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. Last Updated: 07/27/2016

Putin Slams Brussels for WTO 'Arm Twisting'

APSchroeder smiling as Putin speaks during the meeting in Yekaterinburg on Thursday.
YEKATERINBURG, Ural Mountains -- President Vladimir Putin sharply criticized European Union "bureaucrats" Thursday for pressing Russia to raise domestic energy prices as a condition for joining the World Trade Organization and asked visiting German Chancellor Gerhard Schroeder to support him in the dispute.

"EU bureaucrats either don't understand it or deliberately put unacceptable conditions for Russia to join the WTO," Putin said at a meeting with Russian and German businessmen that was part of bilateral consultations in the Ural Mountains city of Yekaterinburg.

"We cannot move to world energy prices in a single day. It will ruin the country's economy. Eurobureaucrats either do not understand this or are trying to impose conditions which are unacceptable for Russia's entry into the WTO," Putin said.

"Such a tough position towards Russia is unjustified and dishonest. It's an attempt to twist our arms, but Russia's arms are getting stronger and the EU won't succeed in twisting them," Putin said.

In Brussels, the European Commission responded to Putin's criticism by saying it is not asking for unreasonable concessions from Russia.

"We are not asking the Russians to make unreasonable concessions or to force obligations on the Russians other than those in the WTO or to try and influence the decisions the Russians will adopt at home," Arancha Gonzalez, spokeswoman for European Trade Commissioner Pascal Lamy, told a news conference.

She said energy pricing, which the EU sees as a trade-distorting subsidy to Russian domestic companies, was just one problematic aspect of the talks.

She said Russia also wanted to give state long-distance telephone operator Rostelecom a market monopoly and charged European airlines too much for flying over Siberia.

She said Lamy would visit Moscow next week to pursue tough talks with Russia.

European Union trade negotiators also say low gas prices give Russian industrial exporters an unfair advantage in foreign markets and distort trade.

Economic Development and Trade Minister German Gref, addressing Russian and German businessmen on the sidelines of the summit, said WTO entry talks had hit a deadlock -- partly because of energy prices.

"Negotiations are proceeding with considerable difficulty. They are deadlocked," news agencies quoted Gref as saying, referring to his meeting in Brussels this week with Lamy.

But a ministry spokesman said Deputy Economic Development and Trade Minister Maxim Medvedkov still intended to attend a Geneva meeting of a working group on overall negotiations on WTO entry, set for Oct. 27-30.

"If something slows down in talks with the EU, it does not mean all work slows down," he said in Moscow.

Gas prices charged to Russian domestic and industrial users are far below world levels. Under proposed but repeatedly delayed reforms of gas monopoly Gazprom, the government plans to raise them gradually.

Prices, however, cannot be pushed up to world levels because Gazprom's transportation costs, factored into European gas prices, are considerably lower on the home market. Europe receives a quarter of its gas supplies from Russia.

Gazprom effectively subsidizes the rest of the economy with its low prices.

National power utility UES, Gazprom's main consumer, plans to raise electricity prices in line with inflation, but also plans to launch a free power market.

"Our position here is not obstinate," Putin said. "We understand that sooner or later we must introduce world prices inside the country. But we intend to do it gradually."

Putin said Russia, which received its first investment grade from Moody's Investor Service on Wednesday, had become a stable country -- a fact the European Union should appreciate.

"Russia's main advantage today is its political and macroeconomic stability," Putin said. "If we move to world energy prices, macroeconomic stability will be undermined."

(AP, Reuters)