Putin summit vital to stop EU/Russia trade spat escalating

GENEVA Thu Dec 13, 2012 1:17pm EST

GENEVA (Reuters) - President Vladimir Putin's summit in Brussels next week may be the last chance to avoid a trade row between Russia and the European Union escalating into a legal battle at the World Trade Organization.

EU Trade Commissioner Karel de Gucht told reporters in Geneva on Thursday that Russia needed to change its "unacceptable" behavior.

"Next week we have a summit meeting with Mr Putin in Brussels but if they do not remedy what they have been - how do I say it? - wrongdoing in recent months we will have to take action. I hope they realize that they have to do something about it and do it quickly," De Gucht said.

He stopped short of saying the row needed to be resolved at the summit but said it would be "an important meeting" in the process, and reiterated the EU's threat of WTO action.

"Let there be no doubt that if it continues like it is now we will see each other back in Geneva."

While the EU is upset about Russia's restrictions on livestock, cars and wood, Russia has a problem with EU energy rules that threaten Russian control of a European gas pipeline.

Russian gas export firm Gazprom (GAZP.MM) has a 51 percent stake in the Nord Stream pipeline running from Russia from Germany, but EU law prohibits energy suppliers from dominating distribution networks.

Russia regards the rules as a trade restriction and could bring the case to the WTO, four months after it joined the body.

Russian Energy Minister Alexander Novak said on Wednesday that regulators, companies and the European Commission would meet next week to discuss Russian concerns and the possibility of giving Gazprom a waiver.

Russia joined the WTO in August after an 18-year negotiation and an eight-month wait for ratification. Some trade diplomats suspect that, unlike China, which took years to become a prominent player in the WTO's dispute settlement system, Russia will quickly become embroiled in litigation.

Moscow and Washington have not even begun their WTO relationship, since the United States has not passed legislation to normalize trade relations with Russia, but they already show signs of getting off on the wrong foot.

In a statement released on Saturday, U.S. Trade Representative Ron Kirk and Agriculture Secretary Tom Vilsack said Russia's new testing requirements on U.S. beef and pork exports "appear to be inconsistent with its obligations" to the WTO, implying that the case could eventually lead to litigation.

(Reporting by Tom Miles; editing by Robert Woodward)

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