Putin Ditches Unilateral WTO Bid

RIA-NovostiPrime Minister Vladimir Putin meeting with his counterparts from the Eurasian Economic Community on Tuesday.
Russia's 16-year quest to join the World Trade Organization took a wild turn Tuesday when Prime Minister Vladimir Putin announced that Russia, Belarus and Kazakhstan would abandon their separate accession talks in favor of a bid to enter as a single regional bloc.

The move threatens to further delay Russia's ascension to the world trade body. The European Union, which said just last week that Russia could join by the end of the year, said Tuesday that it might need to re-evaluate its support. Analysts said Putin had drawn a "line in the sand," indicating that Russia's patience with the WTO had run out.

Putin announced the joint WTO bid at a meeting of the Eurasian Economic Community, a fledgling customs union encompassing the three nations and three other former Soviet republics.

Putin said Russia, Belarus and Kazakhstan still sought WTO entry, "but as a united customs union, not as separate countries."

He said the new customs union would become active next year.

But Kazakh Prime Minister Karim Masimov cautioned that it would be difficult to make the deadlines set by the customs union. "We have set a difficult goal before ourselves, for there to be no customs posts along the Russian-Kazakh border by July 1, 2011," he said at a news conference.

First Deputy Prime Minister Igor Shuvalov later told reporters that the three counties were in "100 percent agreement" on the customs union. Russia will chair the grouping and will therefore be in charge of WTO talks for now, Shuvalov said.

Formal negotiations on WTO accession of the three countries will begin after Jan. 1, Finance Minister Alexei Kudrin said, Itar-Tass reported. He acknowledged that the talks might be more difficult as a three-party bid. "This process will be a bit more complicated," he said.

The other members of the customs union are Tajikistan, Kyrgyzstan and Uzbekistan. Kyrgyzstan has been a member of the WTO since 1998, while Tajikistan and Uzbekistan are working separately to join the trade body.

EU officials sought to play down Tuesday's development but said it could lead to a reappraisal of WTO negotiations.

"We just had a very important and productive meeting in St. Petersburg last week, where the Russian side confirmed its objectives at the highest level," Lutz Guellner, spokesman for EU Trade Commissioner Catherine Ashton, said by telephone from Brussels. "We have no reason to believe that this has fundamentally changed."

Guellner said the trade commission would "want to know the exact details" before commenting further.

However, he said the formation of a customs bloc could prompt a revision of the trade commission's policy toward Russia.

"The basic parameters of this customs union … could create a new situation, which we would first need to carefully analyze to determine the potential impact on Russia's WTO negotiations," he said.

Russian, EU and U.S. officials made a series of overwhelmingly positive comments about Russia's WTO chances during the St. Petersburg International Economic Forum last week.

Ashton, the EU trade commissioner, told a panel on Russian-EU business ties on Thursday that the two countries "have agreed WTO accession should be completed before the end of this year," although she said it wouldn't be easy.

Economic Development Minister Elvira Nabiullina said Russia, the only major economy outside the 153-member WTO, hoped to finish talks by the year's end. "We feel we are coming to agreement with the European Union," she said.

Washington's trade representative, Ron Kirk, also said during the forum that negotiations on Russia's WTO admission had progressed recently and could be over within a year.

Rusnano chairman Anatoly Chubais, however, offered a warning about the customs union that foreshadowed Tuesday's developments. "In recent months, there's been active work to form a new customs union with Russia, Belarus and Kazakhstan," Chubais told the panel. "And it's possible that the process may become an alternative [to WTO]. If the new customs union is formed, a new party to the talks will appear," meaning that negotiations could be further delayed.

Despite recent progress on the WTO, Russia's accession might have been farther away than thought, analysts said.

"Russia's been close many times before in the last 16 years," said Roland Nash, head of research at Renaissance Capital. "This sends a signal that Russia is incredibly frustrated with the process."

Putin's comments could represent an ultimatum to the WTO, said Alex Kliment, an analyst at Eurasia Group.

"He is drawing a line in the sand," Kliment said. "He's saying that Russia is running its last lap, and if it doesn't get to the finish line soon it will simply join another race."

Kliment said that while a great deal of trade went on between Russia, Belarus and Kazakhstan, forming a customs bloc with two countries whose economies were a fraction the size of Russia's would "not be in Russia's best interests."

An official at the Belarussian Foreign Ministry refused to comment on the joint WTO bid.

Trading issues between Russia and Belarus have been anything but friendly as of late. Russia has banned nearly all dairy products from Belarus in the last four days, citing health concerns.