Bloomberg News

Russia Counts on Neutral Swiss to Win Georgia’s Blessing on WTO

September 01, 2011

Sept. 1 (Bloomberg) -- Russia is counting on Switzerland’s status as the world’s second-oldest neutral nation after Sweden to help end its unprecedented 18-year wait to join the World Trade Organization.

Russia has been trying to join the trade arbiter since 1993, surpassing the 15 years China needed before becoming a member. While the U.S. and the European Union back Russia, its southern neighbor Georgia has used the possibility of blocking Russian accession as a bargaining chip for five years. The two countries fought a five-day war against each other in 2008.

Switzerland, neutral since 1815 and the place both Vladimir Lenin, father of the Russian revolution, and Soviet dissident writer Alexander Solzhenitsyn found asylum, has mediated between Russia and Georgia in their WTO negotiations at least four times since March and a further meeting is set for Sept. 12 in Geneva, according to Georgian Deputy Foreign Minister Sergi Kapanadz. The country’s autonomy from blocs such as the European Union and NATO give it added legitimacy in Russia’s eyes.

“Swiss neutrality and non-membership of the EU and NATO are a tremendous advantage because there is no hidden agenda,” said Daniel Warner, assistant director for international relations at the Geneva Centre for the Democratic Control of Armed Forces. “There’s nothing in this for them besides prestige.”

Switzerland, which represents the U.S. in both Cuba and Iran, has also been involved in talks about Turkish-Armenian relations and offers a neutral ground to host sensitive meetings.

Gorbachev, Reagan

The former Russian and U.S. presidents Mikhail Gorbachev and Ronald Reagan first met in Geneva, as did Bill Clinton and Syria’s Hafez Assad. Switzerland has been the venue for peace talks between rebel groups and governments -- such as Indonesia, Spain and Sri Lanka -- and for discussions on a settlement for the divided island of Cyprus.

Lars Knuchel, a spokesman for the Swiss Federal Department of Foreign Affairs in Bern, declined to comment on Switzerland’s role in the Russia-Georgia talks, which are led by Secretary of State Peter Maurer and include Chef de Cabinet Heidi Grau, WTO Ambassador Luzius Wasescha and Guenther Baechler, Switzerland’s ambassador to Georgia. Russia’s Economy Ministry didn’t respond to requests for comment.

To be sure, acting as a mediator also fosters ties with Russia, the 11th-largest economy in the world in 2010. Russia holds the G-20 presidency in 2013 and Swiss Economics Minister Johann Schneider-Ammann has asked Russia to include Switzerland in the deliberations of the world’s most powerful nations.

Skiing, Surgery

Switzerland also wants Russia to support its continued membership of the International Monetary Fund executive board, through which it represents the interests of the Central Asian countries that were formerly part of the Soviet Union.

Russia’s WTO accession may help clinch a free-trade agreement being negotiated between the European Free Trade Association, of which Switzerland is a member, and the customs union of Russia, Belarus and Kazakhstan.

Swiss-Russian ties extend into other areas as well: Switzerland has been encouraging wealthy Russians who ski at resorts from St. Moritz to Zermatt to return for medical checkups or surgery. Edipresse SA, Switzerland’s second-largest press group, began a Russian-language Internet news site three years ago and Russia was the main guest of honor at the Fetes de Geneve festival in 2008.

Economic Boost

With 2 percent of global gross domestic product, Russia is the biggest economy and the only Group of 20 nation outside the WTO, whose 153 members carry out 97 percent of world trade. Joining the WTO may boost Russia’s $1.5 trillion economy by more than 3 percent in the medium term, according to the World Bank.

WTO candidates must negotiate their accession with individual members of the trade arbiter. Georgia, which joined in 2000, has threatened to use its veto to block Russia’s bid unless a dispute over customs controls is resolved.

Russia and Georgia haven’t restored diplomatic relations since their 2008 war over the breakaway Georgian regions of Abkhazia and South Ossetia. Russian accession to the WTO this year remains doubtful while the issue of who has rights over the territories remains unresolved, analysts said.

“The constellation is right, but they need to get rid of the Georgian issue,” said Konstantinos Adamantopoulos, a trade lawyer at Holman, Fenwick & Willan in Brussels who has advised the Russian government on its WTO accession.

Georgia’s Demands

Georgia, which joined the WTO in 2000, said in 2006 that it would seek to suspend Russia’s accession process after Moscow banned the import of Georgian wine, mineral water, fruits and vegetables and threatened to cut gas supplies. Georgia also wants concessions on customs and border administration following Russia’s occupation of Abkhazia and South Ossetia.

Tension is again mounting between the two countries. Georgia recently accused Russia of supporting a spy network and involvement in bombings on its territory. Some Russian politicians and officials say Georgia is rebuilding its military to threaten Abkhazia and South Ossetia -- which Russia says are sovereign nations -- and aiding Islamist insurgents in Russia.

Russia won’t make any deals with Georgia to win WTO membership, President Dmitry Medvedev -- the first Russian head of state to visit Switzerland -- said in an Aug. 4 interview with Georgian and Russian broadcasters. “WTO accession is not too high a price to pay here,” he said.

Russia and Georgia now communicate mainly through Swiss diplomats, who produced a document proposing ways to increase transparency of customs controls. In a rare sign of progress, Russian Foreign Minister Sergei Lavrov said on July 12 that an agreement ensuring transparency of trade across Russia’s border with Abkhazia and South Ossetia was “very much doable.”

--With assistance from Helena Bedwell in Tbilisi and Lyubov Pronina in Moscow. Editors: Andrew Atkinson, Dylan Griffiths

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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