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The Return of the Siloviki

STOCKHOLM – Russian Prime Minister Vladimir Putin recently announced that Russia, Belarus, and Kazakhstan have abandoned their separate talks to join the World Trade Organization. Instead, they would seek to enter the world trade body as a single customs union. In effect, this means that Russia seems to be casting aside its accession to the WTO – a major reversal of Russian strategy.

Putin’s statement hit like a bolt from the blue. Two days earlier, United States Trade Representative Ron Kirk and European Union Trade Commissioner Catherine Ashton had completed successful talks on Russia’s accession to the WTO with Putin’s first deputy, Igor Shuvalov, Finance Minister Alexei Kudrin, and Minister of Economy and Development Elvira Nabiullina. As late as June 3, Putin had declared himself sure of Russia’s “swift joining of the WTO.”

The leaders of Belarus or Kazakhstan seemed equally surprised by Putin’s statement, especially as Russia had just prohibited almost all imports of dairy products from Belarus in a protectionist ploy. After 16 years of negotiations, Russia appeared poised to join the WTO within a couple of months.

Indeed, only three difficult hurdles remained. First, Ukraine demands a bilateral protocol on market access, which would force Russia to abolish roughly 100 trade sanctions, primarily in agriculture. The second obstacle is border controls with Georgia, a mainly political issue: whether Abkhazia and South Ossetia are independent, as Russia maintains, or are part Georgia, as the rest of the world believes. Finally, the EU insists that Russia abolish planned prohibitive export tariffs on lumber. Only the Georgian issue is really serious.