EU AGREES TERMS FOR RUSSIA'S WTO ENTRY, PUTIN SIGNALS SUPPORT FOR KYOTO PROTOCOL

At an EU-Russia summit on 21 May, the EU agreed to support Russia's WTO accession, and Russian President Putin said he would "speed up" Russia's process to ratify the Kyoto Protocol. Both topics had been slated for possible inclusion in an EU-Russia package deal (see BRIDGES Weekly, 28 April 2004). In the end, formal agreement was limited to Russia's WTO accession, with the EU and Russia agreeing on the bilateral terms of Russia's accession. In order to join the WTO, Russia needs to clinch bilateral deals with Members that so request. The President of the EU Commission, Romano Prodi, commented that "today the EU and Russia cement further their trade and economic relations. This deal brings Russia a step closer to the international trade family, the WTO, where it belongs". Russia still faces negotiations with other key WTO Members, including the US and China, before joining.

EU-Russia agreement on Russia's accession terms

The Russian policy of low domestic gas prices had been a stumbling block in bilateral WTO accession talks with the EU (see BRIDGES Weekly, 8 April 2004). In the final deal, Russia agreed to gradually increase gas prices, and to open up its gas pipelines to private firms. Russia agreed to raise gas prices for industrial users from the current US$27-28 per tonne to US$37-42 by 2006 and US$49-57 by 2010. These increases are, in any case, in line with Russia's domestic energy plan. According to the EC, "increasing domestic energy prices will encourage a more efficient use of energy resources in Russia and it is thus mutually supportive of the Kyoto goals". Russian petroleum company Gazprom would, however, be allowed to keep its monopoly on exports of Russian gas. Pascal Lamy, the EU Trade Commissioner, said, "it was a red line for Putin. In these sorts of negotiations, there are red lines, and I can tell you that it will remain a red line for Mr. Putin".

In terms of goods, Russia will bind tariffs at 7.6 percent for industrial goods, 11 percent for fishery products and 13 percent for agricultural goods, in addition to tariff rate quotas for fresh and frozen meat and poultry from the EU representing around EUR600 million, or 15 percent of total EU agricultural exports to Russia, per year.

Russia made a number of minor concessions in the services sector. Lamy noted a successful outcome in the telecoms sector, saying that "we got what we wanted, which is no restrictions on market access as it is in Russian legislation". In terms of flights over Siberia, Russia agreed to make charges "cost based, transparent and non-discriminatory by 2013".

These terms will be included in Russia's overall WTO accession package, which will consolidate the best concessions into market access schedules for goods and services.

Tougher talks to follow

Before joining the WTO, Russia will be required to clinch deals with a number of other current Members. Trade sources indicate that some of the upcoming talks, with countries such as the US, are likely to be tough. In fact, some commentators felt that the deal with the EU had been light -- especially in the services sector -- with the EU leaving certain problem areas to other Members to work out with Russia. All terms of the various bilateral deals will automatically apply to all Members under the most favoured nation principle. Lamy commented that the deal with the EU was meant to encourage Russia to continue bilateral talks, and said it was clear that "here and there, they'll have to give more to the US, Japan, or China". The US is set to get a better deal in the telecommunications and financial services sectors, in terms of protection of intellectual property rights, import duties on aircraft and aircraft parts, as well as the dual pricing of energy.

In terms of timing, both Russian and EU trade negotiators said that Russia would likely make it into the WTO only in 2006 at the earliest.

Putin extends lifeline for Kyoto Protocol

The Kyoto Protocol, which sets emissions limitations for greenhouse gases, cannot enter into force without Russian ratification, following the pullout of the US in 2001. Russia has been sending mixed signals on its intentions in this regard (see BRIDGES Weekly, 1 October 2003). However, immediately following the summit with the EU, Putin said, "it is true that the European Union has met us half-way on certain issues during the WTO negotiations. This cannot but have a positive effect on our position on the Kyoto protocol. We will speed up Russia's moves towards ratifying the protocol...We clearly set out our position on Kyoto long ago. We are for the Kyoto process and we support it". Putin did not, however, set a date for Russia's ratification.

"European Union-Russia deal brings Russia a step closer to WTO Membership," EC PRESS RELEASE, 21 May 2004; "Russia get EU deal on WTO, backs Kyoto," REUTERS, 21 May 2004; "Russia, EU agree on WTO-membership terms," PRAVDA, 25 May 2004; "Lamy Says Russia WTO Accession Talks Nearly Complete; Some EU Goals Dropped," WTO REPORTER, 26 May 2004.