Interregnum Delays WTO Accession

Political paralysis as ministers wait for their new president to take over has dashed hopes of a quick deal with the European Union on Russian entry to the World Trade Organization, a senior Western diplomat said.

Negotiators from Moscow and Brussels have held an intensive round of meetings and phone calls to try to reach an agreement and remove one of the biggest obstacles to the country's WTO entry.

But hopes of a swift deal appear to have been misplaced, the senior diplomat said. He estimated that the earliest the European Union-Russia series of talks could conclude is this summer, putting Moscow's WTO membership back even further, to the year's end.

"As long as the new government is not in place, this will not happen," the diplomat said. "In terms of a bilateral agreement, this will not be before the summer."

Russia is in an interregnum period before President-elect Dmitry Medvedev replaces outgoing President Vladimir Putin on May 7.

The diplomat said Russia needed to make tough decisions on timber tariffs and other issues to close the deal but that ministers were ducking these decisions for fear of jeopardizing their prospects in the new government.

The country's negotiating team has been led by Finance Minister Alexei Kudrin, who hopes to retain a powerful position in the new Cabinet.

The diplomat said many Western countries had wrongly guessed that Putin was prepared to take the political heat for unpopular decisions before Medvedev is sworn in.

"On the American side in particular, they hoped Putin would take decisions during this phase, but he's not doing it."

Investors say membership will make doing business with Russia more predictable, while Russian officials see accession as a badge of their country's transformation into a full-fledged market economy.

The European team has been led by EU Trade Commissioner Peter Mandelson, who has repeatedly said that he wants Russia to join the WTO as soon as possible.

"Mandelson keeps on pushing and shows he is really concerned, but for Russia there are difficult issues, like agriculture, which will be affected," the diplomat said. Apart from the EU, Russia must still finalize bilateral deals with Saudi Arabia, the United Arab Emirates and Georgia. Russia will also face bilateral talks with Ukraine, as Kiev prepares to finalize its WTO entry.

On April 1, Russia raised timber export duties from 20 percent to 25 percent, a step that has hurt pulp and paper producers in Finland and Sweden.

The EU wants these duties scrapped and says they violate a broader 2004 deal with Russia that covers most WTO issues.

The country has also not implemented a deal that would phase out by 2013 Siberian overflight charges for European carriers traveling to Asia.

"They still have not signed it, which has upset the EU side. There is an agreement, but the signature is not there. Clearly, Aeroflot is not happy with this deal as they will lose out."