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. Last Updated: 07/27/2016

Russia Lobbies EU to End '97 Steel Quotas

LONDON — Russia will ask the European Union to scrap a 1997 agreement imposing quotas on Russian steel exports, ahead of Moscow's membership talks with the World Trade Organization, a Russian official said Tuesday.

"We are officially ready and willing to work in Europe without any agreement," Svetlana Stepanova, head of the metallurgical department of the Science and Technology Ministry told a conference on Commonwealth of Independent States' metal sectors.

"We've been trading over the past 10 years and we've become accustomed to the rules of civilized trade," she said.

The 1997 accord, intended to liberalize the EU's steel trade with Russia, also aimed to create competition in the Russian steel sector, previously helped by huge government subsidies and exporting at a fraction of the EU prices.

The EU signed in 1997 a similar agreement with Ukraine, another major CIS steel producer.

Under the deal, EU quotas were raised by 10 percent in 1997, a further 5 percent in 1998 and 2.5 percent more each year up to the end of 2001. The deal also included a double-checking system to counter occasional "re-exporting' tricks used by traders to dodge quotas.

Moscow preferred to scrap the 1997 agreement rather than extend it as talks for Russia's WTO membership were close, Stepanova said.

"It would be very useful to terminate the EU accord. Any new accord would be for several years and that could be very bad for our plans to join the WTO," Stepanova said outside the London conference.

She said senior Russian officials had shuttled between European capitals in recent weeks to persuade EU officials to agree with the move.

"I think our positions are convergent and our legal framework is close to what the EU wants. I'm confident we will be able to convince the EU that Russian exporters are ready and willing to work without any quotas and to behave in a civilized manner," she said.

But a senior Western banker attending the London conference organized by the Adam Smith Institute said Stepanova's optimism should be taken with a pinch of salt.

"The latest information I have suggest it will be quite difficult to reach an understanding with the EU," he said.

Failure of the Russian government to resolutely tackle the so-called Protocol B of the agreement — including state aid, competition policy and environment issues — compounded the problem, the banker said.

"Obviously, we would prefer a reliable market access and greater liberalization," he said.

Talks might also be hampered by a recent decision by Moscow to impose a 15 percent export duty on scrap exports, a move that, the banker said, had irritated Western traders.

"The scrap export think was in violation of the 1997 agreement and it needs to be sorted out quickly. The dispute on scrap export taxes has poisoned relations and this is a real pity," he said.

Stepanova said the government was likely to reconsider the level of taxation: "The [Science and Technology] Ministry has already appealed to the [Russian government] Economic Commission asking it to reduce the duty," she said.