Russia expects WTO deal by mid-December

Reuters News
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Posted: Oct 31, 2011 7:44 AM
Russia expects WTO deal by mid-December

By Lidia Kelly

MOSCOW (Reuters) - Russia wants minor changes to a proposed deal with Georgia over its bid to join the World Trade Organization but expects an agreement in time for its accession to be approved in mid-December, a Kremlin aide said on Monday.

Swiss mediators were meeting officials on Monday in Georgia, the only member of the 153-country bloc that is blocking Russian entry, after talks in Moscow on Sunday on securing accession for the biggest economy outside the group.

"There are no radical proposals ... Only minor changes to the wording (of the compromise deal)," top Kremlin economic adviser Arkady Dvorkovich told reporters in Moscow.

Russian entry after 18 years of negotiations would be the biggest step in world trade liberalization since China joined a decade ago, and the United States and the European Union have urged all sides to agree terms by the end of this year.

Entry will cement Russia's integration into the world economy 20 years after the Soviet Union fell, providing more global access to the world's top energy producer and its $1.9 trillion economy -- about 2.8 percent of the world economy.

"If the positions do not change dramatically, we have a big chance of completing the process soon," said Dvorkovich, who is also Russia's sherpa to the Group of Eight industrial nations and the broader Group of Twenty powers.

The Swiss mediators told President Dmitry Medvedev on Sunday they were hopeful Russia's accession could be secured in December. They were expected to meet Georgian President Mikheil Saakashvili on Monday afternoon.

Dvorkovich said on Sunday he hoped all pending issues could be resolved in a few hours.

Moscow has been working to satisfy Georgia's demands so Georgia consents to a WTO meeting next week that will formally approve Russia's accession terms, keeping it on track for the final assent of a conference of WTO trade ministers in December.

But trade diplomats say WTO Director General Pascal Lamy may have opened a loophole that could allow Russia to reject Georgia's demands and still get into the WTO, because he has called the formal meeting already, without waiting for confirmation from Moscow that Russia agrees to Georgia's terms.

So in theory Russia could now reject the deal with Georgia and still turn up to the WTO meeting next week for approval. But overriding Georgia's veto in that way would be hugely controversial. In an untested area of the WTO rules, it might also end up back-firing.

OVERCOMING ENMITY AFTER WAR

Georgia, a former Soviet republic to Russia's south, fought a five-day war with Russia in 2008 and the two countries have not restored diplomatic relations since then.

Tbilisi offered Moscow what it said was its final compromise deal on Russia's WTO bid last week, covering trade with the two Moscow-backed breakaway regions over which they went to war three years ago.

Like all WTO members, Georgia can effectively veto another country's accession. But Tbilisi also has something to gain from Russian accession because it could boost its exports of mineral water and wine, both of which were popular in Russia before their relationship soured.

The World Bank estimates that accession -- which has long been sought by Prime Minister Vladimir Putin -- could increase Russian gross domestic product by 3.3 percent in the medium term and by 11 percent over a longer period.

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 could cause a 15-20 percent rise in the RTS share index, Ovanes Oganisian of Renaissance Capital investment bank wrote in a research note.

He predicted domestic gas producers such as Novatek, Rosneft and Lukoil would benefit most and saw gains in general for oil producers, metals and mining firms, fertilizer makers and consumer goods producers.

Oganisian said banks and insurance companies could be hit if restrictions on foreign banks are dropped.

(Additional reporting by Megan Davies, writing by Amie Ferris-Rotman and Timothy Heritage Editing by Maria Golovnina)