When he was finally captured, the legendary bank robber Willy Sutton was asked why he robbed banks. “Because that’s where the money is,” he replied.
That stunningly simple truth must have been in the minds of those who contrived to steal approximately $500 million from the three largest banks in the small Eastern European country of Moldova.
Moldova is a country with only 3.5 million people and it is likely to be the next battleground between the European Union and Russia. The thieves stole what amounts to one-tenth of Moldova’s annual Gross Domestic Product. The only person who benefits from this scandal is Vladimir Putin.
The loss was discovered last fall, about the time of parliamentary elections. Suspicions arose that the timing might have been intended to influence the elections. The pro-European Union government survived, but barely, against the pro-Russian Socialist Party.
If the pro-Russian advocates prevail in the next election round it will amount to a cost-free win for Putin. He wants to create a cordon sanitaire around Russia consisting of countries economically and politically beholden to his purposes. With Crimea and his persistent supply of rebels in the Eastern Ukraine he has stymied the United States and its allies. Adding Moldova will give the U.S. another poke in the eye with little fear of pushback, considering the no-action record of the Obama Administration.
To add to Moldovan nervousness, the prime minister recently resigned over allegations he fudged his educational credentials. Replacing him as interim P.M. is Foreign Minister Natalia Gherman. She is strongly pro-EU.
Nearly eight months after the money loss was discovered, the thief or thieves have not been identified. There is a suspect, Ilan Shor, a 28-year-old businessman. He denies any involvement and, in recent local elections, was elected mayor of his town.
Early this year, the government asked Kroll, the international risk assessment firm, to do an investigation. The parliament’s Speaker leaked some of Kroll’s report: “There appears to have been a deliberate plan to gain control of each of the banks and subsequently manipulate transactions to gain access to credit, whilst giving the appearance to the contrary.”
It isn’t clear where the money went, though clues indicate it may have been spread around several Russian and British banks. The three Moldova banks, meanwhile, had to be bailed out by the government.
Moldova has strict monetary exchange controls. A single transaction is restricted to $150,000. Thus, it is impossible for $500 million to go unnoticed by the Central Bank. An analyst with Bank of America Merrill Lynch, Vadim Khramov, told the EU Reporter that it would take months—even years, to convert that amount of Moldovan currency into dollars.
Does this mean some officials were conspirators or looked the other way? A full-scale government investigation is supposed to answer that question, but its publication was expected in May and hasn’t happened yet.
At stake is the long-term direction of the country. Its pro-Western forces want to align Moldova with the European Union and signed an association agreement with the EU last year. The Kremlin has been pushing for Moldova to join its Eurasian Economic Union instead. As a reaction to the EU agreement, Russia embargoed Moldovan fruits, vegetables, and wine, a major source of the country’s exports earnings.
Two regions of Moldova, Gaguazia and Transnistria, are populated largely by Russian speakers. Putin operatives worked hard to support candidates there in local elections. Nationally, local elections in mid-June were a draw. This week runoffs were to be held in the districts not settled last month.
It is unlikely the EU would accept Moldova into membership without a firm commitment by its government to reform banking and the judiciary.
Negotiations with EU began this week. If they fail there is another option for Moldova: a merger with neighbor Romania. The two share language and cultural history. Moldova was once part of Romania. Rejoined, Moldovans would become Romanian citizens and join the European Union.
Romania has a population and GDP about five times that of Moldova.
Public opinion polls show a majority of Romanians support reunification. Moldovans do not; however, this banking crisis may be a turning point.
The core of Moldova’s independence movement (from the USSR) in the late 1980s was the Popular Front, which openly called for Romanian reunification. During the Cold War, reunification had been a forbidden subject because the Romanians could not afford to offend the Soviets. After the Soviet Union’s fall, Romania was the first country to recognize Moldova’s independence. It also provided weapons to Moldova while Russia supported separatists in Transnistria.
A brief war in Transnistria in 1992, as well as concerns in Gagauzia, convinced many Moldovans that reunification could plunge the country into civil war. With Romania allowing dual citizenship to any Moldovan who wanted it, there was no immediate need for reunification. The banking crisis may force the Moldovans to reconsider reunification as the only viable option for survival.
As part of Romania, Moldova’s citizens could enjoy greater economic development and could seek work anywhere in the EU.
The alternative is for Moldova to fall into Putin’s orbit for years to come.