Economic Ties across the River Nistru: Trade and Prospects for Conflict Transformation in Moldova and Transnistria

Trade across conflict lines is a way to help transform and manage a conflict within the framework of confidence-building measures and engagement but without recognising the other side. In the context of the conflict between Moldova and its breakaway region of Transnistria, the latter participates in Moldova’s free-trade area with the European Union (EU) alongside additional confidence-building measures. Based on a new ZOiS survey of firms on both banks of the River Nistru, this report addresses two overarching topics: first, how businesses’ market orientations are linked to their geopolitical preferences; and, second, the dynamics of cross-Nistru trade and its potential to support conflict transformation and management.

Main findings

Market orientations and geopolitical preferences:

• Economic trade on both banks is very much focused on domestic markets, with a limited amount of trade between the two sides. Trade across the Nistru is more important for businesses on the Left Bank (Transnistria) than for those on the Right Bank (Moldova).
• The free-trade area with the EU has reinforced Moldova’s strong orientation towards European markets and contributed to a gradual diversification of Transnistrian firms’ trade relations. While Russia remains an important partner for some firms in Transnistria, European markets now play a growing role in the region’s external economic relations.
• Expectations from EU integration are more optimistic on the Right Bank than on the Left Bank, while the opposite is true for integration with the Eurasian Economic Union. Here, the Left Bank expects more positive effects, such as lower energy costs and better trade links.

Cross-Nistru trade and conflict transformation:

• Firms engaged in cross-river trade report higher levels of trust in businesses on the other bank than firms that do not engage in such trade, suggesting that economic interaction can contribute to confidence-building across the conflict line.
• However, cross-Nistru trade does not seem to influence preferences when it comes to how to settle the conflict. Economic interaction can therefore foster practical cooperation and trust without necessarily changing underlying political positions.
• Despite its potential as a confidence-building mechanism, economic cooperation across the Nistru continues to face significant obstacles. Businesses identified customs-related, fiscal, administrative, and monetary barriers as the main constraints.
• Accordingly, firms place the greatest value on measures that reduce transaction costs and enable business interaction, including simplified customs procedures, financial support mechanisms, and opportunities for direct business-to-business exchange.