Administrative Legacies and ‘Phantom Borders’ in Transnistria, 1996-2003. The Case of the Rybnitsa Sugar and Alcohol Factory

Alexandru Lesanu

doi:10.1515/soeu-2019-0025

Article Open Access

Administrative Legacies and ‘Phantom Borders’ in Transnistria, 1996-2003. The Case of the Rybnitsa Sugar and Alcohol Factory

Alexandru Lesanu

Published/Copyright: November 30, 2019

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From the journal Comparative Southeast European Studies Volume 67 Issue 3

Abstract

With the Soviet dissolution, the eastern districts of the newly established Republic of Moldova refused to recognize the Moldovan authorities and proclaimed the Pridnestrovian Moldavian Republic (PMR). In the post-Soviet context, the PMR, or Transnistria as the international public know it, emerged as a de facto state without international recognition. This ‘phantom’ status in international relations entailed the reputation of being ‘a black hole’ in international trade. However, the de facto state managed to develop its own customs authorities, which created an extensive administrative legacy of what was a merely de facto border. The author uses the concept of ‘phantom border’ to contextualize this administrative legacy of the Transnistrian borders. He traces these legacies through the correspondence between the Transnistrian customs authorities and the administration of the Rybnitsa Sugar and Alcohol Factory—a major local enterprise with a long history as an actor in the regional border infrastructure.

In 2010, Evgenii Timoshenko, a former employee of the Rybnitsa Sugar and Alcohol Factory (Rybnitskii Sakhspirtkombinat) in the Pridnestrovian Moldavian Republic (Pridnestrovskaia Moldavskaia Respublika, PMR)—better known as Transnistria and one of several post-Soviet de facto states—took on the pseudonym of Aber Shellenberg and published Ispoved’ Kontrabandista (Confessions of a Smuggler) on a Russian literary website. In his fictionalized account, Aber Shellenberg describes how he used the fragile post-Soviet border infrastructure of the Transnistrian borderlands during the 1990s and early 2000s in order to smuggle alcohol from the Rybnitsa Sugar and Alcohol Factory to Ukraine and Moldova. ^[1] The emerging post-Soviet border infrastructure comprised various legal regimes. The dissolution of the Soviet Union was accompanied by the emergence of new state entities, some of which were internationally recognized while others lacked any such recognition. While both types of state entities emerged with weak institutions of border control, the post-Soviet de facto states’ situation was exacerbated by the lack of international recognition. In the western borderlands of the former Soviet Union, the former Soviet republic of Moldavia emerged as a newly independent state, the Republic of Moldova. ^[2]

Figure 1

The location of Rybnița.

Source: Author's compilation.

At the same time, the more industrialized and predominantly Russian-speaking eastern districts on the left bank of the Dniester River proclaimed the Pridnestrovian Moldavian Republic (PMR), or Transnistria. Formally, Transnistria is part of the Republic of Moldova, but de facto it has all the attributes of a sovereign state, with the exception of international recognition. More generally, the literature on the post-Soviet de facto states usually considers them from the perspective of their special status as unrecognized entities on the international stage. In the case of the PMR, researchers have analyzed this special unrecognized status to raise questions regarding local identity, ^[3] the internal organization of the local political system, ^[4] and the sustainability of its de facto statehood. ^[5]

On the grounds of these larger issues that have been addressed in research, my study takes a microscale approach to reveal the hybrid nature of the Transnistrian borders. As I show, they combine in them various regimes, with both legal and illegal features. Many international observers assume that Transnistria, since it lacks a clear international status, became a convenient hub for smuggling drugs, arms, alcohol, and other commodities. For instance, the European Commission reported in 2002 that ‘the area has become a ground for illegal arms dealing and organized crime’, while the British Department for International Development claimed that the ‘PMR is a smuggling company masquerading as a state’. ^[6]

Indeed, Transnistria is an ideal case for the study of illegal commodity flows. In order to find illegal elements in the Transnistrian borderlands, one does not need to recur to the actions of criminals. By its very existence, a de facto state creates a legal vacuum that provides ground for suspicion. Mark Galeotti argues that the local criminal organizations were only secondary actors in wider schemes of smuggling. Often, the Transnistrian authorities patronized these criminal organizations and provided a formal framework for their illegal activities. By means of proof, Galeotti points out that Igor Smirnov, the Transnistrian president, appointed his son Vladimir Smirnov as the head of the Transnistrian Customs Commitee (Gosudarstvennyi Tamozhennyi Komitet Pridnestroviia). ^[7] As a matter of fact, through this nomination, Smirnov sought to transform Transnistria into a regional hub for the reexport of various goods to Ukraine or Moldova. In 2002, the annual trade between Transnistria and the Ukrainian port of Odessa had reached approximately two billion US dollars. Many observers pointed to the fact that Transnistria imported more goods than it could possibly consume, suspecting that a part of the Transnistrian import was either smuggled back into Ukraine or sold on the right bank of the Dniester River. Under the leadership of Vladimir Smirnov, the Transnistrian customs authorities were accomplices in all these transnational transactions. ^[8]

Moreover, Charles King has shown that the post-Soviet de facto states also serve as revenue sources for some business and political actors from both the secessionist state and from the parent state. King argues that both Moldovan and Transnistrian actors profit from various trading schemes in goods such as cigaretes, poultry products, and alcohol. In fact, King claims that this is the main reason why the conflict about statehood has remained ‘frozen’, having witnessed more than two decades of negotiations and occasional escalations on this matter. ^[9] Undoubtedly, the lack of international recognition did create opportunities for various interest groups to use Transnistria as a link in the chains of the smuggling of goods or in money laundering schemes. However, this lack also created a situation in which technically all economic transactions became illegal by definition. With a de facto total lack of control inside the borders of Transnistria, the Moldovan authorities have treated any goods as illicit that have entered the Transnistrian territory, whether they be drugs and weapons, or food and energy.

Providing a more nuanced interpretation of the cross-border trade, Abel Polese and Peter Rodgers have argued that smuggling could also represent ‘informal economic practice’. They point to the fact that such informal economic practice is also known as ‘non-official’, ‘hidden’, ‘non-organized’, ‘black’, ‘a-legal’, ‘shadow’, ‘non-visible’, or ‘irregular’ practice. Corresponding with this, they define informal employment as ‘the production and sale of goods and services that are licit in every sense other than that they are unregistered by, or hidden from, the state for tax, benefit and/or labor law purposes’. ^[10]

In the post-Soviet space, many former industrial employees have embarked on a transnational journey in order to make a living from selling various goods. In the case of Transnistria, the train relation between the capital of Moldova, Chișinău, and the Black Sea port city of Odessa in Ukraine—Transnistria’s capital of Tiraspol lies approximately equidistantly between them—is an emblematic example of the ways in which the citizens of the post-Soviet space have instrumentalized borders for their survival. According to Polese, in a situation when corrupt politicians have captured the state, citizens are even entitled to such ‘trade-smuggling’ in order to support themselves and their families. ^[11]

The Transnistrian borders have played a key role in all transnational transactions of this type. Given that they are not visible on any international map, they can be defined as ‘phantom borders’. I use this concept as a research tool to assess the functions of informal border-like structures in a global trade system that is defined by internationally recognized borders. ^[12] To be sure, the Transnistrian ‘phantom borders’ are not simply defined by their lack of international recognition. They contain different regimes of (il)legality. To the east, they are situated on the internationally recognized border between Ukraine and the Republic of Moldova, while to the west they mark a de facto border between Moldova and the PMR on the Dniester River. The empirical basis for my study of the Transnistrian ‘phantom borders’ is represented by the interactions of the Rybnitsa Sugar and Alcohol Factory with customs authorities. Founded in 1898, the Rybnitsa Sugar and Alcohol Factory operated in many different countries, but never moved. The fluid borders and constant political changes in eastern Europe placed Rybnitsa under the authority consecutively of the Russian Empire, the Soviet Union’s Ukrainian Soviet Socialist Republic, the World War Two Romanian occupation regime, the postwar Soviet Union’s Moldavian Soviet Socialist Republic, and today’s contested Transnistrian region in the independent Republic of Moldova.

Throughout its centennial history, the factory was a part of different polities but was always situated in the proximity of borders. At first, it was founded on the Dniester River, in the Podol’sk Province (Podol’skaia Guberniia) of the Russian Empire. The Dniester River separated the Podol’sk Province from the Province of Bessarabia, which was on the border of the Russian Empire with Romania. Second, in 1918, Bessarabia became part of Romania and the factory found itself on the highly contested Soviet–Romanian border. Third, during the Second World War, the Romanian Army advanced to the east of the Dniester River, and the Romanian authorities established the Government of Transnistria (Guvernământul Transnistriei) on this territory. While Transnistria was occupied by the Romanian Army, it did not formally become a part of Romania. Thus, during the war years, the Rybnitsa Sugar and Alcohol Factory was situated on the border between Romania and the Romanian-occupied Government of Transnistria.

The occupation years during the war have repercussions until today, which demonstrates the phantomlike qualities of the de facto border. Recently, Vadim Krasnosel’skii, the head of the PMR, argued that the international community should stop using the term ‘Transnistria’ in reference to the PMR, precisely because it is associated with the Romanian occupation during the Second World War and with the Holocaust. ^[13] While acknowledging all atrocities that took place in the Government of Transnistria during the occupation years, I do use the term ‘Transnistria’ in this text, mostly because this is the term that the international community uses to refer to the PMR. Moreover, in Romanian, ‘Transnistria’ means ‘beyond the Dniester River’, while the Russian term ‘Pridnestrovie’ means ‘by the River Dniester’. Thus, for the purposes of this study, the term ‘Transnistria’ provides a more accurate description of the transnational commodity flows in the region. The fourth polity in which the Rybnitsa Sugar and Alcohol Factory found itself in, after World War II, was a consequence of the Soviet Army returning to the formerly occupied western borderlands. The border now was one between the Soviet Union and socialist Romania. The factory became a part of Soviet Moldavia—a Soviet republic on the Soviet–Romanian border. And finally, in the aftermath of the Soviet collapse, the Rybnitsa Sugar and Alcohol Factory has been situated on the de facto border between the Republic of Moldova and the de facto state of Transnistria.

After more than a century of sugar manufacturing, in 2003 the factory ceased the production of sugar. While it had survived all conflagrations of the 20^th century and the numerous changes of political regimes, it did not survive the post-Soviet transition. This was partly due to the overlapping of the various customs regimes at the Transnistrian ‘phantom borders’. In the following, I trace the administrative legacy of these borders through the analysis of the paper trail left by the Transnistrian customs authorities in their correspondence with the administration of the Rybnitsa Sugar and Alcohol Factory, this major local manufacturer having a long history of interaction with the various border regimes in the Transnistrian borderlands.

The Transnistrian ‘Phantom Borders’ and Their Legacies

In a seminal synthesis of the relevance of borderlands studies, anthropologists Donnan Hastings and Thomas M. Wilson have argued that the study of borderlands is important because ‘some things can only occur at borders’. ^[14] For instance, borders are areas of encounters and confrontations between states; borders may have a peripheral representation on maps, but they play a central role in the establishment and consolidation of state sovereignty. In the following, I use the concept of ‘phantom borders’ to delineate a still wider perspective on matters that can only occur at the borders of a de facto state. The research network ‘Phantom Borders in East Central Europe’ used the concept of ‘phantom borders’ to analyze the administrative, political, and cultural legacies of the former borders between the Ottoman, Austro-Hungarian, and Russian Empires in the structuring of the states that emerged after their demise, and until today. In this context, the administrative borders do not disappear along with their contour on the map, but they continue to shape the current affairs of the successor states. In other words, former political borders, now turned into ‘phantom borders’, do still leave behind also an administrative legacy. ^[15]

In November 2016, a group of Slovenian researchers organized a conference at the Institute for Contemporary History in Ljubljana in order to further develop this interconnection between ‘phantom borders’ and ‘administrative legacy’. ^[16] In his inaugural speech ‘Phantom and Possessed Borders’, Marko Zajc expanded the meaning of ‘phantom borders’ to refer not only to previously existing political borders but also to present ones. According to him, the current political borders can be ‘possessed’ on two levels: the ‘external’ or discursive level, when political actors seek to capitalize on the historical ‘phantoms’ of a given border; and the ‘internal’ level, when the ‘possession’ by a haunting ‘phantom’ is revealed in administrative practices, which include all bureaucratic mechanisms that leave behind an official paper trail. ^[17] This article follows up on this perspective through an in-depth analysis of the administrative legacies of a ‘phantom’ space as it is represented by the borders of a post-Soviet de facto state. The most important features of the Transnistrian ‘phantom borders’ are their situation in the proximity of an international border and their different levels of porosity. The PMR delimited its ‘phantom border’ in two different segments: The first segment, to the east, is situated on the internationally recognized Moldovan–Ukrainian border; while the western section is situated on the Dniester River, thus marking a de facto border without international recognition. In other words, the eastern segment of the Transnistrian de facto border is embedded in the international contexts, while the western segment is contained in the legal framework of the Republic of Moldova.

The different segments of the Transnistrian ‘phantom borders’ feature various historical legacies. During the Soviet Union, the eastern part used to be the administrative demarcation line between the Soviet Socialist Republic of Moldavia and the Soviet Socialist Republic of Ukraine. To the west, the Dniester River during the interwar period used to be an international border between the Kingdom of Romania and the Soviet Union. In 1940, it was incorporated into Soviet Moldavia, along with the annexation of Bessarabia to the Soviet Union. Nowadays, the Dniester marks the demarcation line between the PMR and the rest of the Moldovan territory. ^[18] As an international border between two recognized states, the Ukrainian–Moldovan border is quite thoroughly monitored, while the western border on the Dniester River is less so, precisely because it is not an international border. However, both border segments play an important role in transnational transactions. The various border regimes of a non-recognized state play a crucial role in the legalization of the commodities in the regional economy. If the PMR is not officially recognized as a state, its institutions have a real economic impact on the regional economy.

To avoid the narrow criminal interpretation of smuggling, Willem van Schendel and Itty Abraham have preferred to substitute the concept of ‘smuggling’ with a broader concept of ‘illicit flows’. They argue that no modern state can fully control its borders. Therefore, state representatives regard any form of smuggling as criminal activity. For this reason, in many cases, the international community perceives each individual who is engaged in such ‘illicit flows’ as being a member of transnational crime groups. ^[19] Instead, van Schendel suggests, the analysis of the commodity chains can shed new light on the issue of ‘illicit flows’. To begin with, the commodity chains are in constant transformation, and this transformation not only occurs through the exchange or consumption of commodities. The simple movement of a commodity across a border can change its status from illegal to legal, and vice versa. Thus, the main question for van Schendel is: ‘When people, goods, capital, and ideas flow across borders, what happens to them and to those borders?’ ^[20] To be sure, van Schendel studies ‘illicit flows’ in internationally recognized borderlands. He evaluates the circulation of goods at an international border between two states. By contrast, I trace (il)licit flows that pass through the ‘phantom borders’ of a de facto state. From the perspective of a legal state, any commodities that pass through the customs of an illicit state become illegal commodities. At the same time, the illicit state does possess its customs authorities and consequently its own criteria to define the legality of commodities. The Transnistrian customs authorities monitor cross-border commercial transactions according to the Transnistrian Customs Code (Tamozhennyi Kodeks PMR), while the Moldovan customs consider this Code, and consequently the transactions, to be illegal. Any goods that have been imported through the Transnistrian customs were considered illegal goods, or smuggling, by the Moldovan customs officers. Thus, an entrepreneur who fully respected the Transnistrian legislation was a smuggler for the Moldovan authorities.

After Transnistria declared its independence in 1991, the Rybnitsa Sugar and Alcohol Factory became a Transnistrian factory on the ‘phantom border’ between Moldova and Transnistria. Local customs authorities granted special privileges to the factory in order to facilitate the circulation of alcohol through the Transnistrian ‘phantom border’, while at the same time providing numerous bureaucratic obstacles to the production of sugar. In the following, I use the Rybnitsa Sugar and Alcohol Factory also as a case study to illustrate how these various bureaucratic procedures at the borders of this post-Soviet de facto state have changed the status of commodities.

I draw on documents from the archive of the Rybnitsa Sugar and Alcohol Factory, which I managed to consult in June 2012. As a matter of fact, at that time the archive was the only working unit of the factory, as it had ceased sugar production in 2003. In the meantime, the archivists prepared to submit all the papers from the factory’s archive to the main Transnistrian archive in Tiraspol, where the documents would be classified and provided with reference numbers. As I consulted the documents during this transition period, the documents did not have any reference numbers. Therefore, whenever it is possible, I provide the full title of the document and its issue date as references.

The Transnistrian Customs and the Crisis of Sugar Production

In Confessions of a Smuggler, Evgenii Timoshenko writes that, in the mid-1990s, Aber Shellenberg had several conversations with Andrei Ivashkevich, who was then the director of the Rybnitsa Sugar and Alcohol Factory. During these conversations, Ivashkevich complained about the dire economic situation that ensued after the breakup of the Soviet Union. Along with the liberalization of prices, the factory accumulated numerous debts for the delivery of raw materials, as it could not secure the necessary amount of sugar beet from the Transnistrian and Moldovan farmers. ^[21]

Many documents from the archive of the Rybnitsa Sugar and Alcohol Factory point to these economic problems. In his ‘Analysis of the Productive Activity of the Rybnitsa Sugar and Alcohol Factory in 1997’, L. M. Gontar’, the director of the factory, and L.V. Mikhalevskaia, the chief accountant, reflected on the centennial history of the Rybnitsa Sugar and Alcohol Factory and its vital importance for the Transnistrian population and economy. However, they also mentioned that the fall of the Soviet Union had put the factory to a vitality test. ^[22] In the new realities of post-Soviet Transnistria, the Rybnitsa Sugar and Alcohol Factory became a state enterprise, or rather a de facto state enterprise. In particular, the Transnistrian Ministry of Agriculture (Ministerstvo Sel’skogo Kzoziaistva PMR) assumed the management of the factory. After the collapse of the Soviet Union, the enterprise’s administration confronted the realities of the global market. Gontar’ and Mikhalevskaia stated that with the implementation of market relations the local economy reached a critical condition. ^[23] First, the prices of raw materials had a higher rate of growth in comparison to the prices of the processed goods. Second, Transnistrian manufacturers had to deal with high taxes and the instability of the Transnistrian currency. Third, the Rybnitsa Sugar and Alcohol Factory had an old technological infrastructure, with 94.5% of the equipment in need of capital repairs or replacement. Finally, the factory faced an acute deficit of sugar beet, as the surface area of sugar beet agriculture was decreasing each year. And the complicated customs procedures did not encourage the import of sugar beet from the neighboring regions. ^[24]

Table 1

Directors of the Rybnitsa Sugar and Alcohol Factory, 1995-2003. Source: Author’s compilation.

Names of the directors	Years in office
A. Ivashkevich	1995-1996
L. Gontar’	1996-1997
N. Solovov	1998-2001
A. Ganskii	2001-2003
B. Kirsta	2003

In 1997, the factory employed 648 workers, and during the harvesting season this number reached 860 employees. The size of the labor force was comparable to that of the Soviet period because the technological equipment was outdated and the production process relied mostly on manual labor. At the same time, the factory constantly diminished its productivity, and the administration had to decide whether to keep the labor force and to wait for better times or to dismiss some of the workers. In conclusion, in their assessment Gontar’ and Mikhalevskaia suggested that the Transnistrian authorities needed to find the necessary financial resources for the replacement of the outdated equipment and the relaxation of customs procedures for the procurement of raw materials. ^[25] Similarly, reviewing the results of the 1997-1998 production season, V. Ivanov, the agronomist of the factory, requested the assistance of the Transnistrian bureaucrats in the development of sugar beet farming. He noticed that the harvest of sugar beet was constantly decreasing, which he interpreted as the Transnistrian leadership neglecting the development of the Rybnitsa Sugar and Alcohol Factory, which after all was the only sugar factory in Transnistria. ^[26]

As the Transnistrian farms could not provide the necessary amount of sugar beet, Ivanov noticed that the factory brought in sugar beet from the three Moldovan districts on the other side of the Dniester River. For instance, in 1997-1998, the factory procured sugar beet from 6,782 hectares in Transnistria and 1,141 hectares on the right bank of Dniester. Referring to the procurement of sugar beet from the Moldovan districts, Ivanov noticed that Moldovan farms had considerably reduced their supply. He explained that the Transnistrian customs did not encourage the shipment of Moldovan sugar beet to Transnistria because the Transnistrian authorities imposed high import taxes. As a result, the Moldovan farms preferred to deliver sugar beet to Moldovan sugar factories in Cupcini and Ghindesti. ^[27] In addition, Ivanov claimed that the Moldovan sugar factories were more efficient than the Rybnitsa Sugar and Alcohol Factory, another reason why the Moldovan farms preferred to ship their produce there. In this way, they could receive more sugar for the same amount of sugar beet and they did not have to deal with the Transnistrian customs authorities. ^[28]

In 1998, summarizing the results of the factory’s activity on its hundredth anniversary, director N. Solovov and chief accountant A. Chekoltan confirmed that the main reason for the increasing inefficiency of the sugar production was the shortage of sugar beet. On the one hand, Transnistrian farms produced too little, the reason being that the cultivation of sugar beet required more extensive resources than were available. On the other hand, the 16% of sugar beet that the Rybnitsa Sugar and Alcohol Factory imported from the neighboring regions of Moldova was hampered by the complicated Transnistrian customs regulations, which made such import difficult to carry out in the first place. ^[29] As a consequence, Solovov and Chekoltan maintained, sugar production was no longer profitable. Production cost of local sugar constituted 570 USD per ton, while the selling price was at only 401 USD. Moreover, on the international market, one ton of sugar cost only 235 USD, which made it even more difficult for the factory to find a market for its sugar. In fact, it traded most of its production in exchange for raw materials or other services. ^[30] Between the end of the 1990s and the beginning of the 2000s, the administration of the Rybnitsa Sugar and Alcohol Factory signed numerous barter contracts with enterprises in Moldova and Ukraine as well as offshore companies in the US and Ireland. The increasing share of such transnational barter operations brought the Rybnitsa Sugar and Alcohol Factory to the attention of the Transnistrian customs authorities. Each time it imported raw materials, or shipped sugar or alcohol as a compensation for the supply of raw materials, the administration of the factory had to declare the status of the commodities at the Transnistrian customs. At the same time, the Moldovan customs did not participate in these transactions and considered them illegal.

These barter operations represented up to 80% of the factory’s transactions. Concerned about this high rate of barter transactions in the local economy, and in particular at the Rybnitsa Sugar and Alcohol Factory, the Transnistrian authorities established a Commission of Barter Operations (Mezhvedomstven-naia Komissia po Voprosam Barternyh Operatsii), whose task it was to find measures to diminish the share of barter operations in the Transnistrian economy. ^[31] On 14 March 2001, A. Ganskii, the newly appointed director of the Rybnitsa Sugar and Alcohol Factory, sent a letter to Oxana Ionova, the Transnistrian minister of revenues. She was also the head of the Commission of Barter Operations and the wife of Vladimir Smirnov, son of the Transnistrian president. Pointing to the vital importance of the barter operations for economic survival, Ganskii asked Ionova to allow the factory to continue conducting 80% of its transactions as barter operations. Otherwise, Ganskii argued, the factory would most probably have to stop its production activity. Despite Ganskii’s appeals to the local authorities, the Transnistrian bureaucrats failed to support the factory in its attempt to retain and recover its sugar production. As a result, in 2003 the factory ceased production of sugar. At the same time, however, the Transnistrian bureaucrats did support the factory’s production of alcohol, obviously because they saw a greater chance for profit for themselves if alcohol continued to move through the de facto borders. ^[32]

The Transnistrian Customs and the (Il)licit Flows

As Aber Shellenberg recalls, during one of his meetings with director Ivashkevich he tactfully inquired if he could be of any assistance to the factory, in other words whether he could participate in the alcohol trade schemes and share some of his profits with the local administration. In reply, the director suggested that Aber could supply molasses to the factory. In exchange for molasses, he would receive alcohol. Resuming the terms of their agreement, Ivashkevich declared ‘you bring molasses to the factory. In exchange, you get alcohol. What you will do with the alcohol is not my business.’ ^[33]

In this short dialogue, Ivashkevich in fact provides a short formula for the main activity of the Rybnitsa Sugar and Alcohol Factory during the post-Soviet period. The factory received raw materials (sugar beet or molasses) from third parties and processed them into sugar or alcohol. As compensation for the manufacturing services, the factory retained some amount of sugar or alcohol, while it shipped the rest of the products to the suppliers of the raw materials.

Already in 1996, I. I. Tsynnik, then deputy prime minister of Transnistria as well as minister of agriculture (Ministr Sel’skogo i Vodnogo Koziaistva), had drafted a special regulation ‘On the Manufacture of Alcohol from Molasses at the Rybnitsa Sugar and Alcohol Factory’. This document in fact had provided the framework for the development of transnational barter transactions between the factory and the suppliers of molasses, its main principle being that the factory was not to buy the molasses but to just offer its manufacturing services to the suppliers. In exchange for the processing of molasses into alcohol, the factory would receive half of the alcohol, while the supplier of molasses would keep the other half. ^[34]

In his fictionalized account of the Transnistrian trade, Shellenberg boasts how he invented a legal transnational scheme and managed to derive profits from the unclear status of Transnistria. According to his simple description, the scheme involved two international firms and two Transnistrian factories. In a first step, a Ukrainian firm supplied molasses and fuel to the Rybnitsa Sugar and Alcohol Factory. The factory then manufactured alcohol from the molasses and shipped it to the Rybnitsa Wine Factory (Rybnitskii Vinzavod). In its turn, the wine factory turned the alcohol into an antifreeze solution ‘Morozko’. A Moldovan firm then bought the antifreeze solution and shipped it out of Transnistria. Finally, through a technological procedure, the Moldovan firm transformed this antifreeze solution back into alcohol. Thus, this commodity changed both its legal status and its material shape while passing through the various legal regimes of the Transnistrian ‘phantom borders’. ^[35]

To be sure, during my research at the Rybnitsa Alcohol and Sugar Factory, I could not find any traces of ‘Morozko’. And yet, Shellenberg’s account provides a close approximation of transnational schemes that are traceable as being widely practiced in crossing the Transnistrian ‘phantom borders’ following the Transnistrian Customs Code. According to chapters 9 and 10 of this Code, given Transnistrian enterprises could be licensed to manufacture goods under a special customs control regime. These licenses granted exemption from the payment of any import or export taxes to the enterprises that participated in the transnational barter operations. ^[36]

It is important to know that this special customs control regime was tax free. A supplier of raw materials could commission the manufacturing of products on the Transnistrian territory without paying any import or export taxes, while the Transnistrian manufacturers paid taxes only for the value of their manufacturing services. In this way, the suppliers of raw materials could use the Transnistrian de facto state as a hub to avoid paying both import and export taxes in turning their raw materials into manufactured products. At the same time, chapter 12 of the Transnistrian Customs Code stipulated that if an enterprise could not process its raw materials in Transnistria, it could ship them to a foreign manufacturer, again without paying any customs duties. There was only one condition: the Transnistrian enterprise had to declare all manufactured goods that resulted from the processing of the raw materials. ^[37] The Rybnitsa Sugar and Alcohol Factory and its partners used both customs regimes in their transnational transactions, but with different outcomes for the production prospects. The Transnistrian Customs Office encouraged the transportation of alcohol, but provided numerous bureaucratic obstacles to the production of sugar, even if the Rybnitsa Sugar and Alcohol Factory was the only producer of sugar in the PMR.

For instance, on 10 February 2003, the then director of the factory, B. Kirsta, wrote to the head of the Transnistrian Customs Committee, V. Smirnov. In the letter, Kirsta argued that in 2002 the harvest of sugar beet had been extremely low and the factory had not been able to start sugar production. The administration therefore decided to ship the sugar beet outside Transnistria to be processed elsewhere. According to chapter 12 of the Transnistrian Customs Code, the Rybnitsa Sugar and Alcohol Factory could sign a contract with the Ghindesti Sugar Factory for the manufacture of sugar outside the Transnistrian territory. On 20 November 2002, the Rybnitsa Sugar and Alcohol Factory supplied 3,078 tons of sugar beet to the Ghindesti Sugar Factory, which is located on the right bank of the Dniester River. According to Kirsta, the shipment of sugar beet was coordinated with the Rybnitsa subdivision of the Transnistrian Customs Office (Rybnitskaia Tamozhnia). As a result of this transaction, the Ghindesti Sugar Factory manufactured and shipped 192 tons of sugar back to Rybnitsa. ^[38]

At the same time, Kirsta expressed his disapproval with the Transnistrian Customs Office, which had imposed a fine on the Rybnitsa Sugar and Alcohol Factory for the violation of the customs regulations. He insisted that the Ghindesti Sugar Factory had been entitled to receive a share of the sugar, as well as all the by-products of the sugar production, as compensation for its manufacturing the sugar. Contrary to this opinion, the Customs Office had claimed that the Rybnitsa Sugar and Alcohol Factory had violated the customs regulations because it had not declared the beet pulp and molasses that had resulted from the processing of the sugar beet at the Ghindesti Sugar Factory. The Rybnitsa Customs Office insisted that the beet pulp and molasses had to be declared as ‘exports’. ^[39] On his part, Kirsta claimed that these goods could not be declared as ‘exports’ as they had never left Transnistrian territory, and they had only emerged as the by-products of the sugar production on Moldo-van territory. Consequently, it was impossible to receive any technical documentation for goods that ‘were never on Transnistrian territory’. Further, Kirsta pointed out that the Rybnitsa Sugar and Alcohol Factory was a state enterprise and that by applying the fine, another state institution, the Rybnitsa Customs Office, made the difficult financial situation of the factory even more difficult. In conclusion, Kirsta requested that the Transnistrian Customs Commitee waive the fine. ^[40] In reply, on 21 February 2003, V. Smirnov, the head of the Transnistrian Customs Commitee, insisted that the fine was legitimate and that the factory had not respected the border regime. Smirnov argued that according to the customs regulations any goods that were received by a foreign manufacturer as compensation for manufacturing services had to be declared as exported goods. Thus, he did not waive the fine. ^[41]

On 1 April 2003, Kirsta repeated his request in another letter to V. Smirnov. This time, Kirsta acknowledged that the factory had violated the customs regulations, but he argued that these regulations were very complicated and that the factory had violated them only once. The Transnistrian Customs Commitee, he repeated, should waive the fine. In his request, Kirsta emphasized that, had he not shipped the sugar beet to the Ghindesti Sugar Factory, they would have been lost for the Transnistrian economy. Also, Kirsta pointed out that the factory needed its financial resources in order to continue to produce alcohol. Yet, despite his repeated requests to the Transnistrian customs authorities, Kirsta did not manage to see the fine waived, and it thus contributed to maximizing the negative financial balance of the factory. ^[42]

Despite all its financial difficulties, however, on 3 March 2003 the Rybnitsa Sugar and Alcohol Factory managed to sign an important contract with Frontmark LLC, an American limited liability company with its office in Wilmington, Delaware. According to the contract, Frontmark LLC was to supply thirty thousand tons of molasses to the Transnistrian factory. For the manufacture of alcohol from the molasses, the Rybnitsa factory was to receive an amount of alcohol equivalent to 2,400,000 USD, while Frontmark LLC would receive 8,689,910 liters of alcohol. ^[43] Following the regulations of the Transnistrian Customs Code, on 18 March 2003, the Rybnitsa Sugar and Alcohol Factory received the license to manufacture goods under a special customs control until 1 April 2004. According to this license, the factory had the right to manufacture alcohol from 30,000 tons of molasses precisely. Consequently, it could bring the 30,000 tons of molasses from Ukraine into Transnistria and ship the alcohol outside Transnistria without paying any customs duties. ^[44]

In its turn, Frontmark LLC bought molasses from Severnyi Al’ians, a Ukrainian company with its office in Kyiv, Ukraine. The first 480 tons of molasses reached Rybnitsa through the Transnistrian segment of the Ukrainian– Moldovan border on 4 June 2003. The shipment thus passed through the inspection of the Ukrainian and Transnistrian customs, yet without the authorization of the Moldovan customs authorities. Thus, from the perspective of the Moldovan authorities, this shipment of molasses amounted to smuggling. ^[45]

To be sure, the administration of the Rybnitsa Sugar and Alcohol Factory often shipped alcohol to the righthand side of the Dniester River. As the alcohol crossed the Transnistrian–Moldovan de facto border without being subjected to any excise taxes from either the Transnistrian or the Moldovan customs authorities, its price was lower than the regular price of alcohol on the Moldovan market. Also, the participants in these transnational transactions needed to legalize their commodities before they were sold on the Moldovan market. This meant that they had to coopt Moldovan bureaucrats to certify for the legal status of the smuggled commodity. My research into the Rybnitsa Sugar and Alcohol Factory thus confirms what Charles King hypothesized about agents from both sides of the Dniester River benefiting from the existence of the Transnistrian de facto border regimes. ^[46]

The circulation of molasses thus started in Ukraine and ended up as alcohol in the Republic of Moldova with the participation of a US company. The Transnistrian ‘phantom borders’ and their administrative authorities played a key role in these metamorphoses. Through numerous administrative regulations and documents, the Transnistrian customs authorities shaped not only the legal status, but also the material form of the commodities that traveled across borders in the post-Soviet Transnistrian borderlands. The analysis of the documents of the Rybnitsa Sugar and Alcohol Factory provides a rare occasion to grasp the material practices of the Transnistrian ‘phantom border’ space.

Conclusion

After the end of the Soviet Union, many observers pointed out how the Pridnestrovian Moldavian Republic emerged as ‘a black hole’ in terms of being a borderland, claiming that the de facto state of Transnistria became a convenient hub for the smuggling of goods into Ukraine or Moldova. At the same time, other observers noted how the number of internationally active criminal groups was inflated. In their war against smuggling, states not seldomly attacked the borderland societies on the assumption that they participated in the international smuggling activities, such as the transportation of commodities across the state borders. Yet, rather than being members of international crime groups, individuals involved in these activities often turned out to be selling various goods in order to survive, which complicates the picture, adding shades of gray to what had seemed a crystal-clear black-and-white picture.

The fact that the international community does not recognize Transnistria as a state makes it an easy target for smuggling allegations. At the same time, Transnistria has been a post-Soviet de facto state with customs and border control for close to thirty years. As borders represent a key marker of sovereignty, in non-recognized states customs authorities are even more zealous to establish that their contested borders do delimit their sovereignty. Hence, even if they are not visible on international maps, the Transnistrian ‘phantom borders’ play an important role in regional trade. Along with the manipulation of the various legal regimes on the long perimeters of the ‘phantom borders’, the Transnistrian customs authorities have created a massive administrative legacy also on the internationally recognized borders of Ukraine and the Republic of Moldova.

After the collapse of the Soviet Union, the Rybnitsa Sugar and Alcohol Factory became the only producer of sugar in the PMR. Despite its strategic importance for the local economy, the Transnistrian bureaucrats failed to provide a sustainable model for sugar production. On the contrary, they supported only alcohol manufacturing because alcohol provided a larger profit margin for their transnational transactions. Thus, the Transnistrian bureaucrats failed to make use of the symbolic value of the factory as the only sugar producer and instead focused their attention on the development of profitable transnational schemes to smuggle alcohol into Ukraine and Moldova.

In doing so, the main production scheme involved the production of alcohol from molasses. The practice was that the factory did not buy the molasses but received it from a supplier and took a share of alcohol as compensation for its manufacturing services. At the end of the 1990s and the beginning of the 2000s, the Rybnitsa Sugar and Alcohol Factory signed numerous barter contracts with enterprises from Moldova, Ukraine and the US. The enterprises supplied the molasses, and the factory extracted the alcohol from them.

Once again, in all these transactions the Transnistrian customs authorities played a key role. According to the Transnistrian Customs Code, enterprises could receive licenses for the manufacture of goods under customs control. Once a Transnistrian enterprise received such a license, it could manufacture goods on the Transnistrian territory without paying any import or export taxes. In March 2003, the Rybnitsa Sugar and Alcohol Factory received such a license. Under the terms of this license, the factory signed a contract with Frontmark LLC. The Ukrainian molasses was brought in through the Transnistrian segment of the Moldovan–Ukrainian territory, and alcohol was manufactured from them in Transnistria. Afterward, the Rybnitsa factory shipped the alcohol across the de facto Moldovan–Transnistrian border.

In this complex cross-border context, the production of alcohol from molasses did not constitute simply smuggling. Through manipulations of the various (il)legal frameworks, the Transnistrian customs managed to transform the (il)legal flows of commodities in the regional economy. In the transnational commodity chain, the legal goods became smuggled goods when they entered the Transnistrian territory without the participation of the Moldovan customs, and then they became legal goods by crossing through the Transnistrian– Moldovan ‘phantom border’ into the territory controlled by the Moldovan authorities. Paradoxically, one could say that such movement of goods across the Transnistrian ‘phantom borders’ amounts to legalized smuggling.

Alexandru Lesanu is a holder of the Irmgard Coninx Prize for Transregional Studies at the Forum Transregionale Studien in Berlin, Germany.

Published Online: 2019-11-30

Published in Print: 2019-11-30

This article is distributed under the terms of the Creative Commons Attribution Non-Commercial License, which permits unrestricted non-commercial use, distribution, and reproduction in any medium, provided the original work is properly cited.

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