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Earnings

Russia says no reason to delay WTO membership bid

MOSCOW (Reuters) - Blocking Russia from joining the World Trade Organization because of the conflict in Georgia would defy common sense and break Western promises, a Russian official said on Thursday in response to U.S. warnings.

Russia's Foreign Minister Sergei Lavrov speaks to reporters at Meiendorf Castle outside Moscow August 13, 2008. Blocking Russia from joining the World Trade Organization because of the conflict in Georgia would defy common sense and break Western promises, a Russian official said on Thursday in response to U.S. warnings. REUTERS/Alexander Natruskin

A senior U.S. official said on Tuesday Russian integration into international institutions such as the WTO was in question because of Moscow’s military operations in Georgia. President George W. Bush said on Wednesday the fighting was hurting Russia’s efforts to join global economic and security bodies.

“There are no formal reasons to stop these (accession) talks,” the senior Russian official, who is close to the WTO membership negotiations, told Reuters.

“The statements that our accession should be delayed because of events in Georgia sound strange,” the source said. “It contradicts basic logic, common sense and promises that were given by the governments of Western countries to Russia.”

Russian Foreign Minister Sergei Lavrov, who is not directly involved in the WTO talks, told Echo Moskvy radio station Russia was already frustrated with delays in negotiations and was growing more convinced it will never be accepted anyway.

“Sorry for a rude expression but every time they are just fooling us around,” Lavrov said.

The source said Russia’s accession could nevertheless provide a fresh impetus to the trade watchdog after the collapse of the Doha round of trade talks last month. Russia is the world’s 10th largest economy and by far the biggest country still outside the WTO.

“After the July crisis, Russia’s accession could have provided support for the organization, which is experiencing serious systemic problems,” the source said.

GEORGIAN OBJECTION

The official also said Russia was unlikely to resume trade negotiations with Georgia, already a WTO member, which earlier blocked the accession talks because of Russian backing for its rebel regions.

“In this situation I do not think that this (resumption of talks with Georgia) is possible. Therefore we will look at other ways of solving the problem,” the source said, adding that WTO rules provided a mechanism for such cases.

Georgia and other ex-Soviet neighbor Ukraine are the only WTO members with whom Russia does not have a bilateral deal. Under WTO rules, a candidate country must reach agreement with all existing members.

Before fighting between Russian forces, their separatist allies and Georgia broke out last week, Russia was nearing the end of its decade-old bid to join the WTO. The more Western-friendly camp in Russia’s government saw membership as an important way to strengthen ties with the West.

Russia is now facing growing international criticism over its crushing of Georgian forces, which may strain its relations with the West for years to come.

U.S. Democratic presidential candidate Barack Obama has called for a review of Russia’s WTO bid. U.S. Commerce Secretary Carlos Gutierrez said on Tuesday Russia still had some work to do before it was ready to join.

Russia, which currently mostly exports energy and raw materials, seeks WTO membership to gain better access to global markets for the higher added-value goods it hopes to produce after it diversifies the economy away from natural resources.

The West seeks better access to Russia’s domestic market as rising incomes fuel demand for Western consumer goods, services and technology. The WTO sets the rules for global trade and provides a mechanism for the resolution of trade conflicts.

“All sides are set to lose (due to a delay of Russia’s accession). Who will lose most is difficult to say,” the source said. Deutsche Bank analysts said the delay may hit shares of Russian steel firms.

The source said that only when accession talks resumed in mid-September would it become clear whether other countries were trying to complicate the negotiations process, and it was too early to say how Russia may react.

Editing by Mark Trevelyan

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