TRANSNISTRIA: RUSSIA OPPOSES UKRAINIAN CUSTOMS

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 unusual 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