Emerging Europe Weekly, 2023.2.18

By FMN Team

Destabilization plot thickens in Moldova with a new government and regional interest. In the wake of the collapse of Moldova’s government, additional details have been released about a broader plot by Russia to immediately destabilize the pro-Western government. Moldova’s President Maya Sandu shared intelligence apparently showing Moscow had instructed “diversionists with military training and camouflaged in civilian clothes” from Serbia, Russia, Belarus and Montenegro to enter Moldova disguised as Serbian soccer fans.

In response to the intelligence, the security service has stopped some suspected saboteurs from entering the country and prevented fans from attending a major soccer game, which was apparently to be used to disguise attacks as public protests. While the intelligence is unverified—and Russia denied the plan—the US National Security Council confirmed that the plan follows a typical Russian playbook and is a deep concern to the US government.

Moldova has been forced into rapid change by Russia’s invasion of Ukraine, increasing defense spending this year by 70% while contending with a 4.7% drop in economic output in 2022. Now, Moscow has potentially turned to a familiar pattern of destabilization and delegitimization to try to gain control of the strategically significant and increasingly pro-Western country that Moscow still counts as part of its ‘rightful’ sphere of influence.

Eastern European economies battered by high energy costs. The European Bank for Reconstruction and Development (EBRD) has warned that Russia’s attack on Ukraine will slow growth across Eastern Europe this year, causing energy prices, borrowing costs and inflation to remain elevated while deterring foreign investment.

Hungary and Latvia are expected to see especially deep contractions, while Poland’s growth is forecast to be only 1 percentage point, down from 4.8% in 2022. Energy-intensive factories across the region faced reduced competitiveness as input costs remain elevated, leading the EBRD to expect markedly lower foreign direct investment in 2023.

The multilateral lender has also projected that the negative effects on investment will gradually dissipate if the war turns into a prolonged low-intensity conflict. Meanwhile, the bank raised its growth projections for countries in Central Asia due to higher energy prices and increased remittances from nationals working in Russia when labor is scarce.

Russian consumers put pressure on Western corporate holdouts’ strategies. While many Western companies are devising complicated maneuvers to maintain their operations in Russia and just 8.5% have fully divested, a recent poll by Morning Consult of Russian consumers casts doubt on the value of such strategies as sentiment becomes more nationalistic.

Russian consumers have become less eager to welcome foreign-owned businesses, more likely to favor tariffs on foreign goods and more likely to go out of their way to buy domestic products. They are also less willing to punish violations of foreign companies’ intellectual property rights, as evidenced by legal changes permitting the theft of such property from countries determined to be unfriendly toward Russia.

*A woman shops at a supermarket in Moscow. Photo: Natalia Kolesnikova/AFP/Getty Images*

With the Kremlin’s anti-Western narrative having a measurable effect on consumer sentiment, multinationals hoping to profit off of a peace-play face ever-growing obstacles. Beyond the consumers themselves, military drafts have distorted labor markets, financial restrictions make operating capital difficult to come by, Western export restrictions make key inputs harder to come by and the Kremlin has accelerated its interventions in the private sector from supply chains to merger approvals. While multinationals look likely to hold out hope for now, the Russian economy has seen decades of technological, financial, and societal developments erased.

Gang spying scandal highlights Albania’s centrality in EU smuggling routes. Albanian police dismantled over 500 illegal surveillance cameras that were apparently used by gangs to monitor citizens and law enforcement, reports the Financial Times. Discovered during an investigation into an attempted police assassination, the illicit surveillance network serves as a stark reminder of the growing power of criminal networks that operate a globalized shadow economy of drug trafficking and money laundering.

Successive Albania governments have been criticized by US and EU officials for a proposed amnesty for large banks implicated in illicit behavior, slow judicial reforms and loose anti-money laundering rules. Ineffective efforts come despite Albania’s position as a key entry point to Europe for drugs shipped from Latin America through Africa’s Sahel region.

With its gangs increasingly displaying capabilities once exclusive to the state, Albania risks following in the footsteps of Guinea-Bissau and Paraguay, becoming a key node in global smuggling hubs where the government is effectively subordinated by powerful criminal enterprises.