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Moldova: Romania Criticizes Chisinau's Decision To Cancel Sale Of Energy Networks

Moldova decided this week to pay its energy debts to a Ukrainian company by handing over shares in one of Moldova's troubled electricity networks. The move has sparked criticism from the Romanian government, with Prime Minister Adrian Nastase saying the decision would deter Romanian firms interested in buying the networks. He also warned that Romania might follow Ukraine's lead and demand shares in Moldovan companies in return for unpaid debts. RFE/RL correspondent Eugen Tomiuc reports.

Prague, 31 August 2001 (RFE./RL) -- The Romanian government this week criticized a decision by Moldova to cancel the sell-off of two of the country's electricity networks in which two private Romanian energy companies had expressed interest.

Moldovan officials earlier this week announced that the sell-off of two of the countries biggest distribution networks (REDs) -- RED North and RED Northwest -- had been canceled.

The decision came as a Moldovan court ruled that shares of RED North must be auctioned off to partially repay the $5 million Moldova owes the Ukrainian company Energoalians for electricity sales over the past few years. According to the ruling, Energoalians has priority in buying the shares.

The announcement came after Electrica and Termoelectrica -- two Romanian energy firms interested in the privatization of the Moldovan networks -- sent experts to Moldova to assess the situation.

Romanian Prime Minister Adrian Nastase was quick to criticize the decision to cancel the sell-off and repay the debts to the Ukrainians with shares in the two companies:

"It is not normal, when we want to participate in [the Moldovan] electricity networks sell-off, to learn that [Moldova's energy] debts to Ukraine have been transformed into shares in these networks, and that the public bidding -- in which two Romanian firms were involved -- was canceled two or three days ago."

Nastase warned that Romania might request similar treatment from Moldova, which owes Bucharest some $32 million in unpaid energy bills. He also urged Romanian authorities and companies to be more pragmatic and aggressive in tackling the issue of Moldova's debts to Romania.

Romania and Moldova share what they call a "privileged relationship" based on kinship and common language. Moldova was part of Romania before World War II, and some 65 percent of its 4.5 million population speak Romanian.

However, economic cooperation between the two countries has been very limited in the decade since Moldova proclaimed independence from the Soviet Union. Both Romania and Moldova -- with monthly per capita incomes of some $100 and $30 respectively -- are among the poorest European states.

But while Romania is gradually shifting toward integration into Western structures, Moldova -- which voted Communists back into power earlier this year -- has recently begun to lean further toward Russia, Ukraine, and other former Soviet republics.

Moldova's Communist president, Vladimir Voronin, says his pro-Moscow orientation is based mainly on economic pragmatism. Moldova has long been heavily dependent on Russian oil and gas, while the huge Russian market can easily absorb Moldova's main products - wine, tobacco, and food.

Russia is by far Moldova's largest trading partner, receiving almost 40 percent of Moldovan exports, while Romania accounts for a mere 9 percent. Some 35 percent of Moldovan imports originate in Russia and Ukraine, compared with less than 16 percent in Romania.

Moldova also owes Russia some $600 million in unpaid energy bills, making it vulnerable to Russian pressure -- as happened last winter, when Russia temporarily cut off gas deliveries because of late payments.

Foreign direct investment in Moldova accounts for a mere $350 million. Russia constitutes the main foreign investor, with some $150 million -- or more than 40 percent -- invested.

When he came to power in April, Voronin also pledged to bring Moldova into the fledgling Russia-Belarus Union. But little has been done so far, and a visit earlier this week to Minsk by Moldovan Prime Minister Vasile Tarlev ended with no mention of the union.

Despite Voronin's communist rhetoric, Tarlev -- a technocrat -- is increasingly conscious of the troubles Moldova's economy is facing as winter draws near. Yesterday, he indicated his government's interest in increased economic cooperation with Romania -- which may become an alternative source of energy during winter.

Tarlev yesterday tried to water down the fledgling privatization dispute with Bucharest. He refused to comment on Nastase's remarks regarding the cancellation of the deal, and said Moldova was willing to improve its economic relations with Bucharest.

But he defended the decision to cancel the sell-off of the two energy networks, saying Moldova "has not lost anything." He also pointed out that the deal was solely his government's business: "Each state has its own major interests and has the right to modify, to solve, or to initiate certain issues."

Tarlev also announced that he will meet with Nastase and Ukrainian Prime Minister Anatoly Kinakh in Chisinau in mid-October. The meeting, he said, was meant to improve economic cooperation between Moldova, Romania, and Ukraine.