Kremlin Aide Ties WTO to EU Talks

MTKremlin economic aide Arkady Dvorkovich speaking at the Ritz-Carlton last month at a UBS investment conference.
Arkady Dvorkovich, the Kremlin's top economic adviser, signaled ahead of a key meeting with European officials that the government would be willing to reconsider potentially contentious trade decisions if WTO negotiations could be wrapped up quickly.

Russia's long-term aim of joining the World Trade Organization has been interrupted by a number of trade disputes with Europe in recent years, most recently over a proposal to raise export duties on timber from the start of 2009.

"The head of the government will speak at this summit about our readiness to settle this matter in the course of a few weeks," Dvorkovich told reporters Friday, referring to Russia-EU talks in Italy on Nov. 14.

"If it becomes clear that the WTO accession negotiations will finish quickly, we'll delay making any concrete decisions on trade policy with the EU," Dvorkovich said. "But if the entry talks are being put off for a while and we see that we've got no chance at all, then it's still entirely possible to come to an agreement with the EU on trade but not necessarily within the framework of our earlier agreements," he said.

After Medvedev's meeting in Italy, he will head to Washington for a G20 summit on the global financial crisis. Dvorkovich said the president had sent a letter to the heads of 18 countries, the European Union and the Commonwealth of Independent States, which includes "specific proposals" for getting out of the crisis.

In his first state-of-the-nation address on Wednesday, Medvedev laid much of the blame for the global financial crisis on the United States, saying that since the fall of the Soviet Union the country has held its opinion to be "the single, true and indisputable," leading to a number of "major blunders" in the economic sphere.

The plan includes new institutions for cooperating on macroeconomic policy and the formation of structures to resolve disputes between states and commercial organizations and a reconsideration of how the International Monetary Fund operates, Dvorkovich said.

"It should work more like a bank, and as a lender it should put forward financial, and not political, conditions for borrowers," he said, Interfax reported.

Dvorkovich also sought to ease concerns about the weakening ruble, saying the government was considering a gradual widening of the band in which it trades against the Central Bank's dollar-euro basket, but that a "sharp devaluation" would not take place this year or in 2009.

But if events continue at their current pace, with oil prices falling and the government selling billions of dollars of reserves to prop up the ruble, a more significant devaluation could be in store.

"Without an increase in oil prices or an improvement in the capital account of the balance of payments, the Central Bank will eventually have to devalue the ruble," Troika Dialog's chief economist, Yevgeny Gavrilenkov wrote in a note Friday, Bloomberg reported.

He said that if Urals crude remained below $60 per barrel, it would imply a devaluation of the ruble against the bicurrency basket by 25 percent to 30 percent.