Graham Stack in Kyiv for Business New Europe (www.bne.eu)
Moldova’s governing coalition, the Alliance for European Integration, may be receiving plaudits from European politicians over its EU accession plans, but at home it’s having to deal with a problem common to many poor states in this part of the world, namely the presence in government of controversial businessmen-turned-politicians.
The controversy centres on Vladimir Plahotniuc, Moldova’s richest man and now first deputy speaker of parliament. Plahotniuc, with a fortune estimated at $1.7bn (according to Ukrainian paper Delo ), was for a long time a name without a face. The businessman accumulated his wealth behind the scenes during Communist Vladimir Voronin’s presidency in 2001-2008, apparently by means of energy trading, control of petrol retailer Moldpetrom, real estate operations and banking, with ties to Voronin and Voronin’s son Oleg believed crucial to his success. But while at the time public attention focused on Oleg Voronin, insiders pointed to Plahotniuc as the real mover.
They have been since proved right. When Voronin reached the end of his second term as president in 2009, Plahotniuc seems to have switched allegiance to Voronin’s anticipated successor Marin Lupu, a popular politician from the reformist wing of the Communist Party of Moldova. But Voronin unexpectedly passed over Lupu when deciding whom he would support as successor. When parliamentary elections in April 2009 resulted in a hung parliament, Lupu split from the Communists to head the Democratic Party, a hitherto moribund part of the opposition camp, thus becoming kingmaker for the opposition. Plahotniuc followed him, becoming the Democratic Party’s main sponsor.
Then in 2010, the man whose name had only been a rumour became almost overnight a public figure, helped by the fact that he also controls the country’s largest TV channel, Prime. When fresh elections were finally called for November 2010, Plahotniuc popped up at number-two spot on the Democratic Party’s electoral list only weeks before polling day.
This time round, with Lupu again playing a kingmaker role in the post-election horse-trading, Lupu became speaker of parliament and acting president – and Plahotniuc first deputy speaker of parliament, marking a meteoric entry into politics.
And just as importantly, Plahotniuc’s baby, the Democratic Party, is in charge of the economic bloc in the government, with its man Valeriu Lazar as deputy prime minister and economy minister. Lazar’s remit includes state-owned companies, and the thorny questions of raising their tariffs that are kept low as indirect social subsidies, as well of their privatisation, as demanded by Moldova’s international lenders.
You don’t have to be a conspiracy theorist to see that having the country’s richest man, with a shadowy background, in a position to directly influence privatisation of the family silver is not likely to inspire public confidence, even if the strongest calls for privatisation are coming from the International Monetary Fund (IMF). “It raises questions about where politics stop and business starts. There are fears expressed in the media that Mr Plahotniuc could manage any privatisation for his own benefit,” says Alex Oprunenco, political expert at think-tank Expert Grup.
Oprunenco points out that the intermingling of politics and business is not limited to Plahotniuc – Prime Minister Vlad Filat is also often named as one of the country’s richest men.
Calling up trouble
Public suspicion of Plahotniuc’s influence on state companies seemed confirmed in January when state-owned Moldtelecom, Moldova’s fixed-line telecommunications operator, announced a sharp rise of domestic tariffs – by two or three times according to price category. Moldtelecom, still under Voronin-era management, is a profitable company that pays large sums into the budget, while at the same time domestic tariffs are held low as a subsidy to the rural population and pensioners.
Moldtelecom’s management justified the tariff hike as a reasonable step towards the abolition of cross-subsidisation. The company makes its money from international calls, thanks to the huge number of Moldovans living and working abroad, and has traditionally kept these high to subsidise the low domestic rates. At the same time as raising domestic prices, it cut the international rates, a move it called “rebalancing.”
Moldovans are sceptical. The population are currently reeling under the double-whammy of soaring food prices and hiked energy prices due to IMF demands, at the same time that public sector wages have been frozen. Moreover, the post-election political climate remains highly charged, with the Democratic Party the focus of flak from the now oppositional Communists, as well as a silent rival to Prime Minister Filat’s Liberal Democratic party. “The struggle over Moldtelecom could unplug the whole coalition,” says Oprunenco.
Prime Minister Filat immediately distanced himself from the tariff hike, saying he saw in it the “the influence of certain business circles,” a clear reference to Plahotniuc, and Economy Minister Lazar started to backtrack, saying while the decision might be justified, the timing was not. The new tariffs were due to apply from March 1, but Moldova’s anti-monopoly agency suspended the decision in February.
But hardly had the government backed down on this issue, it found itself wrestling with another Moldtelecom scandal, this time more directly Plahotniuc-related. It transpired on February 24 that over the course of the previous two weeks, Moldtelecom, together with 13 other large companies – including the Moldovan postal service, Chisinau airport and the health and education ministries – had transferred bank accounts hitherto held with the state-owned savings bank Banca de Economii, to the private Victoria bank, the country’s largest private bank, which Plahotniuc ran until entering parliament in November.
The details of this sudden migration of bank accounts are still unclear. Plahotniuc disputes the claim, saying that Victoria Bank has had some Moldtelecom accounts since 2007; Plahotniuc’s office wouldn’t comment to bne. Other companies have said that Victoria bank simply offers better conditions. Ex-president Voronin is using the story to accuse the government of destabilising both Banca de Economii and Moldtelecom in the run-up to privatising them to insider interests. ie. Plahotniuc. “The problem is that with Plahotniuc there in the Democratic Party, people are prepared to believe the worst, and his presence there makes opposition claims about wrongdoing more credible,” says Cornel Ciurea of think-tank VIITORUL. “But it does all look very strange.”
What’s in a name
On a personal level, Platoniuc’s appointment and heightened profile has done nothing to reassure the public about the mysterious oligarch. At the same time as the ongoing political battles over Moldtelecom, Plahotniuc has had his own personal scandal to deal with. In January, Romanian investigative journalists discovered that Plahotniuc – who like many Moldovan politicians, including Filat, also has Romanian citizenship – had recently changed his name in Romania from Plahotniuc to Ulinici. Thus he had effectively acquired a second legal identity in Moldova’s neighbour, and used it to register real estate there.
Plahotniuc claimed to the press that the name change was intended for the benefit of his son who is studying in Romania and who, Plahotniuc claims, faces discrimination over his Slavic surname. The excuse predictably convinced absolutely no one, but instead left Moldovans wondering quite literally: Who is Mr. Plahotniuc?