded by an ineffective Parliament, the lack of a new constitution, a separatist movement led by the Gagauz (Christian Turkic) minority in the south, and unrest in the Transnistria region on the left bank of the Nistru/Dniester River, where a separatist movement declared a "Transdniester Moldovan Republic" in September 1990. The Russian 14th Army intervened to stem widespread violence and support the Transnistrian regime which is led by supporters of the 1991 coup attempt in Moscow. In 1992, the government negotiated a cease-fire arrangement with Russian and Transnistrian officials, although tensions continue, and negotiations are ongoing. In February 1994, new legislative elections were held, and the ineffective Parliament that had been elected in 1990 to a 5-year term was replaced. A new constitution was adopted in July 1994. The conflict with the Gagauz minority was defused by the granting of local autonomy in 1994.

GOVERNMENT AND POLITICAL CONDITIONS

The population of the Moldovan region of Transnistria is approximately 40% Romanian/Moldovan, 28% Ukrainian, and 23% Russian. Separatist forces maintain control of the Transnistrian region, which lies along the Ukrainian border. Moldova has tried to meet the Russian minority's demands by offering the region rather broad cultural and political autonomy. The dispute has strained Moldova's relations with Russia. The July 1992 cease-fire agreement established a tripartite peacekeeping force comprised of Moldovan, Russian, and Transnistrian units.

Negotiations to resolve the conflict continue, and the cease-fire is still in effect. The Organization for Security and Cooperation in Europe (OSCE) is trying to facilitate a negotiated settlement and has had an observer mission in place for several years. In July 2002, OSCE, Russian, and Ukrainian mediators approved a document setting forth a blueprint for reuniting Moldova under a federal system. Over the next year and a half, the settlement talks alternated between periods of forward momentum and periods of no progress. In February 2003, the U.S. and EU imposed visa restrictions against the Transnistrian leadership. In April 2003, the Moldovan Government and the Transnistrian authorities agreed to establish a joint commission to draft a constitution for a reintegrated state. However, fundamental disagreements over the division of powers remained, and a settlement proved elusive.

President Voronin decided not to sign a Russian-brokered settlement with Transnistria in November 2003; the proposal -- seen by many as pro-Transnistrian - sparked opposition protests. During the summer of 2004, the Transnistrian separatists forcibly closed several Romanian language Latin-script schools in the region, for which the regime was subject to international condemnation. In 2005, Tiraspol prevented several farmers on the right bank of the Nistru River from working their fields on the left bank, within Transnistria's "borders." The OSCE Mission to Moldova eventually mediated solutions to these crises.

After a 15-month pause, the sides met for a renewed round of settlement negotiations in October 2005. Mediators from Ukraine, Russia and the OSCE joined the Moldovan and Transnistrian representatives at the talks. In addition, the U.S. and EU joined the talks as observers. However, subsequent "5+2" negotiations have made little progress on a settlement or on withdrawal of Russian forces from Moldova: Russia still has weapons and munitions of the Operational Group of Russian Forces (formerly the Russian 14th Army) stationed in Transnistria, although it pledged to remove them under a timetable established at the 1999 OSCE Ministerial - the so-called "Istanbul Accords." However, there has been no progress on Russian withdrawals since early 2004.

In response to Moldova's call for international monitoring of the border, in December 2005 the EU dispatched a Border Assistance Mission (EUBAM) to help stem the flow of illegal trade between Ukraine and Moldova. In March 2006, Ukraine and Moldova began implementing a 2003 customs agreement, under which Transnistrian companies seeking to engage in cross-border trade must register in Chisinau. Despite the protests of the Smirnov regime, all major Transnistrian businesses have subsequently registered. In what is seen as a response to the new customs procedures, the Smirnov regime boycotted the 5+2 talks in March 2006. The talks have been stalled ever since. In September 2006, the Transnistrian regime held an "independence referendum." Despite the fact that the Smirnov regime claimed that the referendum demonstrated overwhelming support for independence, the vote was not monitored by any western organizations, and no country recognized the referendum or the independence of Transnistria.

Principal Government Officials
President--Vladimir Voronin
Prime Minister--Vasile Tarlev
President of Parliament--Marian Lupu
Foreign Minister--Andrei Stratan
Ambassador to the United States-Nicolae Chirtoaca
Ambassador to the United Nations-Alexei Tulbure

Moldova's embassy in the United States is at 2101 S Street NW, Washington, DC 20008 (tel: 202-667-1130; fax 202-667-1204).

More information about Moldova can be found at the official (Romanian and Russian language) Government of Moldova website at www.moldova.md. The Moldova.org site is maintained by the Moldova Foundation, a non-governmental organization and has some useful links.

ECONOMY

Moldova remains the poorest country in Europe. It is landlocked, bounded by Ukraine on the east and Romania to the west. It is the second smallest of the former Soviet republics and the most densely populated. Industry accounts for less than 15% of its labor force, while agriculture's share is more than 40%.

Moldova's proximity to the Black Sea gives it a mild and sunny climate. This makes the area ideal for agriculture and food processing, which accounts for one third of the country's GDP. The fertile soil supports wheat, corn, barley, tobacco, sugar beets, and soybeans. Beef and dairy cattle are raised, and beekeeping is widespread. Moldova's best-known product comes from its extensive and well-developed vineyards concentrated in the central and southern regions. In addition to world-class wine, Moldova produces liqueurs and champagne. It is also known for its sunflower seeds, walnuts, apples, and other fruits.

Like many other former Soviet republics, Moldova has experienced economic difficulties. Since its economy was highly dependent on the rest of the former Soviet Union for energy and raw materials, the breakdown in trade following the breakup of the Soviet Union had a serious effect, exacerbated at times by drought and civil conflict. The Russian ruble devaluation of 1998 had a deleterious effect on Moldova's economy, but economic growth has been steady since 2000.

Moldova has made progress in economic reform since independence. The government has liberalized most prices and has phased out subsidies on most basic consumer goods. A program begun in March 1993 has privatized 80% of all housing units and nearly 2,000 small, medium, and large enterprises. Other successes include the privatization of nearly all of Moldova's agricultural land from state to private ownership, as a result of an American assistance program, "Pamint" ("land"), completed in 2000. A stock market opened in June 1995.

Following the economic difficulties caused by the Russian currency crisis of 1998, inflation dropped to 5.2% in 2002, the lowest level since Moldova's independence. However, inflation spiked again to 11.6 % in 2003 and never fell below 11% over the following years, rising as high as 12.7% in 2006. In 2006, Moldova faced twin external shocks - a two-fold increase in gas prices and a politically-motivated Russian ban on Moldovan wine imports, a key export item. While relatively stable in recent years, in 2007 the local currency appreciated because of a weakening U.S. dollar and pressure from record remittances from Moldovans working abroad. Reforms to the National Bank of Moldova in 2006 changed the central bank's policy priority from currency stability to price stability (fighting inflation). The National Bank of Moldova has the difficult task of sterilizing the money supply to contain stubbornly high inflation.

Moldova continues to make progress toward developing a viable free-market economy. The economy grew by an average 7% from 2000 to 2005 after years of recession since independence. External shocks in 2006 slashed economic growth to just 4%. After a budget surplus of 1.6% of GDP in 2005, the country had a slight deficit of 0.3% of GDP in 2006 despite better than anticipated revenue performance and prudent spending. The Moldovan economy continues to depend greatly on remittances sent from Moldovans working abroad. These inflows have increased to an estimated $1.2 billion a year.

Privatization results in recent years were not significant. Total proceeds in 2006 amounted to $12.4 million. Several smaller companies, two land plots in Chisinau and a large hotel were privatized in 2006. The government postponed indefinitely the privatization of large state enterprises in the power, telecommunications and agribusiness sectors. In 2007, Parliament passed a new law, introducing new approaches to privatizing and managing state-owned assets (including public-private partnerships), giving priority to economic efficiency. As the European Union expanded to Moldova's border, 2006 saw record high inflows of foreign direct investment. However, cumulative FDI since independence is only $1.28 billion, far below the country's needs. Sporadic and ineffective enforcement of the law, economic and political uncertainty, and government interference continue to discourage FDI inflows.

Spurred by soaring consumption and higher energy prices, imports have been growing more rapidly than exports. This was most prominent in 2006 when Moldova's trade deficit worsened as higher-priced energy imports surpassed exports, which were stunted by Russia's ban on Moldovan wine and agricultural products. Moldova traditionally exported between 70-80% of its wine production to Russia. The country lacks diversification in terms of sector development and export markets. The International Monetary Fund (IMF) and World Bank resumed lending to Moldova in July 2002, and then suspended lending again in July 2003. In early 2006, Moldova reached agreement with the Paris Club on rescheduling of Moldova's foreign debt. In addition, in the spring of 2006, the IMF reached an agreement with the Moldovan Government for a Poverty Reduction and Growth Facility designed to bolster foreign reserves against external shocks with a 3-year, $175 million program that includes a new IMF loan to the National Bank of Moldova.

Moldova continues to be subject to Russian economic pressure. In 2005, Russia enacted a ban on Moldovan agricultural products and in 2006, it banned imports of Moldovan wines. The wine ban has been particularly painful because, prior to the ban, Moldovan wines accounted for a third of the country's exports and 80% of wine exports went to Russia. Although Russian President Putin announced an end to the wine ban in November 2006, Russia had still not resumed importing Moldovan wine as of September 2007. In January 2006, Russian energy giant Gazprom temporarily cut off natural gas deliveries to Ukraine and Moldova - which is almost completely dependent on its neighbors for energy - and subsequently doubled the price of gas to Moldova. The impact has been substantial: Moldova's exports to Russia declined by 47.6% in 2006 and total exports dropped 3.6%, further contributing to a widening trade deficit (47% of GDP). In the first half of 2007, the country's trade deficit was already more than $1 billion (compared with $1.6 billion for all of 2006).

Moldova suffered from a severe drought during much of 2007 which caused hundreds of millions of dollars in agriculture sector losses and prompted concerns about food availability. In response to a request for assistance from the Government of Moldova, the United States provided $350,000 worth of seed to drought ravaged farmers in time for fall planting.

DEFENSE AND MILITARY ISSUES

Moldova has accepted all relevant arms control obligations of the former Soviet Union. On October 30, 1992, Moldova ratified the Conventional Armed Forces in Europe Treaty, which establishes comprehensive limits on key categories of conventional military equipment and provides for the destruction of weapons in excess of those limits. It acceded to the provisions of the nuclear Non-Proliferation Treaty in October 1994 and to the Biological Weapons Convention in December 2004. It does not have nuclear, biological, or chemical weapons. Moldova joined the North Atlantic Treaty Organization's Partnership for Peace on March 16, 1994. Due to Moldova's constitutional neutrality, it is not a participant in the Commonwealth of Independent States (CIS--a group of 12 former Soviet republics) Collective Security Agreement.

FOREIGN RELATIONS

Moldova's Parliament approved the country's membership in the Commonwealth of Independent States and a CIS charter on economic union in April 1994.

In 1995, the country became the first former Soviet republic admitted to the Council of Europe. In addition to its membership in NATO's Partnership for Peace, Moldova also belongs to the United Nations, the OSCE, the North Atlantic Cooperation Council, the International Monetary Fund, the World Bank, and the European Bank for Reconstruction and Development. Moldova is a member of the World Trade Organization (WTO).

In 1998, Moldova contributed to the founding of GUAM, a regional cooperative agreement made up of Georgia, Ukraine, and Azerbaijan, in addition to Moldova. Although the agreement initially included a declaration of mutual defense, Moldova has since declared its disinterest in participating in any GUAM-based mutual defense initiative. Moldova has been involved in information exchange, trade and transportation, border control, and energy projects issues within this regional agreement. In 2006, the organization's members voted to change the name to the Organization for Democracy and Economic Development - GUAM.

The past two years have seen significant developments in Moldova's relations with the West. In 2005, the European Union appointed a Special Representative for Moldova and the negotiations to resolve the Transnistrian conflict and the Delegation of the European Commission opened an office in Chisinau, In December 2005, Moldova welcomed an EU Border Assistance Mission (EUBAM) along its Ukrainian border to crack down on smuggling, strengthen customs procedures and facilitate cross-border cooperation. In accordance with a 2005 Action Plan with the EU, Moldova has begun to harmonize Moldova's laws with those of the EU. As part of this, in late 2005, Moldova enacted its "Guillotine" laws, which slashed unnecessary business regulations, established a framework for relations between the private sector and government and created a mechanism to review the suitability of draft legislation.

In the atmosphere of heightened international sensitivity to terrorism following the events of September 11, 2001, Moldova has been a supporter of American efforts to increase international cooperation in combating terrorism. Moldova has sent demining units and peacekeepers to participate in post-conflict humanitarian assistance in Iraq.

U.S.-MOLDOVAN RELATIONS

The dissolution of the Soviet Union in December 1991 brought an end to the Cold War and created the opportunity to build bilateral relations with the 15 new states that had made up the former U.S.S.R., as they began political and economic transformation. The United States recognized the independence of Moldova on December 25, 1991 and opened an Embassy in its capital, Chisinau, in March 1992. The U.S. Ambassador to Moldova, Michael Kirby, arrived at post on September 1, 2006.

A trade agreement providing reciprocal most-favored-nation tariff treatment became effective in July 1992. An Overseas Private Investment Corporation agreement, which encourages U.S. private investment by providing direct loans and loan guarantees, was signed in June 1992. A bilateral investment treaty was signed in April 1993. Generalized system of preferences status was granted in August 1995, and some Eximbank coverage became available in November 1995.

In November 2006, the U.S. Millennium Challenge Corporation approved Moldova's $24.7 million Threshold Country Plan to combat corruption. The MCC also ruled that Moldova is eligible to apply for full compact assistance and the Moldovan Government is preparing its compact proposal.

[ Fact sheet on FY 2005 U.S. Assistance to Moldova.]

Principal U.S. Embassy Officials
Ambassador-- Michael D. Kirby
Deputy Chief of Mission--Kelly Keiderling
Consular Officer--David Franz
Management Officer--Stanislas Parmentier
Political/Economic Officers--Daria Fane, Ernest Abisellan, Michael Mates
Public Affairs Officer--John Balian
Regional Security Officer--Cameron Burks
USAID Officer--John Starnes

The U.S. Embassy in Moldova is at Strada Alexei Mateevici #103, Chisinau (tel: 373-22-40-83-00/23-37-72; fax: 373-22-23-30-44)

TRAVEL AND BUSINESS INFORMATION
The U.S. Department of State's Consular Information Program advises Americans traveling and residing abroad through Consular Information Sheets, Public Announcements, and Travel Warnings. Consular Information Sheets exist for all countries and include information on entry and exit requirements, currency regulations, health conditions, safety and security, crime, political disturbances, and the addresses of the U.S. embassies and consulates abroad. Public Announcements are issued to disseminate information quickly about terrorist threats and other relatively short-term conditions overseas that pose significant risks to the security of American travelers. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country because the situation is dangerous or unstable.

For the latest security information, Americans living and traveling abroad should regularly monitor the Department's Bureau of Consular Affairs Internet web site at http://www.travel.state.gov, where the current Worldwide Caution, Public Announcements, and Travel Warnings can be found. Consular Affairs Publications, which contain information on obtaining passports and planning a safe trip abroad, are also available at http://www.travel.state.gov. For additional information on international travel, see http://www.usa.gov/Citizen/Topics/Travel/International.shtml.

The Department of State encourages all U.S citizens traveling or residing abroad to register via the State Department's travel registration website or at the nearest U.S. embassy or consulate abroad. Registration will make your presence and whereabouts known in case it is necessary to contact you in an emergency and will enable you to receive up-to-date information on security conditions.

Emergency information concerning Americans traveling abroad may be obtained by calling 1-888-407-4747 toll free in the U.S. and Canada or the regular toll line 1-202-501-4444 for callers outside the U.S. and Canada.

The National Passport Information Center (NPIC) is the U.S. Department of State's single, centralized public contact center for U.S. passport information. Telephone: 1-877-4USA-PPT (1-877-487-2778). Customer service representatives and operators for TDD/TTY are available Monday-Friday, 7:00 a.m. to 12:00 midnight, Eastern Time, excluding federal holidays.

Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 877-FYI-TRIP (877-394-8747) and a web site at http://www.cdc.gov/travel/index.htm give the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. A booklet entitled "Health Information for International Travel" (HHS publication number CDC-95-8280) is available from the U.S. Government Printing Office, Washington, DC 20402, tel. (202) 512-1800.

Further Electronic Information
Department of State Web Site. Available on the Internet at http://www.state.gov, the Department of State web site provides timely, global access to official U.S. foreign policy information, including Background Notes and daily press briefings along with the directory of key officers of Foreign Service posts and more. The Overseas Security Advisory Council (OSAC) provides security information and regional news that impact U.S. companies working abroad through its website http://www.osac.gov

Export.gov provides a portal to all export-related assistance and market information offered by the federal government and provides trade leads, free export counseling, help with the export process, and more.

STAT-USA/Internet, a service of the U.S. Department of Commerce, provides authoritative economic, business, and international trade information from the Federal government. The site includes current and historical trade-related releases, international market research, trade opportunities, and country analysis and provides access to the National Trade Data Bank.

Revised: Oct. 2007

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