Monthly Context Report - September 2023
Summary
Security & Access: Throughout September, Ukraine made slow progress with the counteroffensive. Attempts to reinforce key territorial gains, such as the community of Robotyne in Zaporizhzhia Oblast, have been challenging due to strong Russian frontline resistance. Over the past month, the Black Sea has been a major focal point for hostilities. Since Russia’s withdrawal from the Grain Initiative, Odesa Oblast has become a regular focus of Russian attacks, affecting economic, civilian, and military targets across the entire region. Meanwhile, Ukrainian forces have focused on Crimea, carrying out the most effective and coordinated attacks since the start of the full-scale invasion. Their likely aim is to undermine Russian military capabilities in Crimea in a bid to safeguard vital naval trade routes.
Political & Legal: Ukraine is slated to hold presidential elections in March 2024. However, the constitution legislates that elections are prohibited when martial law is in effect. This would suggest that a presidential vote will not take place. Nevertheless, President Zelenskyi has refused to rule out the possibility of elections next year. The prospect of doing so – under current conditions – has led to pushback from numerous civil society organizations, as well as skepticism from within the government.
Economic & Development: Ukraine’s economy was devastated following the Russian invasion. After an initial recovery, it plateaued in the first half of 2023. This stagnation poses challenges for companies, which are coping with an uncertain business environment and a lack of customers. Additionally, bans on Ukrainian agricultural imports by Ukraine’s closest neighbors, coupled with disruptions in grain exports, have put the country’s agricultural sector at risk, whereas Russia is – for the time being – emerging as a major global grain exporter. Next season, due to low market prices, limited access to financing as well as logistical challenges, Ukrainian farmers are expected to put less land under cultivation, leading to a substantial reduction in grain production.
Humanitarian & Environmental: In stark contrast to the early months of the full-scale invasion, 2023 witnessed a surge in returning refugees, both from abroad and other parts of Ukraine. In recent months, however, the sudden escalation in hostilities has prompted authorities to evacuate communities from frontline areas in Ukraine’s southern oblasts. In July and August, authorities also ordered the evacuation of children from several communities In Zaporizhzhia and Kharkiv oblasts. Key urban areas, such as the cities of Kharkiv, Zaporizhzhia and Dnipro – often the initial destinations for evacuees from Ukraine’s eastern and southeastern areas – remain prepared to accommodate evacuees as needed.
Poland: In September, the EU lifted agricultural import restrictions on Ukraine. Poland, Hungary and Slovakia, however, immediately reinstated them, sparking tensions. Ukraine threatened legal action and hinted at retaliatory bans. In his speech to the United Nations, Zelenskyi accused “certain EU nations” of aiding Moscow. Poland responded by pulling back from additional supplies of weapons.
Moldova: Following an independent audit, Moldovan authorities announced that the country’s debt to Gazprom was $8.6 million, a fraction of the $709 million that Gazprom claims it is owed. Moldova’s Anti-Corruption Prosecutor’s Office detained MPs Alexandr Nesterovschi and Irina Lozavan, charging them with money laundering and accepting bribes from Ilan Shor, the fugitive former leader of the now-banned Shor party.
Trends to Watch
Security & Access: Even as autumn temperatures begin to drop, both sides are striving to maintain pressure along the front lines. As with last year's winter campaign, Russia seems to be focused on mounting an offensive, particularly in Ukraine’s eastern regions. The current deployment of troops and the intensity of attacks suggest the possibility of an impending stalemate along the front lines, with only sporadic movements in certain areas. This could result in locations such as Avdiivka (Donetsk Oblast) and Kupiansk (Kharkiv Oblast) finding themselves in a situation akin to Bakhmut (Donetsk Oblast), which was fought over for more than a year, and which remains a contested zone.
Political & Legal: President Zelenskyi would no doubt prefer that elections take place in March 2024. However, the challenges that such an endeavor poses – and the resulting pushback from both within and outside the government – likely preclude the possibility of it occurring. Whatever the decision, given the time needed to prepare such an election, an announcement will likely be made in the coming weeks.
Economic & Development: The country's economy is showing signs of resilience and recovery, but the ongoing war and related challenges may cloud the economic outlook. Ukraine's agriculture sector, vital for its economy, faces disruptions in exports and increased competition from Russia. The resolution of export route issues and the outcome of elections in Slovakia and Poland will certainly affect this sector. Reforms are essential for Ukraine to remain eligible for international aid from the US and to secure EU membership, with both partners emphasizing the need for anti-corruption measures.
Humanitarian & Environmental: Evacuation orders are expected to be ongoing, particularly following tragic incidents involving children. Mandatory evacuations are possible under martial law, but the government appears hesitant to pursue this option. Given the surge in people returning to their homes—even in high-risk frontline areas—Ukrainian authorities, in cooperation with humanitarian organizations, will need to provide support both to returning populations and to those reluctant to leave frontline communities, while simultaneously discouraging residents from remaining in areas under mandatory evacuation orders.
Poland: Poland’s extended ban on Ukrainian agricultural imports, despite the EU’s disapproval, is ramping up regional tensions and putting Western unity at risk. The ruling PiS party is trying to capitalize on anti-Ukrainian sentiment among far-right parties without alienating its own anti-Russian base, which has resulted in more radicalized rhetoric. Poland’s consensus on protecting its agricultural market has boosted PiS’s popularity ahead of its parliamentary elections.
Moldova: As the November 5 local elections approach, an increase in anti-government protests organized by individuals formerly affiliated with the now-banned Shor party – with possible financial support from Moscow – seem likely. Moldova’s refusal to pay what Gazprom claims it is owed is unlikely to result in significant retaliation, due to Moldova’s successful diversification of its gas supplies.
Security & Access
Battle for the Black Sea
Introduction
Since the beginning of Russia’s full-scale invasion, there has been a struggle for control of the Black Sea. The July 2022 Grain Initiative eased tensions somewhat, but since Russia’s decision to withdraw from this in the fall, the region is once again a hotspot. Aerial, naval and land operations have significantly escalated, reaching unprecedented levels in September 2023.
Both sides are attempting to meet their strategic objectives. Ukraine is working to undermine Russian military capabilities in Crimea in order to safeguard its vital naval trade routes. For its part, Russia is attempting to destroy Ukrainian port and grain infrastructures in the country’s southern oblasts.
Attacks on Crimea
In recent months, Ukraine’s armed forces have stepped up strikes on Crimea, in particular on Russia’s ships, airfields and air defense systems. Sevastopol, which serves as a key Russian fleet coordination and supply center, was the focus of the highest number of attacks. On September 13, using Western-supplied weapons, the Ukrainian army carried out a nighttime cruise missile attack on the Sevastopol naval base. Three of the ten missiles that were launched found their targets, causing extensive damage to the amphibious landing ship Minsk and the Rostov-on-Don, a diesel-electric submarine. Both vessels were in drydock for maintenance, and the shipyard is now unusable.
On September 17, Ukraine conducted a combined missile and drone strike against the S-400 air defense battalion located to the south of Sevastopol, echoing a similar attack carried out three days earlier in Yevpatoria in western Crimea. These were a critical part of increased efforts to cripple Russia’s defense capacities and air superiority.
These actions culminated in a missile strike on Russia’s Black Sea Fleet headquarters in Sevastopol on September 22. Initially, the Ukrainian military stated that the attack had resulted in the deaths of 34 officers, including the commander of the Black Sea Fleet. Video footage later emerged, however, that proved this last claim to be false.
During the period under consideration, there were several noteworthy landing operations. On August 28, Ukrainian special operations forces executed an amphibious raid in western Crimea, which was combined with a UAV attack and the launch of a Neptune anti-ship missile at a ground target in the vicinity. In a separate operation on September 12, Ukrainian forces successfully recaptured four oil rigs west of the Crimean coastline. They had been seized by Russia in 2014 and were being used as advanced radar outposts for monitoring maritime activities.
Russian air raids in Ukraine’s southern oblasts
Meanwhile, Russia continued to attack Ukraine’s southern oblasts, with a particular focus on the country’s Danube ports. Between July 2022 and mid-September 2023, Russian forces carried out 118 missile and drone strikes on Ukraine's Black Sea and Danube port infrastructures. As a result, grain exports in September 2023 were down 51% year on year.
In the wake of Russia’s withdrawal from the grain initiative, Odesa Oblast became a regular target of Russian attacks, with a particularly severe strike on September 25. These attacks extensively damaged a private hotel, the port of Odesa and grain storage facilities in the region.
Broader security picture
Some of the kamikaze drones used in these attacks fell on the territory of Romania, Ukraine’s neighbor and an EU and NATO member. On the night of September 4, drone wreckage was found in an area of Romania close to the Ukrainian border. Romania subsequently issued a protest note to the head of the Russian diplomatic mission in Bucharest, but to no effect. On September 26, Russian forces again targeted port facilities in Odesa Oblast, resulting in damage to the Orlivka-Isaccea border crossing between Ukraine and Romania, as well as to nearby warehouse facilities and vehicles.
Analysis & Forecasting
Over the reporting period, Ukrainian attacks on Crimea have been more coordinated and effective than at any other time since the start of the full-scale invasion. The Ukrainian military has begun deploying multi-domain operations that involve the use of drones, air-launched or surface cruise missiles, amphibious special forces groups and the oblast’s underground pro-Ukrainian network coordinated by intelligence operatives. The goal is to progressively isolate and erode Russian forces in the Black Sea theater via remote engagement. This has caused serious damage to the fleet’s ships and reputation. Observers believe that the ability of Russian forces to carry out wider regional patrols and to ensure a de facto blockade of Ukrainian ports will be reduced. Russia’s assets in the main naval bases are now increasingly exposed to long-range strikes. As a result, they may be moved beyond the range of Ukraine’s Western-supplied weapons systems, for instance, to the Novorossiysk naval base.
Political & Legal Updates
The prognosis for elections in 2024
As the hostilities continue and many Ukrainians cope with economic hardships, the subject of a potential presidential election re-emerged both domestically and abroad. However, the question remains whether this would be feasible under current conditions and how it would affect the country’s fragile social cohesion.
Parliamentary and presidential elections – which under normal circumstances would be held in October 2023 and March 2024, respectively – are prohibited under martial law. Despite this, President Zelenskyi’s comments during a recent trip to Canada suggested he had not completely ruled out the possibility. “We need to think about it, work on it – if everything works out, it can be carried out," he remarked. That said, he has also acknowledged that any election during wartime would present myriad challenges, from voting by military personnel to developing the means that would allow millions of Ukrainian refugees abroad to take part.
In 2019 Ukraine had over 35 million eligible voters. Currently, some 16 million citizens may have difficulties accessing polling stations. These include some one million servicemen, four million citizens living in territories currently controlled by Russia (not including Crimea), 5.8 million refugees and 5.1 million IDPs. As it would be next to impossible for these groups to participate in person, some experts have been discussing other options, such as online or mail-in voting.
Another issue is the cost. For the 2019 presidential election, a total of ₴2.4 billion (nearly $66 million) was set aside in the national budget. Printing the ballots for the parliamentary elections that year cost ₴281 million ($7.3 million). It is difficult to estimate how much wartime elections would cost. Some Western representatives have raised the topic of the elections, starting with Tiny Kox, president of the Council of Europe’s Parliamentary Assembly. President Zelensky has stated that Ukraine does not have financial resources and called on the country’s Western partners for assistance.
Several Republican voices raised their concerns over Ukraine declining to hold elections. Republican candidate Vivek Ramaswamy called Zelenskyi’s request for $135 million a “ballot box shakedown.” “Zelenskyi’s veiled threat to forgo democratic elections in Ukraine unless the American people foot the bill […] represents a new level of extortion of the United States.” During a recent visit to Kyiv, Republican Senator Lindsey Graham talked about the need for elections.
On the other hand, on September 18, 2023, over 100 Ukrainian civil society organizations signed a letter stressing the incompatibility of elections and war. Such an undertaking could “lead to a loss of legitimacy of both the process and the elected bodies, and very likely to a significant destabilization of the state in general,” the letter stated.
Analysis & Forecasting
With eligible voters scattered around the world, some 17% of Ukrainian territory under Russian control, an overall tense security situation and the destruction of significant amounts of election equipment, holding presidential elections in March 2024 appears highly problematic. Nevertheless, Zelenskyi’s reluctance to dismiss the possibility outright suggests that he is confident he would do well if it were held.
Although Zelensky remains the most trusted political figure in the country, his support is eroding. In the days following the full-scale invasion, 91% of Ukrainians supported the president. By July 2023 this figure had fallen to 81%, and in September 2023 it was 75%. This is reminiscent of the shift in public opinion following the 2019 elections. Zelenskyi won with a record 73%, but two years later his support was 21%. Postponing the election for much longer would likely decrease Zelensky’s chance for re-election.
It is hard to predict what a potential list of candidates would look like as the appeal of many of Ukraine’s career politicians declined after February 2022. Three out of four of the most popular candidates during the 2019 presidential elections currently have some of the lowest trust ratings: 73% of Ukrainians do not trust former president Petro Poroshenko, and 82% do not trust two former prime ministers, Yulia Tymoshenko and Yuriy Boyko.
Some new faces have emerged since the invasion: the second and third most-trusted politicians after Zelenskyi are Vitaly Kim, governor of Mykolaiv Oblast, and Serhiy Prytula, a leading fundraiser for Ukraine's armed forces, whose trust ratings are 64% and 51%, respectively.
Holding elections may negatively affect social cohesion and widen existing divisions. Following the suspension of pro-Russian parties in the wake of the full-scale invasion, Ukraine’s eastern and southern regions – those hardest-hit by the hostilities – lost their traditional representatives. Although the Army is the country’s most trusted institution, members of the military do not have the right to run for office. Organising wartime elections – both parliamentary and presidential – would thus proscribe any participation by many of the country’s new military leaders, including Valerii Zaluzhnyi, the enormously popular commander-in-chief of the armed forces.
Economy & Development Updates
GDP growth
The National Bank of Ukraine (NBU) is predicting a 2.9% growth rate for 2023. In the second quarter the economy grew by 19.5% year-on-year (see chart). This significant upturn can primarily be attributed to a low comparison base, as growth had been blunted by the Russian invasion. The first quarter of 2023 was still marked by this wartime economic decline. Renewed growth has been largely driven by increased domestic consumption, as Ukrainians adapt to a feeling of (relative) stability a year and a half into the full-scale war. Economists are suggesting that, despite the rebound in consumer demand, Ukraine's economy appears to have hit a plateau: in the first two quarters of 2023, GDP stalled at 75% of its pre-war level. Despite increased demand, companies are facing two key challenges: an unpredictable business climate and a shortage of customers, since nearly one Ukrainian resident in four lives below the poverty line.
Source: State Statistics Service of Ukraine
Inflation
In August 2023, the country’s annual consumer inflation rate dropped sharply to 8.6%, down from 11.3% the previous month. According to the State Statistics Service of Ukraine, deflation was observed for the second month in a row, with prices falling by 1.4%. This faster-than-expected deceleration was driven primarily by more abundant food supplies, especially newly harvested fruit and vegetables. In response, the NBU Board lowered its key policy rate from 22% to 20%, effective September 15, 2023.
Analysis & Forecasting
Ukraine's economy is proving to be resilient and is showing signs of recovery, but the ongoing war and its associated challenges remain significant concerns for the country's economic outlook. Abundant harvests will curb price increases in the coming months. Combined with the NBU’s efforts to keep foreign exchange rates stable, this is expected to contribute to a further drop in inflation. On the other hand, significant cost pressures stemming from war-related losses, potential power outages and higher fuel prices may limit this. Furthermore, the cost of sustaining Ukraine’s defense capabilities, addressing the aftermath of Russian missile attacks and managing substantial fiscal deficits – notably in the energy sector – represent increased budgetary requirements.
Bans on Ukrainian imports
On May 2, 2023, the European Commission adopted temporary restrictive measures on a series of Ukrainian foodstuff imports, including grain. On September 15, after determining that such imports no longer posed a risk to farmers in the Member States bordering Ukraine, it lifted the measures. Of the five countries that had originally sought the ban, Romania implemented an export-import licensing system, as part of an agreement with the Ukrainian government to protect Romanian farmers, while Bulgaria lifted the ban, since doing so would lower the price of basic food items.
However, Poland, Slovakia and Hungary independently introduced their own bans on Ukrainian agricultural products. Hungary's was the most restrictive – an indefinite ban on 24 categories of Ukrainian products. Poland extended its list of banned products to include wheat flour, bran and oilseeds, while Slovakia imposed restrictions until the end of the year, but only for products that were on the Commission’s original list. These unilateral actions violate the rules of the EU Single Market, as trade policy is determined by supranational EU bodies.
The conflict escalated after Ukraine filed a complaint with the World Trade Organization (WTO) over these bans. The agriculture ministers of Slovakia and Ukraine reached an agreement to implement a licensing system for grain trading, but the disputes with Poland and Hungary continued. While transit is permitted, additional permits and lengthy waiting times mean exports of Ukrainian agricultural products that cross the Polish border have fallen to a third of last year's volume.
Analysis & Forecasting
Agriculture is a fundamental component of Ukraine's economy. In 2021 some 14% of the country’s population were employed in the agricultural sector, contributing 10.9% to GDP and accounting for 41% of export income. In 2022, agriculture’s share of GDP fell slightly to 8%, while its contribution to total exports surged to 53%. The need to sell and export harvests is crucial for the livelihoods of many Ukrainians.
Russia’s decision to withdraw from the Black Sea Grain Initiative and its constant shelling of port infrastructure has significantly affected Ukraine’s export capacities. September grain exports were down 51% year on year, while grain stores within Ukraine are growing. Thanks to favorable weather conditions, the Ukrainian Grain Association has projected a harvest of 80.5 million tons of grains and oilseeds in 2023, an 18% increase over the previous year’s total of 68.3 million tons.
Russia also enjoyed an exceptional harvest and is – for the time being – supplanting Ukraine as a source of grain. Already the world's largest exporter, Russia is set to account for 22.5% of global wheat exports for the 2023-24 harvest season, a significant upturn from the previous year (15.9%). This can be partially attributed to the fact that one-quarter of Ukraine's wheat-producing areas are under Russian control, and these produce six million tons of wheat. This is 13% of Russia's total wheat harvest, and has a value of at least $1 billion, according to research using satellite imagery by NASA’s food security and agriculture program.
A bumper harvest is one of the factors driving wheat prices down. However, experts caution that further escalation in the Black Sea region may cause prices to rise quickly. Russia relies heavily on its Black Sea ports, which process 70% of its wheat exports, and which serve as a vital conduit for global grain supplies.
In Ukraine, small-scale farms and large agricultural corporations alike are predicting that fewer hectares of land will be planted next season, which will result in five to six million fewer tons of grain, including wheat and barley – a significant loss. This is the equivalent of nearly one-third of the current harvest. The primary reasons include limited access to financing, occupied territories, mined farmlands, the implosion of export logistics after the shutdown of the grain initiative (and the lack of prospects for its renewal) and low purchase prices due to the high cost of logistics.
To summarize, the war and disruptions in Ukraine's grain exports have not only affected the country's economy but are also reshaping the dynamics of the global grain market, with Russia emerging as a dominant player. The near-term outlook indicates that Ukraine's agricultural difficulties are expected to continue until export routes are restored. Much also depends on the results of the Slovakian and Polish elections, which are putting pressure on political leaders to appease voters, including farmers dissatisfied with the war's impact on the economy. Ukraine's strong agricultural sector also poses a significant challenge to its EU membership, as integrating such an agricultural powerhouse would require a substantial overhaul of the EU's existing farm subsidy system.
Humanitarian & Environmental Trends
Organized evacuations from frontline and border communities
Now that the front lines have been relatively stable for almost a year, large-scale population movements have momentarily abated. In certain areas of Kherson, Donetsk, Kharkiv and Zaporizhzhia oblasts, sudden escalations in hostilities have led the authorities to evacuate frontline communities. Although mandatory evacuation is permissible under martial law – and, under certain circumstances, international humanitarian law – in practice Ukrainian officials are more likely to intervene only when children are in danger.
For instance, on September 14, after one child was killed and another injured in a Russian air attack, the Kherson Oblast Administration issued a mandatory evacuation order for families with children. The order covered 31 settlements in the frontline communities of Bilozerka and Darivska. By October 5, 305 children (out of a total of 432) and their families had been evacuated.
In late August, Ukrainian authorities issued an evacuation order for children from the Vasylivka and Polohy districts (Zaporizhzhia Oblast), moving 54 children and 67 accompanying family members to safety, most likely to Zaporizhzhia city and district. The number of registered internally displaced persons (IDPs) in the Zaporizhzhia district increased by about 8% (some 12,000 people) since the beginning of the June counteroffensive. However, this upswing is likely reflective of IDPs returning from other areas of Ukraine and abroad rather than due to frontline evacuations.
In Kharkiv Oblast authorities ordered the mandatory evacuation of children in several areas, including ten border communities near Vovchansk on July 17. Following that, Kharkiv city prepared to accommodate 3,500 evacuees, with the possibility of increasing this to 15,000. On August 10, 2023, the months-long deterioration of the situation in the Kupiansk district (Kharkiv Oblast) resulted in the mandatory evacuation of a portion of the population. However, some 10,000 inhabitants remain reluctant to leave. In March 2023, children and people with disabilities had already been evacuated. Local authorities continue to encourage people to move to Kharkiv city and district, the regional center, currently home to more than a third of all registered IDPs in the oblast.
Analysis & Forecasting
Evacuation orders are likely to continue, especially after tragic incidents involving children. In recent months, however, fewer people have actually complied, and the Ukrainian government seems hesitant to enforce these orders, a trend that is expected to continue. As more areas are placed under mandatory evacuation, it will become increasingly challenging for authorities to engage with residents who choose to remain, as well as with those who return to communities near front lines.
At the end of the last heating season, substantial numbers of people returned to various oblasts across the country, both from abroad and other parts of Ukraine. As of late May 2023, the IOM estimated that about 4.8 million individuals had returned to their homes, including to communities near active hostilities.
Ukrainian authorities, in collaboration with humanitarian organizations, face the complex and contradictory task of supporting returning populations in frontline communities, while discouraging them from staying in areas under mandatory evacuation. Given that communities like Kupiansk or cities such as Sloviansk or Pokrovsk (Donetsk Oblast) are likely to remain at-risk areas, developing programs for livelihoods and infrastructure reconstruction conflicts with the potential need to empty areas under threat.
If this situation is not addressed quickly and systematically, communities with a high number of returnees in the vicinity of the front line may experience increased tensions with respect to the national government. This, in turn, could lead to the government losing the trust and support of the vulnerable populations in these areas.
Neighboring Countries
Poland
In September, a crisis unfolded in the relations between Poland and Ukraine after the European Commission decided to lift the restrictions on Ukrainian agricultural imports that it had introduced to protect local farmers in Hungary, Bulgaria, Poland and Slovakia. Poland, Hungary, and Slovakia, however, unilaterally decided to keep these restrictions in place. Ukraine threatened to sue, with Prime Minister Denys Shmyhal hinting at reciprocal bans. President Zelenskyi’s speech at the UN General Assembly – in which he said that certain European countries’ actions were tantamount to aiding Moscow – exacerbated tensions. Poland responded with strong rhetoric. Government spokesman Piotr Muller stated that Poland would pull back from providing additional supplies of weapons beyond those stipulated in current agreements. It will, however, maintain, a maintenance hub in Rzeszów. In contrast to its previously more diplomatic stance, a Polish official called for the extradition of Yaroslav Hunka, a 98-year-old Ukrainian Nazi veteran who had earlier been honored by Canadian parliamentarians and President Zelenskyi, leading to a diplomatic scandal and the resignation of the speaker of Canada’s parliament.
Analysis & Forecasting
Poland’s decision to extend the ban on Ukrainian agricultural imports, despite the European Commission’s position, highlights growing tensions within the European Union and threatens Western solidarity. Ukraine is seeking substantial military and economic aid packages from the United States and the EU, amid skepticism regarding the effectiveness of its counteroffensive against Russia. The grain dispute adds complexity to these negotiations, potentially delaying critical support.
The ruling Law and Justice (PiS) party is trying to appeal to the largely anti-Ukrainian electorate of the far-right Konfederacja Party while attempting to not alienate its more moderate anti-Russian base. This political calculation has led to increasingly radicalized rhetoric. There is both social and political consensus in Poland on the need to protect the Polish agricultural market, and the government’s recent stance – combined with Ukraine’s official reaction – have helped PiS maintain its position in the runup to the country’s parliamentary elections.
Moldova
Following an audit conducted by Norway’s Wikborg Rein Advokatfirma A.S. and the UK-based Forensic Risk Alliance & Co., the Moldovan authorities announced that Moldova’s debt to Gazprom totaled $8.6 million. This is a fraction of the $709 million that Gazprom claims it is owed. Gazprom has disputed these figures, emphasizing that it disapproved of the choice of audit firms from the beginning. The Moldovan government originally signaled its intention to audit the debt in October 2021 during its negotiations for a five-year agreement with Gazprom.
On the political front, on September 22 Moldova’s Anti-Corruption Prosecutor’s Office detained MPs Alexandr Nesterovschi and Irina Lozavan. The pair were charged with money laundering and accepting bribes from Ilan Shor, former leader of the now-banned Shor party, in exchange for reviving the defunct Renasterea (Rebirth) Party, which can now be de facto controlled by Shor, who is currently a fugitive in Israel following his conviction on corruption charges earlier this year.
Analysis & Forecasting
Politically, the coming weeks will see more efforts by Moldovan authorities to curtail Shor’s influence in the run-up to local elections on November 5. This could lead to more anti-government demonstrations, as Shor has shown that he can mobilize people for such protests. Reportedly, this includes payments to protesters.
Moldova’s refusal to pay the millions demanded by Gazprom is unlikely to result in significant retaliation, due to Moldova’s successful diversification of its gas supplies. Gazprom continues to supply all of Transnistria, which will certainly continue given the separatist region’s relations with Moscow.
Moldova receives most of its electricity from Transnistria’s Cuciurgan power plant, which relies on gas supplied by Gazprom. However, the plant is an important source of revenue for the separatist government, while the government-controlled parts of the country are the source of equipment and spare parts for the plant. This interdependence makes the Cuciurgan plant an unlikely means for Transnistria to exert pressure on Chişinău. Furthermore, on 29 September it was announced that the Cuciurgan plant would renew the current agreement, whereby it supplies 85% of government-controlled Moldova’s electricity needs, through October. Negotiations concerning subsequent months are ongoing.