18 august

What is the interest of the European Union in Moldova?

Analysis: Why Moldova is important for Europe? Is the European Union guided by economic interest in Moldova? But how true are the affirmations that the EU, in this part of the world, is guided by geopolitical reasons? Is there really a competition between Russia and the European Union in Eastern Europe? In this case, why EU policies promoted in the countries of Eastern Europe are more reactive than strategic? And finally, why the EU cares about Moldova and what is the European Union’s real interest in this area? The answer to all those questions can be found in the following analysis.

Moldova receives strong and increasing support from the European Union. Moldova has become by far the biggest recipient of EU’s financial aid per capita. Many member states have significantly increased their bilateral aid in the last years, which allowed to have EU- financed infrastructure projects in all regions of Moldova. A steady flow of high level visits demonstrated EU’s rising attention and support to Moldova. In spring of 2014 alone, the President of the European Commission and the President of the European Council visited Chisinau.

Unusually for a rather small country not yet belonging to the EU, Prime Minister Leanca has regularly been met by European leaders such as German Chancellor Merkel and French President Hollande. Nearly every month Moldova has been visited by a European commissioner, and nearly weekly by ministers from member states and other high level dignitaries from the EU with pledges to enhance cooperation. It transpires from many of their statements that Moldova is about to take European integration to a new level: after having gained visa liberalization as the first among the Eastern Partnership countries and after having ratified the association agreement, even the membership perspective is increasingly coming into reach.

Why Moldova is interested in being supported by the European Union is not difficult to explain - as European integration is an unparalleled development project which has worked everywhere else in Europe. But it is less obvious what the interest of the EU in Moldova is. After all the EU is an association of 28 member states with a population of more than 500 million people and a GDP of over 13.000 billion Euro. Why does the EU need Moldova with 3.3 million people and a GDP of roughly 6 billion Euro? The difficulties in answering this question have fueled speculation that behind its support for European integration of Moldova the EU follows ulterior motives, in particular economic and geopolitical interests. Such speculations, however, do not hold true to facts.

Is the EU driven by an economic interest in Moldova?

Economically, the comparison in size between the GDPs of the EU and Moldova refute any strong interest on the EU’s side. The Moldovan market is hardly big enough to generate a significant political interest. The many millions that the EU is giving in aid to Moldova will exceed any economic benefits for the EU in any foreseeable future.

But maybe the EU is promoting Moldova’s European integration just for the interest of European investors– who might be looking for some kind of economic takeover of Moldovan assets - rather than the interest of Moldova? Admittedly this argument may have some credibility at first glance. After all, the people of Moldova have had long-standing experience with a rent-seeking, largely monopolized and stagnating economy, in which most investors were seeking to redistribute the pie rather than to increase trade and commerce. Naturally this may raise suspicion about the intentions and benefits of future EU investments, too. However, this concern is not convincing, because it is founded on a triple misunderstanding.

First of all, EU investors operate in a different and far more competitive environment. Most potential EU investors look for opportunities to increase production or make it more efficient. The more European investment Moldova will attract, the more its business models will change from rent-seeking towards growing output.

Secondly, the attraction of Moldova for foreign investors is limited. Only when Moldova largely integrates itself into the EU’s single market with the implementation of the association agreement, this attractiveness will rise. It is still the case that the EU tries to encourage European investment in Moldova, rather than EU investors pushing EU’s interest in the country.

Thirdly, it would be usually a mistake to try to find a difference between the interest of EU investors in Moldova and Moldova’s interests. It is questionable whether the EU should be interested in investments in Moldova. This is so because the biggest beneficiaries of investments are not the countries that investors come from but the countries to which investments go. Because it is there that jobs are created, the economy gets modernized, wages and tax revenues rise. In fact, EU member states compete among themselves for investments. An investor from Moldova would not only be welcome in Germany, but also, depending on the region, the German state would even repay him directly up to 40 percent of their investments. If, in turn, German investors go to Moldova and invest here, it is Moldova that gains rather than Germany.

To be sure: Europe is not built on the notion that member states just compete for their selfish benefits at the expense of others. Quite to the contrary: The concept behind the single market is rather that the free flow of goods and investments will create new opportunities for all, lead to growing economies, growing markets and growing trade, which is in the mutual interest of everyone involved. So, if the Moldovan economy grows with EU integration, this is generally also good for the EU. However, the fact remains that this interest is far stronger for Moldova than for the EU.

Does the EU have a geopolitical interest in Moldova?

Hardly more convincing is the speculation that the EU’s interest in Moldova is driven by geopolitical interests. Where should such an interest of the EU lie? Clearly, a competition has emerged in Eastern Europe between European integration and the Customs Union created by Russia together with Belarus and Kazakhstan. This competition, as well as Moscow’s critical stance towards European integration, may have fueled the impression that the EU wants to drag Eastern European countries away from Russia’s orbit. But in reality EU’s policies do not follow such geopolitical designs.

First, the EU is not a uniform actor, which strategizes like a national state, but a union of 28 countries which need to coordinate their external relations by finding compromises between their individual interests and viewpoints. Even before the escalation of the crisis in Ukraine, there have indeed been some member states of the EU, in particular in the East, which preferred a policy of containment towards Russia. Yet there have been other member states, particular in Western Europe, including France, Germany and Italy, which followed a policy of engagement and inclusion towards Russia. Thus, within the EU there always existed a wide variety of opinions on Russia, and it’s not difficult to find voices which describe Russia as a partner or as a contender. For this reason it has still remained controversial within the EU after the escalation of the crisis in Ukraine how far the sanctions again Russia should go.

Yet overall, the EU defined the aim of its relation with Russia initially as a strategic partnership. This aim may have never become full reality but it was a broadly shared intention in the EU. This is not to say that the EU has not been concerned about Russia. Already for some time EU-Russia relations have been frustrated by EU worries about authoritarian tendencies and corruption in Russia, by the difficulties of both sides in finding common ground in the negotiations on common free trade area as well as on a new partnership agreement between the EU and Russia, and by different viewpoints on European security matters, including the resolution of protracted conflicts in Abkhazia, South Ossetia and Transnistria. However, it was only the escalation in the Ukraine, which fundamentally strained the relations between Russia and the EU as a whole and strengthened the coherence of EU’s policy towards Russia.

Secondly, it is anything but clear that the EU should have a strong geopolitical interest vis-a-vis Russia in Eastern Europe. Surely, the perception of Russian leaders is that the EU is trying to squeeze Russia out of its traditional sphere of influence and therefore restrict its space of maneuver. But the fact that Russia sees it that way and feels itself challenged by it is precisely the reason why the EU has no interest in playing such geopolitical games. Why would the EU want to alienate Russia? For what kind of gains? Again, for the EU size defines interests. Even Russia has an economy not larger than Italy with a GDP of around 1.6 trillion Euro compared to the EU’s 13.5 trillion. With respect to its economy and population the Ukraine is more than ten times larger than Moldova. But with a GDP of around 135 billion Euros its economy has only about half of the size of some smaller EU states such as Austria or Denmark. So even if Ukraine and Moldova would have joined the Customs Union that would not have resulted in a major shift in the European balance of power.

Of course, the perspective matters, too. For any actor whose vision and interest is focused on the development of Eastern Europe today, it matters a great deal whether it remains in a Russian sphere of influence or whether European integration prevails there. This holds true for the Eastern member states of the EU which are themselves concerned of Russia, the countries in between Russia and the EU, and, finally, for Moscow herself with her close ties to the post-soviet space. But from a more global and long-term perspective the picture changes. For the EU as a whole the rise of Asia in general and China in particular is far more a strategic challenge. And the EU has far less of an interest in any geopolitical competition with Russia in Eastern Europe. It rather wants a partnership with Moscow instead of Russia becoming dependent on China which has already grown into an economic power more than four times larger than Russia and more than half of the size of the EU’s economy.

In fact, the EU’s policies in Eastern Europe were not designed for a competition with Russia. The main offers of the EU, the deep and comprehensive free trade area with the EU and visa-freedom were designed to be fully compatible with the existing free trade and visa free regimes within the CIS. At the same time the EU aimed also to negotiate a free trade area with Russia. It was actually not the EU that confronted Eastern European countries with a choice but Russia by creating the Customs Union. Nobody can have free trade and a customs regime at the same time. Whereas association with the EU would have allowed every country to keep all its commitments with Russia and within CIS, joining the Customs Union would have prevented free trade with the EU. Rather than for any geopolitical design against Russia the EU could be blamed for ignorance: Because the EU had no such intention it actually largely failed to see and prepare for the problem that Russia perceived European integration as a political challenge for its own influence in Eastern Europe.

EU policies in Eastern Europe: Responsive rather than strategic

In fact, the EU’s integration offers in Eastern Europe were hardly driven by any strategic interest of the EU. Far more they were a reaction to the European aspiration of the Eastern European countries themselves. After the number of member states nearly doubled with the accession of twelve countries in 2004 and 2007 the EU suffered from enlargement fatigue thereafter. Particularly in Western Europe public opinion and political leaders alike became very reluctant to enter into any further commitment for European integration, opting for an extended period of internal consolidation first. Thus the EU was not prepared to offer any additional membership perspectives to Eastern European countries, and also the assistance offered to them remained significantly lower than the aid given to countries included in enlargement processes.

As a consequence the neighborhood policy towards Eastern Europe launched by the EU in 2004 falls short of the expectations of countries like Moldova and the Ukraine. It was again less an initiative by the EU but a response to the wishes of Ukraine and Moldova that the EU designed in 2007 the Eastern Partnership with the offers of visa liberalization and free trade leading to the association agreements. The association agreements and their content have not been the product of a proactive EU policy in Eastern Europe. They are far more a reaction to the urging for more integration of the communist government in Moldova till 2009 as well as the coalition governments thereafter and also of the parties of the orange coalition in Ukraine as well as even the following Yanukovych government. Again: rather than for any geopolitical design the EU can be blamed for having lacked a strategic vision for Eastern Europe.

Finally, it would be generally a mistake to understand EU policies with traditional standards of geopolitics. The EU has been built on a rejection rather than a continuation of traditional power politics. A founding principle of the EU is to replace the win or lose logic of domination and territorial disputes against each other with the development of common economical interests in Europe. Thus the EU is actually built on the idea of a new European order in which the rule of law rather than of the law of the stronger prevails. And contrary to trying to squeeze Russia out of its sphere of influence, the EU doesn’t recognize the legitimacy of spheres of influence in the first place, but the free choice of every country. These principles guide not only the internal but also the external relations of the EU. Plus: as the majority of her member states consist of rather smaller states, the EU usually reacts quite negatively to attempts of larger states to bully smaller ones. Thus, the more pressure Russia puts on its European neighbors, the more support they can expect from the EU.

What happens in Eastern Europe is not a simple geopolitical contest. In fact, the major players, the EU, Russia, and the other Eastern European countries do not just follow different interests. Their intentions are different in kind. Among all these players, only Russia follows a clear cut geopolitical interest because it is concerned that European integration will reduce its influence and leverage over the post-Soviet space. The EU, rather than having an opposing interest, is opposing the principle of geopolitical power politics in Eastern Europe itself, promoting its own values instead. And the three Eastern European countries which have signed the association agreements with the EU – Ukraine, Moldova and Georgia - see European integration primarily as an instrument for their own modernization and economic development.

The consequence is a somewhat paradoxical situation: Eastern European countries like Moldova, the Ukraine and Georgia have a stronger interest in deepening their integration with the EU than with Russia, but Russia has a stronger interest in Eastern Europe than the EU. This doesn’t mean that the EU would not care for Eastern Europe in general or Moldova in particular. Quite to the contrary: The EU obviously cares for Moldova far more than any selfish interest would dictate. But why the EU cares for Moldova has little to do with traditional economic or geopolitical interest.

Why does the EU care for Moldova? Values more than interest

So, why, finally, does the EU care for Moldova? There are two primarily reasons for the EU’s support for Moldova. Firstly, Moldova as a European state has a recognized right to participate in European integration. Ideally the project of European integration is meant to be a project for the whole continent, open to every European state. This does not mean that the EU is trying to impose European integration on anybody. In fact, for all the complexity of its working, the EU has become more occupied with itself than with the rest of Europe the more it grew. Plus: the criteria for EU accession are quite high, and the process of accession takes usually many years. But by its own values the EU sees itself bound to support countries which aim for European integration and which promote and implement European values. And Moldova clearly is a member of the European family with a claim to EU support.

Thus the EU´s support for Moldova is based more on values than interest. For this reason even in the aggravating competition with the customs union in Eastern Europe the EU has not offered financial or economic assistance just for joining its own integration offers but has kept her support conditional on reform efforts. As a consequence the EU´s policy towards Moldova has taken an ambivalent approach. On the one hand the EU has remained critical towards shortcomings with respect to corruption, rule of law or market economy and pushing for reform. On the other hand the EU has strongly supported these reforms and the pro-European course of Moldova.

As the EU´s attitude towards Moldova as a European country is primarily based on values EU attention is actually more important than the EU´s interest towards the country. The government has been quite successful in raising this attention. A few years ago rather few EU leaders, officials and experts were much aware of Moldova. By now this awareness of Moldova in the EU has multiplied, and with it has the commitment and priority the EU attaches to Moldova. And with it confidence has been built that the country, despite its shortcomings in crucial reform areas, is on the right track. By geographical proximity and state of reforms Moldova is largely perceived as the Eastern European country which is already closest to the EU.

To be sure: The EU has one self-interest in the European integration of Moldova, too. Preceding the plans for the Customs Union, the Eastern Partnership was not designed or prepared for a competition with Russia in Eastern Europe. But is success of failure will have an impact on the credibility of the EU. So far, the Eastern Partnership has only been a limited success. From the six countries to which it was addressed, Belarus and Azerbaijan showed from the beginning only a narrow interest in the Eastern Partnership. Armenia, after having already concluded negotiations for an Association Agreement with the EU, had to opt for the Customs Union. In Ukraine, President Yanukovych’s last minute decision against signing the association agreement at the end of last year caused a civil uproar that ousted him from office but also provided the opportunity for Russia’s occupation of Crimea and the insurgency in Eastern Ukraine. Thus, it is also for her own credibility that the EU wants Moldova to become a success of European integration.

The EU’s real interest: Stability and development

But there is also, secondly, one more fundamental and long term reason other than credibility why the EU is actually interested in the development of Eastern European countries: this is the issue of regional stability and security. However, for the EU the security in Eastern Europe depends less on whether the countries in the region belong to a Western or Eastern bloc of states but on the internal development and stability within the countries of the region. And for the EU the biggest threat for stability is the lack of a sustainable development within these countries.

Since their independence countries like Ukraine and Moldova have fallen more and more behind the development in EU countries. In Poland or the Baltic state the average annual growth rate for the last two decades has been at four percent or higher. In Moldova it is at only one percent. This lack of development resulted in increasing emigration and an aging population which are further reducing the potential for future growth.

Together with widespread corruption and a deficient rule of law these problems form the deeper root of instability in Eastern Europe. To take the crisis in Ukraine as an example: Without involvement of Russia the conflicts in the Ukraine could not have escalated as they did. But without excessive corruption and a lack of prosperity having undermined the legitimacy and confidence in Ukrainian state authorities long before the conflicts could probably not have escalated in the first place. If Moldova would be a more prosperous country, and the rule of law in the country more reliable, it would also be easier to resolve the Transnistria conflict.

Conflicts like in Ukraine or Moldova affect European security in general, and the instability in Eastern European countries can also breed other threats for EU countries, such as organized crime. In this respect, European integration is for the EU also a means to overcome chronic instabilities in Eastern Europe. As such, European integration does not work by Moldova just finding stability by belonging to a bigger Union. But it works by being an external provider of the domestic reforms and conditions Moldova needs to improve its development at home. From half a century of European Unification the EU has taken the experience that the implementation of the basic values of the EU - human rights, rule of law, good governance, democracy, and functioning market economies with equal opportunities - is also the best guarantee to ensure prosperity and stability.