The case of Transnistria
BSSB.BE researchgate.net 21.11.2016
A look at Transnistria’s economy affords a glimpse into the multiple links with and significant dependence on the patron state, Russia. Despite having been the industrial powerhouse of the Moldovan Soviet Socialist Republic (MSSR), by 2005 the region found itself in deep crisis.
Though the region’s propaganda evinced pride in providing living standards higher than
those in right-bank Moldova, these achievements, dubious at times, were not the fruits of a sustainable economic model, but rather of generous aid by Moscow.12 Yet even this significant aid was not able to counter the region’s growing economic problems, largely related to the combination of two key structural features: the central role of inefficient, energy-intensive
industries and the high dependence on foreign trade.
The first key characteristic of the Transnistrian economy was one inherited from the Soviet period: its role as an oversized regional industrial hub built around a small number of large, energy-intensive heavy industries, especially metallurgy (Silari, 2010, 2).
Paradoxical as this may seem in the case of a politically isolated region, between 1998 and 2008 Transnistria’s yearly foreign trade amounted to between 200% and 409% of its GDP, a level significantly higher than that in Moldova proper. These two structural features were complicated by massive labor migration, which weakened the entity’s tax base, and created serious budget problems, especially at times when world demand for the region’s main exports, such as steel, plummeted, as in 2008.
Between 2008 and 2012 Transistria’s deficits grew from 20% to over 70% of its budget expenditures (Silari, 2010; Radio Europa Libera, 2011; Scurtul, 2013), an extraordinarily high figure, even if compared with those of the faltering right-bank Moldovan economy.
Taken together, these features synergized to make the region especially dependent on exports and, more generally, goodrelations with external partners.Transnistria’s structural economic problems and increasing dependence on Russian aid triggered processes that wouldbecome central to the dynamics of interest differentiation, contestation and defection –processes related to, among otherthings, the illegal appropriation of Russian aid.
In addition, the appropriation of end-user utility payments (especially gas)was also used to ﬁll gaps in the overall budget (Balmaceda, 2013).Privatization, another important strategy used to cover budgetary shortfalls, also affected elite interactions.
Starting in2001, the Transnistrian government embarked on an aggressive campaign to privatize Moldovan SSR state assets previously“nationalized”by Tiraspol. At its height in 2002, such sales contributed to nearly a third of state revenues (32.8%).
It must benoted, however, that the absence of recognition by a single outside state, not even Tiraspol’s Russian patron, cast a seriousshadow on the legality of any nationalization and subsequent privatization of property, posing serious potential futurelosses for investors participating in these illegal privatizations should Transnistria revert to Moldovan control.
While thislarge-scale privatization helped delay a budget crisis, it also presented opportunities for widespread rent-seeking, which, asdiscussed in the next section, also involved external actors.
Given the general lack of transparency and accountability in Transnistria, however, it is hard to ascertain how much of theincome from privatization went to support the state budget, and how much of it beneﬁtted private actors able to takeadvantage of insider knowledge and corruption opportunities. Such rent-seeking around the privatization process un-doubtedly affected not only relations between various local elites, but also relations with Russia, the main supplier of in-vestments, energy and other forms of aid.
These “unusual ways to ﬁll the budget”are also signiﬁcant for helping answer the second part of this article’s centralquestion: “How do relations with a powerful external patron state inﬂuence the differentiation of economic actors and theirtransformation (or not) into contestation-ready political actors and the timing of defection?”
The means of accruing addi-tional budget funds inﬂuences which actors and interest groups could potentially beneﬁt from rent-seeking manipulationsrelated to Russian investments and assistance and how these interest groups would develop their own economic preferences,which could go against the preferences of the patron state or of the de facto leadership itself.
From 1991 to 2011: differentiation of economic interests under apparent political stagnationIgor Smirnov’s removal from power in December 2011 would have been unthinkable without the muted but consistentdifferentiation of economic interests taking place in Transnistria since 1991.
Although this differentiation came most clearly tolight during the 2011 presidential elections, careful analysis reveals growing contradictions between elite groups already inthe late 1990s. Two of the three major candidates, president Smirnov and head of the Supreme Soviet AnatolyKaminsky, wereclearly associated with speciﬁc economic interests and interest groups.
While the Respublika movement represented Smir-nov’s interests and those of the “old guard”associated with it (Korobov and Byanov 2006, 518), Smirnov failed to build a rulingparty. In the absence of a ruling party that could regulate differences between elites (Brownlee, 2007; Geddes, 1999; Way,2005a), defection became more likely.How were these processes affected by factors such as divergent elite interests, privatization and role of external actors in it,and patron state positions?
The following section compares these processes at the time of de facto independence (1992–1995,or juncture no. 1) and at three additional crucial junctures (2001, 2006, and 2011) that represented key changes in therelationship between the regime and other local elites.
Crucial juncture 2: 2001During the 1990s, despite Sheriff’s quiet development of a distinctive personality, the enterprise’s growth did not nega-tively affect relations with the Smirnov regime. The 1990s were characterized by the informal mutual provision of favorsbetween Sheriff and the Smirnov elite;
- Sheriff’s activities developed through “a special arrangement with the President’sfamily: in return for unconditional support, Sheriff was freed from paying taxes to the state budget and import duties tocustoms”(Kommersant, September 19, 2006, as cited in Isachenko and Schlichte, 2007, 22).
- With Sheriff’s economic poweronly just emerging, this period was marked by the company’s accommodation to the Smirnov system and the sharing ofbeneﬁts between both groups.
- As such, there was little reason for a Sheriff defection from the ruling coalition, as was evi-denced by its behavior in the 2001 presidential elections.
Crucial juncture 4: the December 2011 presidential electionsThe unexpectedly open electoral process in the December 2011 elections, as well as its outcome, cannot be explainedwithout taking into account two factors:
1) the further differentiation of economic interests around the newly-privatizedindustrial sector and
2) the preferences of Russian actors active in the area.By 2011, economic interests within Transnistria were becoming increasingly diverse.
On the one hand, especially inconditions of a shrinking economic pie, the rent-seeking manipulations of the immediate Smirnov family were having direct.
In the case of Transnistria, privatization processes involving key outside players provided a unique opening for elitedefection by sparking a causal chain of re-evaluation of economic interests eventually leading to the decision to defect fromthe incumbent’s coalition.
Signals provided by the patron state also affected elite decisions by changing their perceptions ofincumbent durability. The evidence of the Transnistrian case also reveals that, in and of itself, a reduction in the role of thestate in the economy is not enough for new, self-assertive actors to emerge.
If, at one level, reductions in the state’s power inthe economy create space for new actors to emerge, a no less important factor is who these new actors are and how theyinteract with other “insider”or “outsider”elites and the interests of patron states and economic actors within it.
Thus in thecase of Transnistria the mere existence of strong economic elites separate from the president (in the form of Sheriff and later economic actors related to the newly-privatized companies) was not enough to make them into assertive political actors.
Theydid not decide to defect from the regime until faced with presidential family rent-seeking of such magnitude that it out-weighed the beneﬁts of the informal coalition, beneﬁts seen most directly in the Sheriff-Smirnov duopoly’s ability to preventother smaller economic actors from doing business in Transnistria.
In addition to contributing to the debate on the sources and timing of elite defection, understanding the Transnistrian caseand the sometimes contradictory role of external inﬂuence on post-Soviet de facto states can also shed light on the limits ofpatron state leverage on dependent client states. The Transnistrian case shows how economic support from Russia, with orwithout the intention of the aid providers, became the basis of rent-seeking schemes by domestic actors –schemes thatacquired a life of their own and helped solidify these actors’new economic preferences, some of which ran counter to thepreferences of the patron state.
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