Bloomberg News

EU, Russia Agree on WTO Terms, Leaving 2011 Entry Possible

October 21, 2011

(Updates with analyst comment in fifth paragraph.)

Oct. 21 (Bloomberg) -- The European Union backed Russia’s bid to join the World Trade Organization, saying 2011 entry for the world’s largest energy producer remains a possibility.

The bloc said it had reached an agreement over rules governing the auto industry after Russia in 2005 began offering preferential import duties to foreign carmakers that agreed to assemble vehicles in the country and use more local parts.

“We have struck a deal on the final outstanding bilateral issues, leaving the way open for Russia to join the WTO by the end of this year,” EU Trade Commissioner Karel De Gucht said today in an e-mailed statement. “This understanding will help to protect EU jobs in the car and car components’ industry.”

Russia, the largest economy outside the global trade arbiter, has sought entry since 1993, exceeding China’s 15-year wait for membership. Georgia, a WTO member with which Russia fought a five-day war in 2008, must now resolve bilateral objections to Russia’s accession.

“The last economic obstacles to Russia’s WTO accession have been removed,” Yaroslav Lissovolik, head of strategy at Deutsche Bank AG in Moscow, said today by telephone. “Russia has never been so close to entering the WTO.”

U.S., Georgia

The Obama administration said last year it had resolved most issues necessary for Russia to enter the WTO. U.S. Vice President Joseph Biden said during a trip to Moscow in March that the U.S. “strongly supports” its bid.

For American companies to qualify for lower tariffs and other measures Russia adopts as a condition to join the Geneva- based WTO, Congress must repeal a Cold War-era law limiting trade and grant the nation Permanent Normal Trade Relations.

Russia is in the “final stretch” and may complete the accession process in December, Deputy Economy Minister Andrei Slepnyov said this month. It has reached a “general” agreement on lowering meat import quotas with “key players,” he added.

The latest round of talks between Russia and Georgia failed to resolve their differences, Georgia’s Deputy Foreign Minister Sergi Kapanadze said Oct. 20. The Black Sea nation has withheld approval because of disputes over control of customs checkpoints in the breakaway regions of South Ossetia and Abkhazia.

The Swiss-mediated negotiations, held in Geneva, are slated to resume early next week, he said.

‘Hiding Behind’ Georgia

The U.S. and Europe shouldn’t “hide behind” Georgia in delaying Russia’s WTO entry, Prime Minister Vladimir Putin said Oct. 6. Negotiations may be finished by year-end and outstanding objections are “purely political,” he said in an Oct. 11 interview to Chinese media.

“Everyone, including our partners in the WTO accession process, should understand that this isn’t just in Russia’s interests,” President Dmitry Medvedev told supporters this week. “It’s in the interests of various businesses, foreign business, and generally in the interest of properly regulated international trade.”

The EU’s backing means Russia may now be able to able to conclude talks with Georgia in time to join the WTO at a meeting of the body’s General Council in December, according to Deutsche Bank’s Lissovolik.

“The uncertainty with Georgia remains, but now we can hope that common sense will triumph,” he said.

--With assistance from Patrick Henry and Henry Meyer in Moscow, Helena Bedwell in Tbilisi and Eric Martin in Chicago. Editors: Andrew Langley, Leon Mangasarian

To contact the reporters on this story: Alena Chechel in Moscow at achechel@bloomberg.net; Scott Rose in Moscow at rrose10@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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