Moldova’s struggle to define itself within a broader regional context was thrown into stark relief following the 2022 Russian invasion of Ukraine. A landlocked country of nearly three million bordering southern Ukraine, Moldova has long grappled with pro-Russian sentiments, a phenomenon that has felled previous Western-leaning governing coalitions and continues to play an important political role in the country’s autonomous Gagauzia region as well as in the Moscow-backed breakaway region of Transnistria. The gravity and extent of Russia’s pressure campaign on the country have become apparent, with the Moldovan government alerting the international community to a Russian-backed coup attempt in February 2023 and raising concerns about recent inroads made by pro-Russian politicians in Gagauzia.
Despite concerted efforts by Russia to subvert the central government, Moldovan public opinion continues to favor integration within the European Union: 63 percent of Moldova’s population believes that the country’s future lies with EU membership and a 67 percent assert that EU-Moldova trade relations are critical. In light of this, President Maia Sandu and her administration have pursued a plethora of reforms to meet EU standards, which EU officials have since recognized and commended. However, the country’s future in the Western camp may hinge on the government’s ability to attract foreign investment, especially as its economy continues to feel the aftershocks of the invasion of neighboring Ukraine.
Moving forward, a Moldova governed by President Maia Sandu presents a critically important opportunity for Western investors to consolidate the young country’s democratic institutions, benefit from underexplored markets, and take advantage of its strategic location near the Danube and the Black Sea.
Westward Winds: Moldova’s Shift toward the European Union
Since gaining independence, Moldova has been cited as one of Europe’s poorest countries, with a GDP per capita of $6,410. Thanks to endemic corruption and fraud, perhaps best exemplified by the 2014 alleged theft of $1 billion by pro-Russian politician Ilan Shor, the country’s economic health has suffered, prompting many of its citizens to move abroad in search of better opportunities. As many as one million Moldovans may have emigrated from their birthplace in search of better job opportunities. The resulting “brain drain” has added pressure on the government as it simultaneously confronts the weight of an aging population. Russian pressure campaigns have further boxed the country in, with Russian-owned Gazprom wielding its long-time near-monopoly on the country’s gas supply in a bid to keep the country within Moscow’s sphere of influence.
The invasion of Ukraine, however, has shifted the winds in favor of Moldova’s European integration and transformation into a free-market economy. In March 2022, Moldova applied for EU membership, and in the ensuing months, Moldova’s minister of economic development and digitalization announced his plan to overhaul the country’s bureaucracy and tax system in a bid to attract foreign investment, stimulate Moldova’s growing small and medium-sized enterprise sector, and combat corruption. Additionally, the Moldovan government has moved to break Russia’s stranglehold on its energy supply, buying 100 million cubic meters of gas from a local entity and laying the foundations for Romanian-generated electricity to become a major player in the country’s supply. Though Chisinau’s reforms have so far engendered incremental change, the European Union has been pleased with the country’s trajectory and with President Maia Sandu’s guiding hand, awarding it member state candidacy status in June 2022.
Elected president in 2020, Maia Sandu brings a wealth of expertise and experience in development finance to Moldova’s government. President Sandu, a Harvard Kennedy School graduate and a former World Bank staffer, is leading a vast reform agenda aimed at bringing the country’s institutions in line with those of the European Union. As part of the Moldovan government’s initiative to reform its justice system, President Sandu’s administration has enacted a comprehensive judiciary reform and sought to root out systemic, high-level corruption by establishing the Independent Anti-Corruption Advisory Committee and an Anti-Corruption Court. Thanks to her efforts, confidence in the country’s institutions has reached new heights, with Moldova’s corruption perception index ranking rising five points between 2020 and 2022.
International backers have been encouraged by her anti-corruption and pro-business bona fides. In 2021, for example, President Sandu received $560 million in International Monetary Fund (IMF) funding toward continued good governance programs as well as a three-year, $660 million EU-funded Economic Recovery and Resilience plan. Recently, IMF staff conducting negotiations surrounding the country’s Resilience and Sustainability Facility needs declared their support for disbursing another approximately $169 million to aid the central government in developing Moldova’s renewable energy sector as well as investing in climate-resilient infrastructure.
Perhaps most telling of President Sandu’s reform agenda and desire to attract foreign direct investment is her government’s prioritization of “economic diplomacy,” which has seen the creation of commercial offices in the United Kingdom, Austria, and France over the last three years. Moldova is at a turning point, and Western allies should prioritize supporting Moldova’s pro-democratic reforms to prevent the return of a corrupt, pro-Russian government.
A Roadmap for the Future
The success of President Sandu’s administration and Moldova’s integration into the European community may depend on Western investment in four of the country’s critical industries: agriculture, industry, manufacturing, and services. Together, these industries accounted for 96.7 percent of the country’s GDP of $11.5 billion in 2020, pointing to the importance of their growth for the current government’s continuity.
The revival of Moldova’s agriculture sector, especially its wine production capabilities, represents the country’s shift away from Russia and may present a roadmap for future public-private partnerships and other foreign direct investment in the country. In 2006, Russia’s embargo of Moldovan wine led to losses of $180 million and a 63 percent decrease in domestic wine production. Looking to support businesses along its wine value chain pushed the country to work more closely with the West. This collaboration between Chisinau, the United States, and its Western allies proved to be a sound move for the Moldovans, with the European Investment Bank extending 21 million euros of credit to 20 companies toward upgrading their agricultural processes. Since partnering with U.S. and European investors, Moldova’s wine industry has diversified its export destinations, selling 68 million bottles to 70 countries, rather than 80 percent of its bottles to Russia, as it has for the last 20 years. In the wake of its Western-backed revival, Moldova’s wine producers have garnered worldwide praise for their products, as well as the backing of President Sandu.
As Moldova seeks to decouple itself from Russia and plant its flag firmly within the European camp, Western investors will be warmly welcomed by an administration soldiering through crisis after crisis and will play an integral role in helping affirm the country’s place in the European Union.
Daniel F. Runde is senior vice president, William A. Schreyer Chair, and director of the Project on Prosperity and Development at the Center for Strategic and International Studies in Washington, D.C. He is also the author of The American Imperative: Reclaiming Global Leadership Through Soft Power (Bombardier Books, 2023).
The author would like to thank Jedidiah Devillers for his research support. This commentary also benefited immensely from the insights of a CSIS seminar held on October 6, 2023.
