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Putin’s war raises tensions in Moldova and its pro-Moscow enclave

Tensions are rising in the pro-Russian separatist territory of Trans-Dniester in Moldova, with ominous comments from Moscow raising fears that the conflict in Ukraine may extend to its neighbor. Just back from the enclave, a senior security monitor says neither side wants to get involved in Russian President Vladimir Putin’s war.

Claus Neukirch heads the Organization for Security and Co-operation’s mission to Moldova where he facilitates the search for a settlement over Trans-Dniester, where breakaway authorities have been in conflict with various Moldovan governments for 30 years.

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The trip to Tiraspol, the capital of the self-declared republic, followed a series of unexplained explosions in Trans-Dniester that set nerves jangling. Shortly before, a Russian general included Trans-Dniester in Moscow’s war aims, arguing that ethnic Russians there were being abused.

What comes next in Ukraine is impossible to predict, and differences between Moldova and Trans-Dniester run deep. With 1,500 Russian troops stationed in the territory, just 70 km (43.5 miles) north west of the Ukrainian port of Odesa, Moscow has a dominant voice.

Still, “this is also an opportunity,” said Neukirch, speaking on Saturday at the OSCE’s permanent mission in Chisinau, Moldova’s capital. “To a certain extent they are together in this crisis.”

The war has cut both sides off from a vital trade route, through the Black Sea port of Odesa, while Ukraine’s move to close its land border with Trans-Dniester has for the first time forced all of the territory’s exports and imports to pass westward, through Moldovan customs.

For all its pro-Russia orientation, 54 percent of exports from Trans-Dniester went to the European Union in 2021, compared with 14 percent to Russia and 9 percent to Ukraine, according to the European Union’s Border Assistance Mission to Moldova and Ukraine. That trade would be jeopardized should Russia take control of the territory, a move that would subject it to US and EU sanctions.

On Friday, Moldovan and Trans-Dniester negotiators staved off a potential energy crisis, extending a contract for Moldova to buy electricity from power plants over the Dniester River, in Trans-Dniester, ahead of Sunday’s expiration date.

At the same time, Moldovan officials agreed to allow a metals factory important to the Trans-Dniester economy to keep working for a similar period, while ecological concerns are ironed out. The plant is a significant revenue earner and employer, exporting much of its product to Poland and importing scrap metal to feed its furnaces from Romania, both EU member states.

“We support all the positive processes that take place here,” said Artur Dmochowski, special envoy to the OSCE’s current Polish chair, in a statement on Saturday. He had traveled to Tiraspol with Neukirch. “We welcome the recent involvement of the sides at a high level, which allowed the resumption of the activity of the metallurgical plant in Râbnița.”

There is more cause for concern than hope, however, so long as the war in Ukraine continues. Earlier in the week, a series of attacks and explosions were reported on Trans-Dniester soil, including at the headquarters of the state security building, an airfield, and a large AM radio transmitter.

Nobody was injured and no one claimed responsibility. The Trans-Dniester authorities blamed Ukraine for the attacks, while Ukraine accused Russia, and Moldova cited pro-war factions within Trans-Dniester.

Russian forces at the same time destroyed the only bridge connecting a region of Ukraine south of Odesa to the rest of the country. That heightened long-held concerns in the port city that Russia’s Black Sea Fleet could attempt an amphibious landing in an area Ukrainian forces were unable to reach, and then march north to Transnistria, creating a new front in the war.

With the bridge destroyed, any Ukrainian forces heading south, or Russian ones on their way to Trans-Dniester, would have to pass through territory controlled by Moldova, which has minimal armed forces.

Who was responsible for the attacks and what plans Russia has for Trans-Dniester or Moldova more widely, remains unclear. The Russian military’s ability to pull off such an amphibious attack, or to support it by breaking through Ukrainian defenses to reach Trans-Dniester from the east appear, for now, limited.

Even so, the moves have left Moldova in a precarious situation: Still dependent on Moscow for much of its energy supplies, vulnerable to propaganda pumped across the Russian TV channels that still air across the country, and politically divided.

The Russian threat to break a corridor through to Trans-Dniester came a day after Moldova’s President Maia Sandu signed into a law a ban on the display of two Russian pro-war symbols -– the ‘Z’ painted on Russian tanks, and the St. George ribbon that commemorates the Soviet Union’s World War II victory over Nazi Germany.

Russian Foreign Ministry spokeswoman Maria Zakharova said the consequences of the ban would be “painful for Moldova.”
Officials in Chisinau are awaiting with apprehension the annual Victory Day celebrations on May 9, when many traditionally wear the St. George ribbon.

That, Moldova’s Foreign Minister Nicu Popescu said in a video briefing, is “a very dangerous new moment in the history of our region.”

Read more: Ukrainian official: Russia ready to use Trans-Dniester to move on Moldova or Ukraine

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Ukraine army denies claims Lysychansk is ‘encircled’

The Ukrainian army on Saturday rejected claims that Moscow-backed separatists and Russian forces had surrounded the key eastern city of Lysychansk, but said heavy fighting was ongoing on its edges.
“Fighting rages around Lysychansk. (But) luckily the city has not been encircled and is under control of the Ukrainian army,” Ruslan Muzytchuk, a spokesman for the Ukrainian National Guard, said on Ukrainian television, after a separatist spokesman made the allegations earlier in the day.
Capturing the city would allow the Russians to push deeper into the wider eastern region of the Donbas, which has become the focus of their offensive since failing to capture Kyiv after launching their military operation in Ukraine in late February.
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Across the Donets river from Lysychansk, the Russians seized the neighboring city Sievierodonetsk last week.
Andrei Marotchko, a spokesman for the separatist forces, earlier told the TASS news agency: “Today the Luhansk popular militia and Russian forces occupied the last strategic heights, which allows us to confirm that Lysychansk is completely encircled.”
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China adds $45 billion in stimulus to pay for infrastructure projects

China announced another stimulus measure to finance infrastructure projects, part of its push to drive investment and increase employment in the second half of this year as the economy starts to recover from the effects of Covid lockdowns.

The government will raise 300 billion yuan ($44.8 billion) to finance infrastructure projects by selling financial bonds and other methods, the State Council chaired by Premier Li Keqiang decided Wednesday, according to a report by the official Xinhua News Agency.

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Those bonds are usually sold by policy banks. The money will be used to replenish the capital of major projects such as new types of infrastructure, the statement on Thursday said.

These types of financial tools can help expand effective investment, drive employment and facilitate consumption and allow China to stick to its stance of “not flooding the economy with stimulus or over-printing money,” the meeting concluded, adding that this will help banks achieve a better match between their loans and deposits and improve the transmission of monetary policy.

The People’s Bank of China will take the lead to support China Development Bank and Agricultural Development Bank of China to raise the funds via financial bonds, according to a late Friday report by Financial News, a newspaper published by the central bank.

The top economic planner will come up with a list of projects for the investment, in collaboration with other agencies and state-owned enterprises, it said.

Infrastructure projects are a key factor in determining how fast the economy can grow in the remaining six months of this year as other sources of growth such as housing and private consumption are still slowing.

President Xi Jinping pledged last month to strive to meet economic targets for the year, although Beijing’s Covid Zero strategy has caused analysts to cut their forecasts for annual growth to levels far below the official goal of around 5.5 percent.

The announcement lifted the share price of heavy equipment makers in the onshore market. SANY Heavy Industry Co. climbed 4.1 percent on Friday, Zoomlion Heavy Industry Science and Technology Co. gained 4.9 percent and Jiangsu Hengli Hydraulic Co. rose 1.9 percent, while the benchmark CSI 300 Index dipped 0.4 percent.

New Stimulus

The new stimulus can in theory leverage as much as 1.2 trillion yuan in credit from the banking sector and capital markets, based on the government requirement that the money should be at least 20 percent of overall investment, according to Nomura Holdings Inc. economists including Lu Ting.

But its impact in reality could be much smaller, and won’t be enough to plug an estimated 6 trillion yuan funding gap that the government has to fill if it wants to carry out its proactive fiscal policy, they wrote in a note Friday.

Local authorities are under huge financial stress this year due to the cost of Covid controls and tax cuts, as well as a slump in land sales that reduced a key source of revenue.

The new money is in addition to the 800 billion yuan the three policy banks were told in June to lend for infrastructure projects. That loan quota has already been allocated to the policy banks, local newspaper the 21st Century Business Herald reported Friday, citing sources it didn’t identify.

China Development Bank was allowed to boost lending by 400 billion yuan, Agricultural Development Bank of China’s quota for new credit was 300 billion yuan and another 100 billion yuan was assigned to the Export-Import Bank of China, the newspaper reported.

The development banks’ main source of funds is issuing bonds or loans from China’s central bank, although it hasn’t been announced where the money to finance these new loans will come from.

The size of the additional bonds is only a fraction of what the policy banks normally issue in a year. The banks sold a gross amount of 5.5 trillion yuan bonds in the interbank market last year, with a monthly average of 460 billion yuan, according to Bloomberg calculation based on Chinabond and Shanghai Clearing House data. Between January and May this year, they issued 2.3 trillion yuan in bonds.

The State Council, which is China’s cabinet, also vowed to implement a batch of investment projects that are aimed at increasing workers’ income and boosting their consumption.

These projects will have to spend more than 30 percent of central government funding on paying workers, up from 15 percent previously.

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UN condemns protesters’ storming of Libya’s parliament

A senior UN official for Libya on Saturday condemned the storming of the parliament’s headquarters by angry demonstrators as part of protests in several cities against the political class and deteriorating economic conditions.
Hundreds of protesters marched in the streets of the capital Tripoli and other Libyan cities on Friday, with many attacking and setting fire to government buildings, including the House of Representatives in the eastern city of Tobruk.
“The people’s right to peacefully protest should be respected and protected but riots and acts of vandalism such as the storming of the House of Representatives headquarters late yesterday in Tobruk are totally unacceptable,” said Stephanie Williams, the UN special adviser on Libya, on Twitter.
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Friday’s protests came a day after the leaders of the parliament and another legislative chamber based in Tripoli failed to reach an agreement on elections during UN-mediated talks in Geneva. The dispute now centers on the eligibility requirements for candidates, according to the UN.
Libya failed to hold elections in December following challenges including legal disputes, controversial presidential hopefuls and the presence of rogue militias and foreign fighters in the country.
The failure to hold the vote was a major below to international efforts to bring peace to the Mediterranean nation. It has opened a new chapter in its long-running political impasse, with two rival governments now claiming power after tentative steps toward unity in the past year.
The protesters, frustrated from years of chaos and division, have called for the removal of the current political class and elections to be held. They also rallied against dire economic conditions in the oil-rich nation, where prices have risen for fuel and bread and power outages are a regular occurrence.
There were fears that militias across the country could quash the protests as they did in 2020 demonstrations when they opened fire on people protesting dire economic conditions.
Sabadell Jose, the European Union envoy in Libya, called on protesters to “avoid any type of violence.” He said Friday’s demonstrations demonstrated that people want “change through elections and their voices should be heard.”
Libya has been wrecked by conflict since a NATO-backed uprising toppled and killed President Muammar Gaddafi in 2011. The country was then for years split between rival administrations in the east and west, each supported by different militias and foreign governments.
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