Victim of blockade, PMR's largest company forced to cut output almost 40%

Steel producer MMZ (shown) is the largest company in Pridnestrovie. It accounts for half of the country’s budget income

RYBNITSA (Tiraspol Times) - In 2006, the total output of steel producer MMZ in Rybnitsa, northern Pridnestrovie, was down 35.6% compared to 2005. The loss in production of the country's #1 taxpayer was caused by a coordinated economic war jointly undertaken by Moldova and Ukraine, says Pridnestrovie's vice minister of industry, Yury Ganin.

2006 was the most problematic year in the company's history. MMZ melted only 675.4 thousand tons of steel last year - 373 thousand tons (35.6%) less than in 2005. The output of rolled steel dropped to 639 thousand tons (-250 thousand tons), and exports nearly halved.

Although operating at full capacity until March of 2006, it was forced to slow down production and suffered a 44.3% drop in output in the second half of the year.

In March, Pridnestrovie suffered what an MMZ manager described to news agency Infotag as "an economic blockade imposed on us by Moldova jointly with Ukraine."

Predatory customs rules caused drop in exports

In March of 2006, Ukraine announced that it would only accept imports that were stamped by customs officials in the Moldovan capital of Chisinau. The March 3 resolution additionally required companies in Pridnestrovie to pay taxes to the irredentist Moldovan government in Chisinau, with which they fought (and won) a war in 1992 for independence. The coordinated Moldovan/Ukrainian action was seen as predatory by the government in Tiraspol and a threat to the survival of the 555,000-strong local population; similar in size to Montenegro, the latest country in Europe to declare independence.

Shortly thereafter, Moldova announced a halt in railroad traffic through Pridnestrovie, cutting off all direct cargo trains between Moldova, Pridnestrovie, and Ukraine. As a result, the plant was left practically without railroad communication, and had to curtail production by two-thirds.

At the time, Yury Ganin explained to Tiraspol Times that the move was aimed at bringing Pridnestrovie to its knees through the application of economic warfare:
" - Our most important companies are the ones which suffer very heavy losses. For instance, the MMZ Steel Plant in Rybnitsa has already suffered over US$150 million in lost earnings, and keeps on incurring losses because this huge enterprise is not able to dispatch its produce directly to Ukraine. First, trains loaded with Rybnitsa metal items have to call to the Moldovan territory, and only after this - to other countries. As a result, the trains have to make a gigantic loop at least 500 kilometers long," said Ganin.

Economic war unpopular with locals

Ukraine added to the troubles of MMZ with the invention of a new tax: Also in 2006, and in addition to the customs rules, Ukraine introduced a new customs duty on the supply of metal scraps. Charging 30 euros per ton, this eroded the profitability of MMZ and forced the company to look for other suppliers of raw material.

The combination of new customs rules, the removal of trains, and a new tax designed to remove profits amounted to a "triple whammy" which local observers were quick to classify as an all-out economic war. Designed to bring Pridnestrovie to its knees and remove its demand for international recognition and independence, the economic warfare was coupled with trade blockades and aimed squarely at the regions largest companies. With MMZ providing half of the local revenue, it was no surprise to analysts that the company was the prime target for the joint actions by Ukraine and Moldova.

" - We have human rights, too, but the shortsighted politicians in Moldova are forgetting that," says Alexandru Voda, a local resident from Rybnitsa. "They wage a complete economic warfare against us, and this is hurting the ordinary citizens, the ones that are the weakest in society. What do they expect to accomplish? Just more hatred. Transnistria is not a danger to anyone, and we just want to work hard to rebuild our country. But their economic war against us is not helping. Even the Moldovans who live here say the same: We never want to be part of Moldova because we know how they act and how much they are hurting us," explains Voda.

The privatized MMZ Rybnitsa steel works is Pridnestrovie's largest company and brings in about 50% of the republic's revenue. It is also the main provider of jobs in its hometown, Rybnitsa in Northern Pridnestrovie.

With a ranking as one of the world's ten most advanced steel companies, the Rybnitsa-based MMZ is the biggest economic asset of the new and emerging country which is also frequently referred to under names such as Transdniester or Transnistria.

It was built with German technology and inaugurated in 1985. Today it is still the largest and most modern in this part of Europe.

See also:
» Under duress, MMZ Rybnitsa steelworks resumes exports