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«AgroInvest» — News — Russia Says WTO Membership by July Is ‘Realistic’

Russia Says WTO Membership by July Is ‘Realistic’

2010-12-09 11:44:34

Russia may join the World Trade Organization in the first half of 2011, attracting investors and opening markets for the country’s exporters, Economy Minister Elvira Nabiullina said after the European Union agreed to settle issues that had stalled the bid.

Nabiullina and EU Trade Commissioner Karel De Gucht signed an accord yesterday that sets out terms for resolving “key questions” between Russia and the bloc. So-called multiparty talks on broader issues such as agricultural subsidies, meat imports and Russia’s customs union with Belarus and Kazakhstan should be resolved by the end of June, Nabiullina said.

“It is realistic if we work intensively,” she told reporters late yesterday in Brussels. “The majority of industries will win in the end,” she said. “For example, the steel industry will win and will be able to deliver to EU markets without quotas.”

Russia, the largest economy outside the WTO, has been seeking to join the Geneva-based trade arbiter since June 1993. The EU is Russia’s biggest trading partner, with the flow of goods and services between the two countries rising 35 percent to $217.8 billion in the first nine months of the year, according to Russian government statistics.

“Membership will make Russia more like other countries,” Vladimir Osakovsky, a Moscow-based economist at UniCredit SpA, said yesterday by telephone from Moscow. “It’s an opportunity to increase capital inflows.”

Capital Outflow

Net capital outflow was about $9 billion last month, raising the figure to $29 billion so far this year, central bank Chairman Sergey Ignatiev told reporters in Moscow today.

While WTO membership will strengthen exporters, it may weaken the position of producers focused on the domestic market, according to Troika Dialog and Otkritie Financial Corp.

“Confirmation that Russia is finally at the last stages of entry to the WTO would be positive for the steel names, as it would remove some export barriers,” Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow, said in an e- mailed research note on Dec. 7.

The metals sector, which accounts for 15 percent of exports, will benefit without becoming “a big winner,” Alfa Bank’s Moscow-based economists Natalia Orlova and Dmitry Dolgin said in a research note today.

“With 65 percent of exports brought by oil and gas, the economic impact of the accession on export revenues will be weak,” Orlova and Dolgin said.

‘Uncompetitive Sectors’

WTO entry may also improve investor sentiment if it becomes the “anchor” for broader changes in the Russian economy, Troika Dialog strategists, including London-based Kingsmill Bond, said in a Dec. 1 research report.

OAO Novolipetsk, Russia’s largest steelmaker by market value, jumped 4.2 percent to 138.56 rubles in Moscow trading yesterday. Shares retreated 1.1 percent today. OAO AvtoVAZ, the nation’s biggest carmaker, fell 1.34 percent yesterday and declined a further 0.8 percent to 35.388 rubles today.

“As a WTO member, Russia will have to import rules and regulations that will open up uncompetitive sectors to non- residents, thus improving overall business environment, increasing production and leading to structurally lower inflation,” said Ivan Tchakarov, BofA Merrill Lynch Global Research’s chief economist for Russia, said in a research note.

Annual inflation averaged 15 percent from 2000 through 2009. It is set to reach 8.4 percent at the end of this year, missing the government’s 8 percent forecast, according to Ignatiev.

Corruption

Russia is the world’s most corrupt major economy, according to Transparency International’s 2010 Corruption Perceptions Index. The report ranked Russia 154th among 178 countries and placed it alongside Tajikistan and Kenya.

Becoming a WTO member is perceived as a good way of stimulating investment, although “the high cost of doing business in Russia may hamper” foreign direct investment inflows, according to Alfa Bank.

Foreign companies already operating in Russia could accelerate their investments as business confidence improves, Citigroup Inc. said in a research note today.

“WTO accession could potentially improve investors’ sentiments toward Russia in the short-term,” Dmitry Polevoy, ING Groep NV’s economist for Russia and Kazakhstan, said in an e-mailed response to questions. “But more long-term effects will likely depend on the final terms of accession and specifically the time frame for removal of the existing protectionist barriers.”

Russia also has yet to reach an agreement on its WTO accession with Georgia. The former Soviet republic has threatened to block Russia’s entry to the WTO if its northern neighbor doesn’t lift a four-year-old economic embargo.

When asked when Russia would settle bilateral issues with Georgia, Nabiullina said, “So far there are no such claims.”

Bloomberg