By Margarita Antidze and Gleb Bryanski
TBILISI/MOSCOW (Reuters) - Russia was close to joining the World Trade Organization after being offered a "take it or leave it" compromise Thursday by its tiny neighbor Georgia, the last holdout in Moscow's tortuous 18-year path to membership of the global trading club.
Russian entry to the WTO would be the biggest step in world trade liberalisation since China joined a decade ago, and the United States and the European Union have urged all sides to try to settle membership terms by the end of this year.
Only Algeria has spent longer trying to negotiate WTO membership, and after a big diplomatic push, trade diplomats say the conditions are so favorable for Russia that it's a case of 'now or never.'
Georgia, like all WTO members, has an effective veto on Russia's membership, and it is the last to agree. Its offer of a compromise deal was the climax of a long and knotty negotiation, overseen by Swiss mediators, about how to handle trade through two breakaway regions of Georgia that are loyal to Russia.
Sergi Kapanadze, deputy foreign minister and the head of Georgia's delegation, said the proposal provides for the electronic exchange of trade data and international monitoring of trade between Russia and the two Georgian regions.
"If Russia accepts this proposal, it will become a WTO member ... there is nothing unacceptable for Russia in this proposal," Kapanadze told Reuters.
"It is the final proposal, it won't and cannot be changed. The game is really over now and it is up to the Russians to decide."
Russian negotiator Maxim Medvedkov said Russia would give its response by early next week.
Georgia's ambassador in Geneva, Zurab Tchiaberashvili, said the fact that Medvedkov was referring the compromise back to Moscow suggested that he accepted it. Previous rounds of talks between Russia and Georgia, which went to war over the disputed regions in 2008, have ended much more fractiously.
Russian WTO membership could bring rapid benefits for Georgian exports such as mineral water and wine, both popular in Russia until the relationship soured.
For Russia, which already has strong exports of oil and gas, the benefits may be slower to materialize, though the World Bank estimates it could increase Russian GDP by 3.3 percent in the medium term.
Advocates of membership say Russian consumers will benefit and Russia will have to become more efficient, making good on the government's mantra of diversification by putting the oil-dominated, state-led economy on a diet of rule-based openness.
Russian opponents of accession say a flood of imports will stifle domestic producers, and Russia may be hit by demands that it give up longstanding policies such as the gas export monopoly enjoyed by Gazprom.
WTO membership would need to be ratified by parliament, but Prime Minister Vladimir Putin has declared himself in favor, saying its benefits outweigh the disadvantages.
A FEW MORE HOOPS
Although Russia may have overcome the most tricky obstacle, it still needs to jump through some hoops that could produce a last-minute stumble, potentially jeopardizing a tight deadline.
The first is the WTO's working party on Russia, which will meet informally on November 7-8 to finalize its accession terms.
That is very nearly a done deal, but Russia still needs to agree to a few small but important matters, such as its definition of high-quality beef, an unresolved issue with meat exporters such as Brazil, Australia and the United States.
Russia's candidacy would then go to a formal meeting of the working party on November 10-11 to get the accession package signed off and forwarded to a meeting of ministers in December.
Any of the WTO's 153 members can stop a formal meeting of the working party, a rule that provides an effective veto even for small nations like Georgia.
But working party chairman Stefan Johannesson said the meeting would go ahead, "strongly supported" by WTO members.
Despite Georgia's compromise offer, one western diplomat said Ambassador Tchiaberashvili sent a letter to WTO members insisting Georgia could still block the meeting if there was no deal with Russia. But, in a sign of limited patience with Georgia, he was told he would have to turn up and strike Russia's candidacy from the agenda.
"It's perhaps a bit more uncomfortable to have to turn up to block the meeting when you've got an entire room of people glaring at you," the western diplomat said.
(Reporting by Margarita Antidze, Gleb Bryanski and Tom Miles; Editing by Tim Pearce)