Putin says no advantages for Russia from WTO

MOSCOW Mon Aug 25, 2008 10:17am EDT

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MOSCOW (Reuters) - Prime Minister Vladimir Putin said on Monday Russia sees no advantages to WTO membership and should freeze some commitments made during entry talks in a sign Moscow is pulling away from the West after its war in Georgia.

Putin, quoted by Russian news agencies during a government meeting, said Russia's economy would incur a heavy burden in meeting World Trade Organization membership requirements and that some of these demands were against the country's interests.

"Judging by the rhetoric of the last few days, it seems things are moving toward a sharp confrontation between Russia and practically the whole of the rest of the world," Vladimir Osakovsky, an analyst at UniCredit, said.

"That has every chance of spilling out into real action from both sides. Perhaps the halting of the WTO accession process could be the first real step, a real consequence of the war."

Russia, the world's 10th largest economy, is by far the biggest country still outside the World Trade Organization (WTO) and has been negotiating membership since 1995. It had previously been thought a deal could be reached by year-end.

The Kremlin has faced criticism in the West after a brief war over the Georgian breakaway province of South Ossetia, when Moscow launched a massive counter-attack to Tbilisi's attempts to take the province by force.

Putin said Russia should withdraw from some of the agreements signed earlier on WTO accession, Interfax reported.

"We propose continuing negotiations within the framework of the working group on WTO accession, but informing our partners of the need to exit some agreements which currently oppose the interests of the Russian Federation," Putin said.

"We don't feel or see any advantages from membership, if they exist at all. But we are carrying the burden," Interfax quoted the prime minister as saying. "We need to make this clear to our partners."

"Certain sectors of our economy, above all agriculture, are carrying a fairly heavy load," RIA Novosti news agency quoted Putin as saying, referring to WTO accession.

CONFRONTATION

Analysts said Putin's statement raised questions over the economic program set out during the choreographed handover of the presidency to Dmitry Medvedev in May this year.

"It's another reason for investors to question the government's commitment to not just the reform agenda but the whole economic program that was set out as part of the political transition," Chris Weafer, chief strategist at Uralsib brokerage in Moscow, said.

"The main concern for investors from all these recent events is that the program could be materially changing, i.e. perhaps less emphasis on the diversification and the openness."

As tensions in the Caucasus region persist, several Western officials, including U.S. Commerce Secretary Carlos Gutierrez, have suggested Russia's military operations in Georgia have put its WTO bid at risk.

Accession depends on Russia settling several outstanding issues, including export duties on timber, farm subsidies and the role of state-controlled enterprises such as gas producer Gazprom.

President George W. Bush has said the fighting was hurting Russia's efforts to join modern global economic and security institutions.

In addition, on a bilateral level, WTO rules give member state Georgia some leverage over Russia's candidacy. A candidate country must reach agreement with all 153 members, as well as agreeing separate deals with any member that seeks them.

Georgia objects to Russia's support for the rebel regions of South Ossetia and Abkhazia, saying it cannot control customs on Russia's borders with these regions.

As a result it is blocking formal talks on Russia's accession while allowing informal negotiations to continue.

(Additional reporting by Christian Lowe, Toni Vorobyova and Robin Paxton; Editing by Matthew Jones)

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