Sun, May 11, 2014 page14

• Transdniestrians in economic EU-Russia tug-of-war

  • By Isabelle Wesselingh / AFP, TIRASPOL, Moldova
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  Founded under the tsars, the KVINT brandy distillery has survived three wars, weathered the upheavals of being under Communist rule and made it through the collapse of the Soviet Union.

  Today, the wine and spirit producer operates from Transdniestr, a country that does not exist in the eyes of the world, but whose economy is facing a though choice between Russia and the EU.

  The pro-Russian breakaway region, a narrow strip of land wedged between Ukraine and the Dniestr River, proclaimed its independence from Moldova in 1990. Although it is not recognized by any state, it has its own parliament and currency and exists in a state of de facto independence since the 1992 War of Transdniestr.

  

  A KVINT employee rolls out a red carpet between brandy barrels at the spirit maker’s flagship distillery in Tiraspol, Moldova, on April 17.

  Warning: Excessive consumption of alcohol can damage your health

  Photo: AFP

  “KVINT was founded in 1897 and of course, it lived through all the ups and downs of history in this region,” Anna Kozyrina, the company’s public relations manager, told reporters in a small museum in Tiraspol, the de facto capital of Transdniestr.

  The famous spirit made by KVINT — known to Russians, Ukrainians and Moldovans as cognac — has made it to the Vatican and even into space, thanks to Russian cosmonauts.

  Yet the distillery was hit hard by former Soviet leader Mikhail Gorbachev’s anti-drinking campaign in 1986, which saw part of its vineyards uprooted and forced it to produce fruit juices instead of spirits for a year.

  Since then, KVINT has replanted more than 1,500 hectares of vineyards and now employs 1,500 people — a big step up from the 600 workers it had before the fall of the Soviet Union — to produce the 20 million bottles of booze a year that generate it revenues of US$50 million. KVINT’s top-end Divine brandies are exported to Italy and China, although Russia, Moldova and Ukraine remain its main markets.

  Yet as the crisis between Russia and the West over Moscow’s incursion into Ukraine deepens, KVINT and the key players in the Transdniestrian economy face two nagging challenges: The first is a potential erosion of trade with Kiev, but the main bone of contention lies with an association agreement Moldova is due to sign next month with the EU, a move that the pro-Kremlin authorities in Tiraspol fiercely oppose.

  “What is happening in [the Moldovan capital of] Chisinau, these moves toward the European Union are counterproductive,” Transdniestrian President Yevgeny Shevchuk told reporters.

  He wants the enclave to join the Kremlin-led Customs Union, a nascent alliance at the heart of Russian President Vladimir Putin’s bid to extend Moscow’s influence.

  “Of course, the authorities in Tiraspol have to show that the EU is not a necessary partner for the economy, rather Russia. However, trade statistics show the majority of exports go to Europe,” a member of the EU Border Assistance Mission to Ukraine and Moldova said.

  The 28-country bloc absorbs up to three-quarters of the total volume of goods produced in the enclave, compared with the 15 to 20 percent of exports sent to Russia, according to data provided by the mission.

  Many European high-street brands have their clothes and shoes produced in Transdniestr due to the lower labor costs.

  Local textile giant SA Tirotex exports about 70 percent of its production, mainly to Europe.

  “Transdniestr has a lot to gain from an association agreement with the EU,” said Pirkka Tapiola, who heads the EU Delegation to the Republic of Moldova.

  Accusations that the deal — which includes a free-trade pact — would block access to markets in the East “are a myth,” he said, adding that “the agreement is not limiting Moldova’s sovereignty to sign trade agreements” with others, a reference to Russia.

  Yet the Kremlin’s influence in Moldova and Transdniestr extends beyond being an important export market, since both are heavily dependent on Russian gas. In addition, tens of thousands of both area’s residents work in Russia to escape poverty.

  With the tensions in Ukraine rising, the gap between the pro-European government in Chisinau and the pro-Russian separatists in Tiraspol has widened.

  At the moment, firms in Transdniestr are, like Moldovan companies, exempt from EU custom duties even though Tiraspol imposes duties on EU imports, but if the new trade agreement enters in force, goods from the enclave could face heavier duties.

  “The risk for Transdniestr — if they refuse any kind of compromise with Moldova and the EU — is isolation,” a source said.

  Yet for ordinary citizens like vegetable seller Yelena Rotari, there are fears of what it could mean for their livelihoods.

  “We were told that with the EU, we will not be able to sell our products directly anymore, we will have to sell them to supermarkets for a much lower price,” she said.
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