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MOLDOVA’S FOREIGN POLICY STATEWATCH

“WINE” WARFARE AT THE DOORSTEP - NOTHING NEW JUST BUSINESS FOR RUSSIA

Institute for Development and Social Initiatives “Viitorul”

Issue 8, August 2010

Dan Amonte

Moldova’s Foreign Policy Statewatch represents a series of brief analyses, written by local and foreign experts, dedicated to the most topical subjects related to the foreign policy of Moldova, major developments in the Black Sea Region, cooperation with international organizations and peace building activities in the region. It aims to create a common platform for discussion and to bring together experts, commentators, officials and diplomats who are concerned with the perspectives of European Integration of Moldova. It is also pertaining to offer to Moldova’s diplomats and analysts a valuable tribune for debating the most interesting and controversial points of view that could help Moldova to find its path to EU.

I n vino veritas, the old saying goes, but not complacent for Russia!

The famous aphorism ‘In Vino Veritas’ is clearly not for Ghenadie Oni-schenko, Russian Chief Sanitary Inspector, whose precious indications about wine quality gained an inglorious reputation last years. The Agency is all known for its harsh protectionist policies, applied to the states that are tied up on Russian market with their low-cost wines, vegetables or milk. Earlier, the above mentioned agency has ‘saved’ Russian consu-mers from the ‘peril’ of Belarusian milk (June 2009), and then in January

2010, it also rescued Russians from the US ‘chicken and pork meat’, which was considered potentially maleficent for the population, but politically acceptable af-ter a new ‘package deal’ on US-Russia trade agreements.

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2 Moldova’s Foreign Policy Statewatch

Str. Iacob Hîncu 10/1, Chişinău MD-2005 Republic of Moldova 373 / 22 221844 phone 373 / 22 245714 fax [email protected] www.viitorul.org

This time, “Rospotrebnadzor” - the Russian-language name for the Russian Trade and Sanitary Inspection Authority (RPN), - has not allowed 47 tons of Moldovan wine to be delivered to Russia, claiming that bottles of imported wine might have a concentration of “dibutyl phthalate and metalaxyl”. The above harmful ingredients are the terms for commonly used “plasticizer”, which is used as an additive to adhesives or printing inks, but indispensable in the modern technologies lines for alcohol processing1. The precious “finding” allowed RPN Chief Sanitary Inspector to accuse Moldova Cabinet of Ministers for its “incompetence” (!), stating that [when] “last time Russia banned Moldovan wine in 2006, the previous Cabinet was able to restore trade relations, showing willingness, but the current one seems to be unable to manage it now” (…).

Going far beyond this undiplomatic rhetoric, the RPN Sanitary Chief outlines the case of the most recent 14 consignments with 43.200 bottles of wine, stopped by the same Sanitary Inspection between 2006 and 7 July, 2010.2 He also warned that under such circumstances, Russian ban could be applied to all wines imported from Moldova in the next 2 weeks, while all other wine parties will be returned to laboratory tests.3

Worried about the militant rhetoric, a delegation of experts arrived in Moscow to check evidences, but very soon, they found the Sanitary Inspection is unwilling to share it with the Moldovan wine-experts, who had to return home after less than one day of work. Thus, Moldovan officials refused to accept Rospotrebnadzor”s argument that Moldova exports its wines without appropriate control tests, claiming instead that the documents issued by the National Inspection of Wines are credible and acceptable in Europe. Loyal to his words, Russian Sanitary Chief stated “Moldavian wines should be used to paint fences” to mass media, in a kind of “black humor” that almost has paralyzed the wine-exports of Moldova to Russian market. No, black humor is not about the wine making, nor it is about the professional credentials of the current Chief Sanitary Inspector, it is indeed strictly about attempt to influence the domestic politics in Moldova. Although, Onishchenko denied any political motivation of these actions4, local experts have analyzed the ban as a provocative, close to a political embargo that has nothing in common with the quality of the wines5.

The Chair of the Parliamentary Committee on Agriculture and food processing, Dmitri Todoroglo, ex- Minister of Agriculture, and MP of the Communist Party of the Republic of Moldova has publicly stated that officially, Moldovan Cabinet of Ministers did not receive any sort of official certificate of tests made up at Rospotrbnadzor, and that there is no any article amongst 52 of the Trade Agreement between Moldova and Russia, which would regulate the concentration of dibutyl phthalate and metalaxyl ingredients, and that in fact this most recent claim “exceeds those imposed in most of the EU states, where Moldova exports its wines”6. On the other side, Moldova”s Minister of Agriculture and Food, Valery Kosarchuk claims that Moldovan exporters – in their largest majority “private owners” - produce high-quality wine without any harmful substances, and that the so-called soup of “dibutyl phthalate”. He also outlined that the above mentioned substances “could kill a human only if he would consume 270 tones of wine in one day”.

Nevertheless, the risks are serious since the wine industry in Moldova is still a major field of the national economy, and one of the major contributors to state budget. It accounts now for almost 5% of GDP, having a 25% of the total exports, but employing up to 30% of the people in processing industries. On the other hand,

1 The use of this substance in cosmetics, including nail polishes, is banned since 1999 in the European Union under Directive 76/768/EEC 1976, particularly in the manufacturing toys for kids.2 MOSCOW, July 15 (RIA Novosti)3 Reuters, July 19, 2010, Moldovan Wine May Be Banned in 2 Weeks - http://www.themoscowtimes.com/mobile/news/article/410578.html At present Moldova ranks third in the supply volume to the Russian market (its share is about 12.25%), it ceded its previous first position to France and Bulgaria, but still holds a good position because of its traditional good reputation and affordable prices.4 A new “wine war” of Russia against Moldova in the making? April 07, 2010, last updated - http://economie.moldova.org/news/a-new-wine-war-of-russia-against-moldova-in-the-making-207936-eng.html 5 Infotag, Vissarion Cesuev : RosPotrebNadzor decision as a clear a political underpinning and is caused by the Moldovan authorities” stupid position on the problems, relating to the settlement of the Transnistrian conflict, the CIS participation in this matter, the celebration of the 65th anniversary of the victory in the Great Patriotic War, the condemnation of the Communist regime, which was issued recently through a presidential decree.6 D.Todoroglo, We don”t know how could Russian experts find out dibutyl phthalate in wines, http://www.jurnal.md/ro/news/r-moldova-nu-stie-cum-expertii-rusi-au-gasit-dibutilftalatul-in-vin-190036/

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most of the companies operate as joint-stock wine-making companies with prevalent or exclusive Russian investments, making up almost 30% of the entire sector7. So, the largest exporters to the Russian market are, in fact, Russian-owned companies, while the so-called accusations on the quality of wine are by no means, politically induced. But, this cannot but nurture anti-Russian sentiments, which may create additional resistance to accept Russian plans or measures, becoming a long-term handicap to its own interests.

Some of the Russian analysts, who cannot be suspected of holding pro-Moldova positions, evaluate this new ban as potentially dangerous for Moscow influence in the region. First of all, there are obvious losses for Russian-owned companies located in Moldova, which have invested heavily in wine-making, brandy-making and tobacco industries in the last decade. Unjustified sanctions may increasingly spoil Russia”s plans to remain attractive for the states that belong to the CIS space.8

It is not a novelty for Russia to use economic sanctions in order to “defend its political ideas”. In March 2006, Moldova's exports of alcohol products were lifted by a similar decision of the RPN under claims that pesticides and heavy metals were found in Moldovan wines. If Moldova has exported alcoholic products worth USD 313 million in 2005 to various countries, i.e. USD 250 million wine exports to Russia, in 2006, Moldovan alcohol exports decreased to a modest USD 173 million. Independent surveys show that the 2006 embargo resulted in almost 180 mln direct losses to the private wine-makers of Moldova, particularly to the small wine-making enterprises. Another effect of embargo imposed by Moscow was the creation of a growing in influence of Russian-owned wine-making companies in Moldova, producing wine, but also political influence inside of the Moldovan economy. Thus, custom restrictions aimed to acquire a substantial part of the winery-sector - one of the important sectors of the local industry. In the same 2006 and 2007 years, Russia has staggered an upfront “trade boycott against Georgia and Moldova. It also engaged in the “unknown hero monumental crisis” in Estonia, which later has received a cyber attack, and afterwards, decided to step in a sharp policy line on oil and gas “tough – love” talks with Belarus and Ukraine. The subtle character of these techniques that were labeled at the beginning of the Cold War “indirect aggression” does not allow to clearly qualifying them as aggression and condemn by international community.

If in 2006, Russia has used the embargo in response to the joint-decision of the Ukrainian and Moldovan presidents, who invited and supported installation of an EU Border Monitoring Mission, seen in Moscow as an attempt to involve international organizations in the “inner proclaimed space of vital interests of Russia” . Although, Russia resumed Moldovan imports in 2007 of wine, meat, apples, grapes, tobacco, and sunflower seeds, it announced much stricter quality control standards, and additional filters on the companies allowed to “trade with Russia”. Nevertheless, it also heavily affected the Russian way to join WTO and annoyed the EU, simply because the incidents indicated clearly that Russia has mismanaged its power and resources, willing to maximize its overt influence within the ex-USSR space by using all available levers. In July 2009, Russia lifted all restrictions on the import of Moldovan wine and was even prepared to open extra customs points9, but some of the Moldovan domestic rifts challenged the initial Moscow”s position, and although perfectly in line with the new political architecture of power of the coalition-based pro-EU Government in Chisinau, it outraged a quick response.

7 Data on properties in the wine-making field of the Moldovan economy show that almost 30% of the companies have accepted participation of Russian capital, ac-cording to Anatolii Palade, Director of Proconsulting business consultancy firm. http://businessclass.dev.md. Rosstat (Russian State Statistics) show that investments in Moldovan economy registered by January 1, 2007 almost 200 mln usd (22% of the total FDI), while Moldovan investments in Russia were 3,9 mln usd. Over 435 companies have been registered in Moldova with capitals from Russia, but only 85 of them were average or large (more than 1000 usd), such as: Gazprom, Saliut, Dionis Club, Savva, Aroma, Topaz, Pribor, Moldizolit, Calarash, VIsmos, Buket Moldavii, Moldgres, Moldovacabel,.8 MOSCOW, April 25 (RIA Novosti), Zurab Todua, PROSPECTS FOR RUSSIA9 MOSCOW, July 15 (RIA Novosti)



Playing “hard-chess” or “soft-wrestling” The exports of wine to Russia turned into one of the most active tools of influence on Moldova in the last decade. If in 2006, wine-embargo arrived as a result of the EU Border Mission set up along the common borders of Ukraine and Moldova, in 2010 Russia got particularly nervous when Moldovan authorities refused to attend the Military Parade in Moscow of the 9th of May, followed by the official declaration of the date of 28 June 1940 as “a day of mourning for the entire nation, in a remembrance for those killed by Soviet regime.

More than 300.000 of innocent people have been murdered by Soviet regime on the current territory of the Republic of Moldova, after its annexation from Romania. The Presidential Decree has stipulated a mourning Ceremony for the “victims of the occupation” in the most-central square of Chisinau, as a sign of historic remembrance. In fact, Moldova is not unique in this policy of reconsidering of its past allegiances to the Soviet regime, since the Baltic States have equally condemned the Soviet occupation. Some of the EU states gone so far even as Poland, adopting a legislation according to which some people can be fined or even imprisoned if they display or buy related symbols, as the illustration law stipulates. 10

Meanwhile, the same Decree has called Russia to withdraw immediately its armory and military staff from Transnistria, being qualified by the Moldovan authorities as an occupied territory, thus an automatic association between the years of 1940 and 2010 was created, that sparked exasperation in Russia, primarily in Duma, who see thus a `complete remake of the political stage in Moldova, where Russian interests are not anymore considered as natural`. Since, Russia has attempted to force Republic of Moldova to accept the separatist Transnistrian region as “an equal side” in the negotiations, in an attempt to cover for the fact that it is Moscow behind the conflict, this new development poured salt on the wounds.

In response, Russian Foreign Ministry called the decree as “an element of political campaign aimed at undermining partnership between Moscow and Chisinau”. Then, Duma”s international affairs committee chairman, Konstantin Kosachev claimed that [… this would have contradicted to the “international community”s” position on the Russian troops in Moldova], and a deliberate action to falsify history and the II world war results”11. Condemning the decree as “sacrilegious” (a term previously applied to Estonia”s relocation of the Red Army monument from downtown Tallinn), the Russian MFA warns of possible “confrontations in Moldova”s multi-ethnic society” in this connection. Instead of a “so-called occupation,” Moscow advises Chisinau to speak about “the history that we and the Moldovan people share.” The document puts Moldova”s governing Alliance for European Integration (AEI) on notice that Moscow “expects pragmatic approaches to prevail in the Moldovan leadership and the AEI”12.

Both statements seem to be at least bizarre, since there is no anybody monopoly on historical truth, nor it is acceptable that Moldovan politicians will follow up an agenda that would only match Russian viewpoints, particularly on the historic episodes that caused mass suffering during the installation of the Soviet regime after the II world war. It is equally exotic to claim a foreign state”s decree, as outraging Russian affairs, particularly when the above mentioned decree is logical step from the investigative work, implemented by the State Committee on the investigation of crimes made by the soviet regime, while the same decree has been already referred by a Declaration of the OSCE Parliamentary Assembly in Oslo, calling Russia “to honor its obligation and remove its troops from Moldova, fulfilling thus its 1999 Istanbul Summit commitments13”. Thus, Onischenko”s bold statement on the “poor quality of wines” coincides with the latest June 14 Decree issued by the President Mihai Ghimpu, calling on Russian soldiers to get out of Moldova from the occupied 10 RT, New Polish law equates Communist and Nazi symbols, 30 November, 2009, http://rt.com/Politics/2009-11-30/poland-bans-communist-symbols.html 11 Alexey Ostrovsky, Chair of the Standing Committee for CIS Affairs and Contacts with Compatriots (near abroad), 12 Russian MFA Commentary, Interfax, June 25, 201013 OSCE Summit Declaration, 6-10 July, 2010, http://www.oscepa.org/images/stories/documents/activities/1.Annual%20Session/2010_Oslo/Final_Declarationish.pdf

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territories of Transnistria, where the frozen conflict is still largely due to the military presence of Russia”14. Local analysts see the growing pressures on wine experts from Moldova as being directly linked with upcoming anticipated parliamentary elections. This viewpoint is also shared by the Director of the Russian Center for Political Information, Alexei Mukhin, who sees the theory of the “harmful elements in wines” as a “moral pressure” on Chisinau, pointing out to the fact that accusations of the Chief Sanitary Inspector dangerously coincides with criticism in Duma. It is absolutely obvious that the maneuver speaks more in terms of political penalties than in terms of the quality of wines, which is just the opposite of the official statements from the Russian side. This is also shared by international press, who endorses the theory that this new “attack” on Moldovan wine-sector is designed “to harm the pro-EU camp of the Alliance - a multi-party coalition of forces that look westwards; instead of paying tributes to a traditional “Moscow-first” approach. “Old enemies” will again meet at the rows in November 2010, represented by the Communist (CPRM) and the pro-Western AIE (Alliance for European Integration) groups. So, if the Alliance is more concerned with its uneasy “return of truth and remembrance”, the Communists call now to arms, happy to use the emerging opportunity as “perfect ammunition” in the upcoming general elections for November 2010.

Trade or LoveOne of the main lessons of transition in the ex-Soviet space is that the Soviet empire is still alive, and may easily counter-strike when small nations claim their freedom moving towards a closer integration with the West. Since, Russia controls a considerable flow of key commodities on the CIS markets (gas and oil); it attempts to misuse its statute as the main trade partner, whenever this is justified in geopolitical gains. Moscow tries to use access of goods to its market (wines, vegetables, and textile) only if CIS states show full political loyalty to its geopolitical aims, imposing a sharp trade asymmetry and compelling leverages of pressure on domestic and foreign policy choices. For years, Russian attempted to present its huge market as a “club benefit” allocated for CIS membership. But, trading with Russia has never been a piece of cake, since political considerations and blatant injustices, regularly disputed the original assumptions. In fact, Russia has never hesitated to impose sanctions or make trade-offs on the expense of the national states, which have not fully escaped so far from its “post-soviet” embracement.

This allows Russia to sell gas at EU-top prices (280 euro pr 1000 m3), but has fighting back international prices for the traditional products it receives from its CIS states. In other words, while the West offers significant benefits of cooperation that will be obvious in time, Russia is intervening today to deter westernization of its border-states, threatening with deprivation of the basic things so necessary for their daily life of Moldova, Georgia, Ukraine. As a result, Russia makes significant pressures on population, and consequently manipulates the behavior of some political elites. And there is strong indication that this has become the sacred goal of the Russian foreign policy for the foreseeable future. Thus, Russia is also able to threaten the basic of their state”s survival, sustaining separatist structures and igniting more ethnic discontent on their territories�. At the same time there is a deep-rooted feeling among Russian policymakers that their country will not be able to revive as a strong influential player outside of the institutionalized framework of CIS, but fail to respond to the growing demands coming from its former satellites. A vivid example in this regard is the case of Belarus, which has ultimately failed to follow indications of the Russian leaders, willing to lift the “bread for concession policy imposed from Moscow, although this would unnecessarily leads to a more democratic Belarus.

Many would expect to improve the predictability of behavior for Russian elites by allowing them to join WTO, but it appeared that Russia would seek to joint it “on its own terms”, and only if it will keep almost intact its huge domestic market, with minimal range of WTO regulations taking preeminence over federal 14 RFERL, Acting Moldovan President Mihai Ghimpu lays a bouquet of flowers at a memorial for victims of the Soviet occupation in Chisinau on June 28. July 02, 2010 http://www.rferl.org/content/Moldovan_Leader_Defiant_In_Soviet_Occupation_Row_With_Russia/2089272.html



This publication was produced by IDIS “Viitorul” with the financial support of Soros Foundation Moldova and the National Endowment for Democracy. The opinions expressed in this publicati-on reflect the author’s/authors’ position and don’t necessary represent the views of the donors.

Str. Iacob Hîncu 10/1, Chişinău MD-2005 Republic of Moldova 373 / 22 221844 phone 373 / 22 245714 [email protected] www.viitorul.org

laws, and almost unrestricted right to the state agencies to intervene in private affairs, or run things against the market economy principles. In fact, this would brilliantly explain why today”s Russia is still facing formidable obstacles after 17-years of intense negotiations. A recent statement of the German Chancellor, Angela Merkel, emphasize the support to Russia”s bid towards WTO, but expects it to join it no earlier than Spring 2011, dubbing a similar statement made by US President Barack Obama during the Washington summit.

So, Russia”s ascension to WTO meets the interests of Russia, the US, and most of the world trade community, but not of Moldova, who sees its economic weak but nevertheless vital trade relations directly affected by the disruptive decisions of the Russian state officials. The problem here is that Moldova, already by mid of 2007, has formally endorsed Russian bid to join WTO, but under conditions that its trade relations will improve and other potential “wine embargo”s” will not take place anytime soon. So far, this minimal condition has been unattained in relations between Russia and Moldova. On a similar vein, Moldovan Cabinet of Ministers gave in 2008 its consent for Russian bid to WTO, but under strict conditionality “to outpost any further deterioration in trade relations, while applying the WTO aquis communitaire in full, in accordance with the organization charter and specific regulations”. As one of the former Prime Minister of the Moldovan Government stated in 2007 by the moment of considering Moldova”s response to the Russian bid towards WTO –

“first, we must address the issues, which do not fit in rules of game at the WTO, such as - import of agricultural products and ban on import of Moldavian wines, but also bilateral agreement on raising VAT on import of natural gas to be collected at the place of the final destination in accordance with norms of WTO, meaning in Moldova, and not in Russia, as it has been done following Russian stubborn attitude”.

Nevertheless, once the deal is again broken by the Russian side, Moldovan authorities may consider a halt to their previous acceptance to back up Russia”s accession to WTO until the situation of its exports is settled finally, and damages incurred to the Moldovan producers are paid in full.

As a policy recommendation, Moldovan Government shall do all necessary efforts to expand onto other civilized markets, where Moldovan goods, including wines and spirit, could be treated with confidence and respect. The Government shall consider also invitation of EU-based companies that could certify exported goods at international standards, thus having serious ammunition against accusations that are born out of political campaign. It is equally important that Moldovan wine-industry will wake up and progress towards international markets, which are difficult to conquer, but extremely important and attractive on a long term perspective. Private business shall improve its quality control mechanisms, following international and domestic regulations, and replace practices that often led to extreme vulnerabilities, as it cause political influences to gain ground in bilateral relations. That includes consistency of wine quality, delivery terms and other generally accepted practices that are common in the West, but were still questioned in Moldova by those who received previously a privileged position in selling wines to Russia.

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