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. Last Updated: 07/27/2016

WTO, Russia Hold Their Turf

Washington, Brussels and Moscow agree that the sooner Russia joins the World Trade Organization, the better. But the consensus ends there.

Both Russia and the WTO have dug in their heels over conditions for entry, with little room for compromise.

"We're ready to accede to the WTO tomorrow," Deputy Economic Development and Trade Minister Maxim Medvedkov said Wednesday at a WTO conference hosted by the Adam Smith Institute.

But if the WTO does not compromise on certain points "we will never be able to reach an agreement," Medvedkov said.

Russia's accession now depends on the WTO, he said.

President Vladimir Putin has suggested 2004 as a possible date for accession while calling the terms more important than the timing.

Some powerful business interests have urged the government to delay entry or provide protection for key industries.

The negotiations are sticking on about half a dozen points, including sensitive sectors such as aviation, automotive, agriculture, banking, insurance and telecoms, said Medvedkov, Russia's point man on WTO accession talks.

The stickiest point is the European Commission's insistence that Russia bring domestic and foreign energy prices into line.

Medvedkov said Russia plans to balance energy prices according to its own plan and on its own time.

"Our system of regulation does not differ in any way from the systems used by other WTO countries," he said. "We consider that it is not appropriate to take on obligations in this area."

"We are two to tango, as our English friends say," said Herve Jouanjean, the EC's director for WTO affairs.

The European Commission will continue to demand that Russia commit to bringing domestic energy prices into line with export prices, he said.

"We are not asking to change prices overnight," Jouanjean said. "But we cannot accept that an economy ... subsidize to a large extent its industrial sector."

Energy subsidies to Russian industry amount to nearly $5 billion per year, and natural gas export prices were six times higher than domestic prices, he said, citing a report by the Organization for Economic Cooperation and Development.

Jouanjean and Medvedkov are expected to meet later this week ahead of informal WTO talks in Geneva on Oct. 30, where the energy issue "will be discussed in great detail," Medvedkov said.

Jouanjean also said Russia is not doing enough to open its markets and is backtracking by asking to impose caps on foreign participation in the banking, insurance, telecoms and distribution sectors.

"We have the impression that there is no possibility for our companies to seriously enter the Russian market," he said, blaming Russia's "fragile" regulatory environment and harsh conditions imposed on foreign companies.

Dorothy Dwoskin, assistant U.S. Trade Representative for WTO and multilateral affairs, said Russia has displayed "great reluctance ... to lock in current levels of access" to the market for foreign companies.

Dwoskin, in town this week for talks with Russia's WTO team, said further problems included Russia's reluctance to improve banks' transparency and inadequate legislation and enforcement, which could affect the country's ability to comply with WTO rules.

"Russia is not where it wants to be in terms of passing legislation," she said.

The United States will also pay closer attention to rampant piracy, she said.

"Enforcement of IPR protection, including combating computer piracy, are essential in the coming months, and will certainly boost the accession process," she said.

Both the EC and U.S. representatives stressed that the sooner Russia accedes, the sooner the country will have a say in WTO rule making.

"Delay is not in Russia's national interest," Dwoskin said.

Jouanjean said accession could help Russia along the path toward reform and development.

"The choice for Russia is whether you join and at the same time learn and develop your economy in parallel ... or you wait," he said.

"I can tell you coming from a normal market economy, it will never be the right moment to join the WTO because in all our economies we are facing change at each and every moment," he said.