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December 21, 2012 10:05 am
An EU-Russia summit on Friday could prove pivotal as Brussels considers whether to launch the first World Trade Organisation complaint against Moscow since it joined the club a little more than three months ago.
EU officials acknowledge that such an act could invite retaliation. But they also express mounting frustration that Moscow has ignored their pleas on a collection of festering trade disagreements ranging from pigs to cars.
“Do we take the Russians to the WTO?” one asked. “A lot will depend on what is said at the summit.”
Tense trade relations are one of several thorny issues to be discussed at the two-day meeting, which began on Thursday evening in Brussels. The summit – a twice-annual affair – is not expected to produce any written agreements, and both sides have strained to play down expectations.
But it has the potential to reveal discord on a number of fronts – from disagreements over Syria and human rights to Russian discontent with an ongoing EU investigation into alleged market abuses by the state-owned Gazprom.
There is also the complicated matter of Cyprus. Its efforts to secure a financial rescue from the EU and International Monetary Fund have been complicated by its banking system’s preponderance of Russian depositors.
Months ago, Cyprus’ appeals to Russia for assistance worried fellow member states, who feared it would give the Kremlin undue influence. Now an opposite concern has emerged in Germany and other national governments about the political backlash they might suffer if they are seen to be using taxpayer money to rescue offshore Russian bank deposits.
Of all those issues, trade may be the most immediate. EU-Russia trade amounted to more than €300bn last year, with the EU ranking as the biggest exporter to Russia. Moscow is counting on EU investment to help diversify its economy and ease its reliance on oil and gas exports.
When Russia joined the WTO in August after more than 18 years of negotiations, the EU – which had lobbied on Moscow’s behalf – hoped that a sometimes rocky commercial relationship would find surer footing.
But those hopes have faded. EU officials complain that Russia has failed to live up to its WTO obligations and has even thrown up new protectionist barriers.
“Since Russia has become a member of the WTO they are doing exactly the opposite of what they are supposed to do or what they have been promising to do,” Karel De Gucht, the EU trade commissioner, fumed earlier this month, warning that his patience was running out.
The biggest source of controversy is new Russian legislation that would require carmakers to pay for the cost of recycling vehicles. Moscow has billed it as environmental legislation, but Brussels believes it is discriminatory because it only applies to imported cars.
There are a series of smaller irritants, too, including a Russian ban on EU live pigs, supposedly for health reasons, and slow progress by Moscow to remove fees charged to European airlines that fly over Siberia.
Mr De Gucht, never known to shy away from a confrontation, said he planned to demand answers from Valdimir Putin, the Russian president, when the two stand “eyeball to eyeball” at the summit.
Vladimir Chizhov, Russia’s ambassador to the EU, suggested on Wednesday that Mr De Gucht would come away frustrated. “The Russian economy is still digesting WTO membership,” he told reporters, adding that Moscow was not prepared “to make another leap of liberalisation” for Brussels.
Mr Chizhov also suggested that Moscow could use its new membership against Brussels. “Russia has also some issues that it may be appealing to the WTO to address,” he said, citing the EU’s energy liberalisation laws, which would require Gazprom to cede some control over proposed pipelines.
Some analysts speculate that Mr Putin has always been more interested in the prestige of WTO membership than its goal of promoting free trade. In any case, rushing to embrace Russia’s WTO commitments could be politically awkward for him at home.
Even if the two sides do come to some accommodation on Friday, there are still other issues clouding their trade relations. Mr Putin’s determination to create a Eurasian customs union, with Belarus and Kazakhstan, is problematic for Brussels.
At a minimum, EU officials view it as a distraction that complicates their efforts to forge closer trade relations with Russia. It may also be a source of competition since both Moscow and Brussels are vying behind the scenes to close trade agreements with Ukraine.
“At some point, there will be a decision point for Kiev because no country can be a member of two customs unions simultaneously,” Mr Chizhov said.
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