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CEPS European Neighbourhood Watch. Issue 51


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CEPS European Neighbourhood Watch. Issue 51

Editorial by Michael Emerson: «Russian Games with the WTO and the International Order»

Sixteen years since it first submitted its bid to join the World Trade Organisation (WTO), Russia has thrown the process into confusion. First Prime Minister Putin declared in June that Russia's application was to be withdrawn, in favour of a joint application with Belarus and Kazakhstan with whom it plans to establish a customs union in January 2010.  Then President Medvedev at the G8 summit in Italy on 10 July said that Russia could join in either of two ways, jointly with Belarus and Kazakhstan or separately, the latter course being “simpler and more realistic”.

Russia's chief trade policy negotiators know full well from their sixteen years of apprenticeship what joining the WTO entails, with the progressive accumulation over these years of obligations beyond simple agreement of a binding tariff schedule for ‘most-favoured nations' (i.e. other WTO members states). Take the terms of Ukraine's accession as the most relevant model. The final report concluding in favour of Ukraine's accession and its related annexes and protocols run to hundreds of pages, and beyond the tariff schedule concerns topics such as competition policy, export restrictions and subsidies, technical barriers to trade, government procurement, free trade zones, agricultural policies, intellectual property rights, patents, copyrights, enforcement procedures, and details on the extent of market opening for all service sectors (the list of serviced sector commitments takes over 40 pages alone).

The idea of making a single unified multilateral agreement with this content is a surrealist proposition for any group of states that are not already integrated to a virtually federal level. Russia's chief negotiators know this.

So what does Prime Minister Putin think he is doing, when President Medvedev feels obliged to say in public at the G8 summit that Putin's line is unrealistic? One interpretation might be that Prime Minister Putin shot off with his proposition without taking advice from his officials. But that seems unlikely. Putin is generally an assiduous master of detail in whatever he does.

A second interpretation is that he was not without technical advice, but went ahead with a different political rationale. This would be that he does not want Russia to accede to the WTO, since his government is constantly wanting to adopt trade policy measures that would be ruled illegal if a member of WTO, or at least seriously contested. He does not want to be bound by international rules. Examples in recent years of measures that were either WTO-incompatible, or could have been seriously contested and taken to WTO dispute settlement procedures, include wine sanctions taken against Georgia and Moldova in 2006, the meat dispute with Poland and the EU in 2007, the timber expert dispute with Finland and the EU in 2008, and the automobile import tariff increases in 2009.  He wants to be able to continue to use trade sanctions as a political tool.

A third interpretation relates to Russia's wish to advance renewed economic integration with whichever CIS states are willing. Only Belarus and Kazakhstan are currently willing to join Russia in a customs union, although trade sanctions taken in the last months by Russia against milk products from Belarus may make this country think again. However to pull these two countries into a joint WTO application could provide leverage to advance the economic integration agenda of the three countries beyond the tariff unification of the customs union. In addition the customs union will deprive Belarus and Kazakhstan of the option of going on to negotiate their own trade agreements with major partners such as the EU or China.

Combining interpretations two and three would suggest that Putin spotted a smart move to stop any realistic chance of the WTO accession which he does not want, but without having to say so, while at the same time using the manoeuvre to increase Russia's leverage over Belarus and Kazakhstan. However this turns out to have been not so smart. It has thrown into the open the well-known divisions among the Russian leadership and elite circles over the real issue: whether it is in Russia's interest to accede to the WTO or not, and more broadly whether Russia's modernisation objective should be furthered with increasing international openness and acceptance of generally accepted global rules of the game. Putin reveals himself to be against WTO accession with all that this implies, contrary to numerous speeches saying he is in favour; Medvedev appears to be in favour. There seems to be no other explanation why Medvedev felt obliged to intervene in their most explicit policy difference so far observed.

It is also reported in the Russian press that Russia is contemplating withdrawing from the Energy Charter Treaty, which it has signed but not ratified. This would be a further move to distance itself from internationally binding legal obligations. However such a move would not be as easy as might be supposed, since a state withdrawing from the Treaty would still be bound for a further 20 years after withdrawing by provisions protecting foreign investment on its territory (Article 45), and this even for a non-ratifying state.  The consequence of this is that Russia could be subject to judgements in international courts of justice following complaints over breach of Energy Charter provisions (e.g. over the treatment of foreign investors), with serious possible consequences in the event of non-compliance (e.g. seizure of assets abroad).

In any case these episodes throws unfavourable light on the role of Russia as privileged member of the G8, which is meant to be the inner sanctum of the world's most advanced economies. Russia's presence in G8 alongside the absence of China (WTO member state) is already an objective anomaly. At the same time Russia pretends to a grand role in reshaping the world order, for example convening recently a meeting of the so-called BRIC group with Brazil, China and India. 

At the same time Russia is also pretending to lead Europe and the West into a new normative pan-European security order, against the background of having invaded Georgia a year ago, and going on to justify recognition of the independence of Abkhazia and South Ossetia with the Kosovo precedent that it had otherwise been using as tool to criticise the immorality of the West. OSCE is the obvious organisation to preside of any such development, but Russia has been doing its best to undermine it for several years. Similarly in the Council of Europe, where  Russia is subject to a very large number of cases brought against it at the European Court of Human Rights in Strasbourg; in fact so many that proposals have been made to streamline the proceeding there, and avoid that this overload wrecks the institution. But Russia blocks these technical reforms.

Russia's ruling elite have the ambition for their country to be a leading international actor, with a branding as promoter of a reshaped normative world order. But Russia's actual track record is one of undermining several European organisations to which it belongs, or acting contrary to their letter or spirit, and also complaining when applications for accession (such as to the WTO) are subject to standard membership criteria which it seems not to want to comply with. For Russia's international political ambitions to be successful there will have to be more consistency, professionalism and credibility for the sincerity of its motives.

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№9(36), 2009