C O N F I D E N T I A L SECTION 01 OF 02 MOSCOW 002260

SIPDIS

SIPDIS

E.O. 12958: DECL: 03/07/2016
TAGS: PREL MARR MOPS ETRD UP MD RS
SUBJECT: TRANSNISTRIA: RUSSIA OPPOSES UKRAINIAN CUSTOMS
ENFORCEMENT

Classified By: A/DCM Kirk Augustine. Reason 1.4 (b, d)


1. (C) Russian Special Envoy Valeriy Nesterushkin told us
March 6 that the Ukrainian customs implementation threatened
the future of peace negotiations between Moldova and
Transnistria, including the current 5 2 format in which the
U.S. participates as an observer, and its prospective April
session. He claimed that the Transnistrians had in response
imposed an embargo on rail cargoes to and from Ukraine, and
that had blocked cargoes coming from Russia headed to
customers in the West as well as to Russian forces deployed
in Transnistria.


2. (C) Nesterushkin argued that Moldovan assurances to the
WTO prevented it from agreeing on a customs regime with
Ukraine over the heads of the Tiraspol authorities. He
provided an extract from the January 11, 2001 Working Party
report of the WTO that he claimed supported his view and
referred, inter alia, to the May 8, 1997 agreement signed in
Moscow between Chisinau and Tiraspol. Asked whether that
document was not just a basis for settlement, rather than the
settlement itself, Nesterushkin said that on the basis of
that agreement, Tiraspol and Chisinau had signed 130
documents, including one on customs cooperation. Those
documents had never been disavowed, but all were now "on
hold," Nestorushkin said, though he admitted that some of
them were put "on hold" by the Tiraspol authorities and
others by Chisinau. Asked whether the "mutual elaboration of
customs policy" foreseen by the customs agreement had ever
been carried out, Nesterushkin said no. The extract that
Nesterushkin provided is transcribed in para 6 below.


3. (C) Nesterushkin implied that the negotiating process
should prevent either party from creating facts on the ground
that would change the negotiating situation (i.e., the
current stalemate). We replied that in the U.S. view,
Moldova was exercising normal sovereign rights, and creating
facts on the ground is nothing unu

sual in peace processes.
Nesterushkin called for consultations with European and U.S.
counterparts to defuse the situation.


4. (C) Nesterushkin could not explain the Ukrainian
enforcement of its decision except by saying that "someone"
had made the Ukrainians an "offer they could not refuse" (in
the "Godfather" sense, he made clear). Ukraine would suffer
great losses -- a $280 million trade with Transnistria and
investment in the Rybnitsa metallurgy plant. He also thought
the action was "strange" coming three weeks ahead of the
Ukrainian parliamentary elections.

Comment
--------------


5. (C) The logic by which the text below supports
Nestorushkin's argument is at best tortured, and seems
backward. Transnistria is, in fact, in violation of
Moldova's WTO obligations as expressed in the Report, which
mentions assurances that WTO provisions would be applied
uniformly throughout Moldovan territory. Were either Russia
or Ukraine members of the WTO, it seems to us they would have
grounds to press the GOM to enforce its WTO obligations on
Transnistria (i.e., open trade again) "without...petition
through the courts."

Document Extract
--------------


6. (U) English Language Text of the extract (we have put in
brackets parts that were bolded and underlined by the Russian
redactor):

WT/ACC/MOL/37
11 January 2001

REPORT OF THE WORKING PARTY
ON THE ACCESSION OF THE REPUBLIC OF MOLDOVA

The representative of Moldova also noted that appeals could
be made to an independent tribunal. When both parties at the
trial were legal persons the economic courts examined the
issue. There were two economic courts in Moldova. One had
jurisdiction over the Chisinau municipality and the other
over the rest of Moldova. If one of the parties to the trial
was a natural person, the issue was brought before the
ordinary court and other superior judicial institutions.
Courts of the first instance were based in each
administrative unit (former rayons), in total 40. Despite
the creation of new administrative units - judets, that
consist of several rayons, courts of the first instance
remained in each former administrative unit, as well as major
cities: Chisinau, Balti, (Bender and Tiraspol) had several

MOSCOW 00002260 002 OF 002


such courts based on their internal administrative division.
Higher-ranking tribunals were based in Chisinau, Balti,
(Bender, Tiraspol) and Cahul. There was one Court of Appeal
in Chisinau and the Supreme Court of Justice is also based in
Chisinau.

In response to requests for information (regarding the
Agreement on the Transnistria region, the representative of
Moldova referred to the Memorandum on the Basis for
Normalization of Relations between the Republic of Moldova
and Transnistria signed in Moscow on 8 May 1997. The
Memorandum, and the Agreement on the Organizational Basis of
Social-Economic Collaboration, signed on 10 November 1997,
were the legal bases for settling the conflict.) Based on
this (Moldova was making every effort together with other
interested countries to overcome the consequences of the
conflict.) The activity taken so far had succeeded in
ensuring economic stability and (compliance with Moldova's
external obligations.) As regards issues related to foreign
trade commitments, (Moldova succeeded in finding common
ground with the Transnistrian authorities. The
representative of Moldova stated that Moldova had signed a
special protocol on customs cooperation with the Transnistria
region that foresaw mutual elaboration of customs
policy, exchange of statistics and facilitation of border
measures.)

The representative of Moldova confirmed that all fiscal,
financial and budgetary activities performed by local
governments would be in compliance with Article III of the
GATT 1994. The representative of Moldova confirmed that
sub-central entities had no autonomous authority over issues
of subsidies, taxation, trade policy or any other measures
covered by WTO provisions. He (confirmed that the provisions
of the WTO Agreement, including Moldova's Protocol, would be
applied uniformly throughout its customs territory and other
territories under its control, including in regions engaging
in border trade or frontier traffic, special economic zones,
and other areas where special regimes for tariffs, taxes and
regulations are established.) He added that (when apprised
of a situation where WTO provisions were not being applied or
were applied in a non-uniform manner, central authorities
would act to enforce WTO provisions without requiring
affected parties to petition through the courts.) The
Working Party took note of these commitments.

Transit

The representative of Moldova stated that, at present,
transit of commodities through the territory of Moldova was
free from the levy of fees or customs duties. In relation to
VAT and excise tax, Moldova granted freedom of transit
through its territory to the trade of WTO members as
prescribed by Article V of the GATT. The only charges levied
were those for transportation and those commensurate with
administrative expenses or with the cost of services
rendered. He added that (Moldova was a party to a
multilateral agreement on transit trade within the framework
of the CIS. Moldova had also signed transit agreements with
Romania, Ukraine, Belarus and Russia.

Annex I
Laws, Regulations and Agreements
-- (Law and Agreements on local authorities)
-- Law on the legal status of Gagauzia (Gagauz-Yeri) - No.
344-XIII of 23 December 1994;
-- Memorandum on the basis for Normalization of Relations
between the Republic of Moldova and Transnistria signed in
Moscow on 8 May 1997;
-- Agreement on the organizational basis of social-economic
collaboration between the Republic of Moldova and
Transnistria signed on 10 November 1997.

End text of extract.
RUSSELL