VZCZCXRO0982
PP RUEHDBU
DE RUEHMO #2260/01 0661501
ZNY CCCCC ZZH
P 071501Z MAR 06
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 1898
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY

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