VZCZCXRO5329
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK
RUEHYG
DE RUEHCH #0613/01 2171341
ZNR UUUUU ZZH
R 051341Z AUG 09
FM AMEMBASSY CHISINAU
TO RUEHC/SECSTATE WASHDC 8244
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/USDOC WASHINGTON DC
RUCPCIM/CIM NTDB WASHINGTON DC

UNCLAS SECTION 01 OF 02 CHISINAU 000613 
 
STATE FOR EUR/UMB, EEB/IED, EEB/ESC, EEB/IFD/OMA, EEB/EPPD 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EAGR EINV EFIN ETRD PGOV KTDB MD
SUBJECT: USD 1 BILLION CHINESE LOAN FOR MOLDOVA 
 
Sensitive but not classified.  Please protect accordingly. 
 
¶1. (SBU) Summary:  On July 23, Moldova's Minister of Construction 
and Territorial Development and the president of Covec signed a 
memorandum of understanding for a USD 1 billion loan.  Some news 
about this loan had circulated earlier, as Moldovan press noted in 
early February that China's largest construction company, Covec, 
announced a possible 15-year, one-billion dollar loan for Moldova. 
This loan would hold particular significance as the IMF and 
Government of Moldova (GOM) were unable to come to terms on a new 
agreement in June as the economic crisis hit Moldova harder.  With 
repeat parliamentary elections set for July 29, the GOM was not 
willing to implement the policies an IMF agreement had required in 
the period leading up to elections.  Moldova sought other sources of 
financial support.  Russian Prime Minister Putin announced a USD 500 
million loan to Moldova on June 22.  End Summary. 
 
THE DISUCSSION OF A CHINESE LOAN BEGINS 
--------------------------------------- 
 
¶2. (SBU) Initial reports of a potential loan from China appeared in 
the Moldovan press in early February.  The first public discussion 
of the loan arose during a video conference at the Novosti news 
agency in Chisinau.  The Covec representative in Moldova, Ruslan 
Barladeanu, stated in an interview with the weekly Ekonomicheskoe 
Obozrenie that China was prepared to offer the loan for 15 years at 
three percent with a five year grace period.  According to 
Barladeanu, China would offer the funds for infrastructure projects 
and the construction of manufacturing facilities.  Several media 
noted the development but gave it limited attention. For example, an 
interview with Barladeanu in Ekonomicheskoe Obozrenie appeared on 
page 16. 
 
THE IMF AND THE RUSSIAN LOAN 
---------------------------- 
 
¶3. (SBU) Moldova's IMF agreement ended in May and an IMF mission 
visited Moldova from May 28 to June 8 to negotiate a new 
arrangement.  Following unproductive discussions with GOM officials, 
the mission departed without a new agreement.  With a dire budget 
crisis and with GDP projected to decline nine percent in the current 
year according to the IMF, the GOM sought funding through other 
sources.  Neither other IFIs nor bilateral agreements were options 
for support as long as there was not a new agreement with the IMF. 
Russian Prime Minister Vladimir Putin announced a USD 500 million 
loan to Moldova during acting President Voronin's visit on June 22. 
The first tranche of USD 150 million would supposedly be available 
in 2009.  Upon returning from Moscow, Voronin had noted that the GOM 
was seeking similar loans from China. 
 
 
THE MEMORANDUM OF UNDERSTANDING WITH COVEC 
------------------------------------------ 
 
¶4. (SBU) On July 23, Moldova's Minister of Construction and 
Territorial Development, Vladimir Baldovici, and the president of 
Covec, Fang Yuanming, signed a memorandum of understanding for a USD 
1 billion loan.  Local press reported that discussions would follow 
regarding the terms of the loan.  Baldovici stated, as had been 
reported in February, that the loan would be for 15 years at three 
percent with a five year grace period.  He noted that negotiations 
on the final terms and parliamentary approval would take about four 
months.  The initial tranche could arrive in Moldova by the end of 
the year, he added.  Moldova would focus on road construction, 
energy production, treatment plants, the industrialization of 
agriculture, and the construction of production facilities for high 
tech products with the funds.  He added that Moldovan workers would 
provide most of the labor force for the projects. 
 
COMMENT 
------- 
 
¶5. (SBU) The signing of the memorandum of understanding took place 
six days before the parliamentary elections of July 29.  It was 
widely believed that the loan announcement was meant as an electoral 
boost to help the image of the ruling Party of Communists of the 
Republic of Moldova (PCRM).  (Note:  In the election, the Party of 
Communists went from a majority of 61 in the 101 seat Parliament to 
a plurality of 48, against a combined opposition of 53.  Voronin 
remains Acting President until 61 MPs can be found to vote for a 
successor.  End note.)  Although the amount of the loan is huge for 
Moldova, the PCRM elected to have the Minister of Construction and 
Territorial Development sign on behalf of the GOM.  Neither acting 
President Vladimir Voronin nor Prime Minister Zinaidii Greceanii 
showed up - this could be because they considered the moneys 
unlikely to actually appear.  Alternatively, it is also possible 
that both of them were being careful not to give the opposition or 
 
CHISINAU 00000613  002 OF 002 
 
 
the international community any chance to accuse them of 
capitalizing on the event just before elections.  We suspect that 
Moldova many never actually see these funds. 
 
¶6. (SBU) Acting President Voronin's grandson, Alexei Voronin, began 
work in the Republic of Moldova's Embassy in Beijing in September 
2006 following his graduation from Johns Hopkins University.  The 
Moldovan Ambassador to China, Iacov Timciuc, is considered a good 
friend of the Acting President.  Timciuc left Beijing in April 2009 
and in July 2009 Alexei Voronin was named Charge d'Affaires.  There 
is speculation that the grandson has helped Moldova forge closer 
ties with China. 
 
¶7. (SBU) The international press speculated that China may be 
offering such loans as a means to both increase their influence 
overseas and to boost domestic demand by exporting Chinese equipment 
and Chinese expertise.  The Chinese government is likely concerned 
about domestic migrant workers arriving in its cities seeking jobs 
and the unrest unemployment could cause.  Local experts speculate 
that the Russian loan might depend on whether the PCRM is able to 
stay in the government.  Likewise, the Chinese loan will depend on 
the composition of a new government and whether it turns eastward or 
westward. 
 
CHAUDHRY