Russia - EU summit on WTO - a Russian view

Posted in Russia | 27-May-04 | Author: Dmitry Udalov

Although Russian accession to the World Trade Organization (WTO) continues to be a matter of serious debate within the Russian Federation (RF), Putin declared it to be one of the main goals of his second presidential term.

According to WTO regulations, new countries are only admitted by consensus. This means that two-thirds of all WTO members must vote in Moscow's favor. Thus, the EU position concerning Russia’s accession to the WTO is extremely important. Only six months ago, it seemed nearly impossible that the EU and Russia would reach an agreement. Moscow and Brussels had huge differences and the energy problem, in particular, seemed insurmountable. But a compromise has been reached.

Moscow hosted the thirteenth Russia-EU summit late last week, during which both sides signed a protocol on completing their talks regarding Russia's accession to the World Trade Organization.

Six months ago, the EU was demanding that Russia abolish Gazprom's export monopoly and that it stipulate equal gas-transit rates for domestic and foreign producers via Russian territory. EU Trade Commissioner Pascal Lamy and Russia's Economic Development and Trade Minister German Gref exchanged tough statements. Russian President Vladimir Putin exchanged similar pleasantries with Brussels, saying that the EU position amounted to "arm-twisting" and letting it be known that Russia intended to retain control over Gazprom and the gas pipeline network.

The EU modified its negotiating position after Putin called its partners "Euro-bureaucrats" who were preventing Russia from developing its market economy. When the talks became essentially deadlocked last autumn, leading Russian and EU experts were called in to rectify the situation. They were able to find common ground.

The aforesaid protocol merely formalises Russia's legally binding fuel and energy commitment. The government undertakes to create a favourable gas market, enabling producers to cover their expenses and make profits. However, this commitment does not deal with gas sales to the public or to social-infrastructure facilities.

The Russian government also voiced its intentions in the area of gas; for instance, domestic gas prices will reach $37-42 per every 1,000 cubic meters by 2006 and hit $49-52 by 2010. The government said that it had no intention of creating unnecessary obstacles to the construction of new gas transport facilities. Russia is ready to abide by its WTO commitments as regards the freedom of gas transits. Still, Moscow believes this principle does not apply to gas pipelines, maintaining that all pipeline issues should be settled according to a special agreement. Talks on this issue are already being planned.

Moscow also managed to defend its positions on other important issues. The protocol stipulates the stage-by-stage liberalization of Russia's export duties over a transitional period of two or three, and up to seven years depending on the commodities. Export duties will then decline by a small margin—from 10.3% to about 8%. Moscow also defended its interests in such areas as the aircraft industry and the automotive industry; sectoral tariffs are to be just under their current level. Quotas will be introduced in the agro-industrial sector and during the admission of foreign financial institutions to the Russian market, but no direct subsidiaries of foreign loan agencies will operate in Russia.

The signing of the latest Russia-EU protocol is a success in general for Russia, at least according to members of the Russian government. They claim it will facilitate Moscow's talks with the United States, Japan, and China. Any country's negotiating position is directly proportional to its commercial interests. Russia saw the EU as a major force because it accounts for 55% of the country's foreign-trade turnover.

Therefore, it can be argued that the Russia-EU agreement is a giant step toward Russia’s attaining its goal of WTO membership. Therefore, one might expect that Russia will join the WTO in either 2005 or 2006.

Yet, it is still important to emphasize that some Russian experts consider it absolutely unnecessary for Russia to join the WTO. According to their thinking, until Russia can offer something more to the rest of the world than oil, gas, and steel there is no need for it to join the WTO.

Sources Russian media,
http://www.gazprom.ru/,
http://www.wto.org/

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