Warmer relations between Chisinau and Moscow in the middle of fall. Economic commentary by Info-Prim Neo

The first half of October, among a number of political, economical and social events, was also marked by the so-called “warming” between Moldova and Russia. After an older meeting between those two Vladimirs – from Chisinau and Moscow, followed by several failures, it is now the foreign ministers’ turn to hold meetings and to organize, after a long break, a Moldovan-Russian Joint Committee’s meeting on trade an economic co-operation. Strangely, the Russian side is headed by the Minister of Education and Science, Andrei Frusenko. Laying aside political and geo-political meanings of the “hugs” between Chisinau and Moscow, rather timid for the time being, let us focus on the economical side of the “reconciliation”. The divergences emerged between the Russian Federation and the Republic of Moldova in a series of political issues, and a pro-Western option announced by Chisinau have changed the “Russian strategic partner” into an ill-willed one. First, agricultural goods (fruits, grains, vegetables, etc.) were forbidden to enter the Russian market, then the products of animal origin followed, and eventually – the finishing stoke – Russians decided to stop drinking Moldovan wine. In other words, the R. of Moldova was deprived of its main market, which was previously receiving 70-80% of exported wines. More to the point, the price of natural gas supplied to Moldova has doubled. The Moldovan economy, fragile enough before the events, experienced a shock. The industry, which was already losing capacity, is now declining (- 5.7% in eight months), and the wine industry cut its production in half. The GDP started limping and the trade balance is just one step away from 1 billion (USD 977.5 mln in eight months). Though, both local and foreign experts claim that in 2007, even under the Russian embargo, the Moldovan economy has a chance to recover, and in 2008-2009 to reach + 6-7% of GDP, the figure prior to the crisis. Obviously, the “warming” means more than economics and it might have a significant influence on Moldova’s development. Some of Moldova’s foreign partners could change their attitude or even mistrust the new neighbor of the EU. Let us stick to economics though. Even if for a relatively short period the Russian market would open wide its gates to all of the Moldovan goods, local companies should bear in mind their lesson and to stay cautious. The winemakers should bring Moldovan wines back onto the shelves of Russian stores, and the farmers should make themselves conspicuous in Russian cities’ agricultural markets, with their sales tactics changed. The process of promoting wines on alternate markets, on the go lately, must be carried on; the relations with Russians ought to be built according to international trade rules, which provide for liabilities and compensations, and also via international organizations, which would mediate argues when these emerge, and not based on “brotherhood agreements” as before. The Russian market is quite large and important for us, but not the single and most important one. The lesson must be thoroughly learnt, as the next test might be tougher. Political, economical and other sorts of international relations have no room for sisters and brothers, but for interests and competition, often quite rough for the small countries, which are faltering in choosing a direction. After two crises – one in 1998 and the other in 2006 – both rooted in Russia, we have no right to experience another one.