Russia’s WTO accession – something happening again?

February 14, 2008


The news are just out: Peter Mandelson is in Russia to discuss its WTO accession.

Russia’s double-headed eagle is in action again. On the one hand, sabre rattling on the rise in military matters, more pragmatism in economic matters on the other. The last big speech by Putin had these two elements: only the sabre-rattling was heard in the West. My little source  close to the ground reported:

Putin outlines economic development goals in speech at State Council
Deutsche UFG, Russia
Monday, February 11, 2008

At the State Council meeting on Friday, President Putin made several important statements about Russia’s economic development.

__ Development should become innovative, and the growth rates much higher than now.

Using Russia’s natural resources to undertake further extensive development may become a significant threat for the country. Instead, economic reforms should be continued as the Russian economy is currently not effective.

__ Russia needs a specific development plan through 2020.

__ In the tax sphere, Putin supports the idea that the co-financing of pension savings should be tax exempt. Also, the tax on companies’ and individuals’ medical and educational expenses should be minimised. VAT should be minimised and the tax rate unified.

__ Productivity should increase four-fold in 12 years.

__ Income inequality should be reduced.

__ Power in Russia should be decentralised. Regarding recent changes, Putin particularly mentioned the political changes which have taken place in the last several years and that have resulted in the development of a stable and working political system.

__ The state sector should be reduced and private capital attracted more actively.

__ Russia may be able to double its 2000 GDP by 2009. For 2000-07, GDP has already increased by 72%, and to double it by 2009 would require an annual growth rate of 7.8% y-o-y (less than in 2007).

__ There will be no denomination this year.

All in all, this speech is one of the most liberal over the last several years and may, in our view, be an indication of the main economic targets that Putin will set if he becomes Prime Minister after the presidential elections. We believe that it will be taken positively by the market.”

This change in tone in economic policies is a better starting point for final negotiations to enter the WTO. Regarding the internaitonal politics of Russia’s WTO accession: Russia has started reaching out to Georgia (see here and here) to solve various bilateral issues between them. Georgia is wielding its veto to Russia’s WTO accession. Ukraine managed to access to the WTO before Russia – making Russia lose face. It looks like Russia is hurrying up and wanting to get its act together. There is an understanding that it cannot remain isolated from the rest of the world, and entering the WTO (as well as attenting NATO summits) shows that Russia and the West are “talking to each other” again, if harshly.

Oh, and let me, at this late hour of the day, and as a relaxing game, develop a conspiracy theory – these are so popular in matters Russian and post-Soviet. Was the Georgian tycoon Patarkatsishvili killed by both the Georgian  and the Russian governments? Both hate him – the first for his role as opposition leader, the latter for his friendship with the exiled oligarch Berezovksy…;-) Strange coincidence, this death and this sudden warming up of relations between Russia and Georgia. 😉


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