Georgia puts up…Russian WTO membership for an auction

Mr. Lawrence Summers

Negotiations over the Russian entry into World Trade Organization have been dragging on  since 1995, which seems to be record term for that. Not a single country in the world had struggled for the membership in this international club longer than Russia. Discussion among Russian economists on whether Russia needs WTO or not is still on and will seemingly last forever. It seems, though that those who oppose it are actually right. Mutual cancellation of customs tariffs will lead to the increase of margin on traditional Russian export goods, i.e. mostly raw natural resources (oil, gas, metals and fertilizers) but due to the traditional Russian export-trade model, these profits would still never leave various „tax havens” and would never get back into country

(well, perhaps, they would — but in the shape of „foreign investments”). From the other hand, opening of the Russian market for the foreign commodities and services may bancrupt certain part of Russian companies, that would turn out to be unable to compete with the imported goods. However, government seemingly has different opinion on that matter and still strives for the WTO. In order to succesfully finish this eternal dispute on the conditions of entering the WTO, Russia had to settle the issues with the import of American chickens and export of Russian wood.

            However, Georgia steadily blocks Russian path to the WTO — it is willing to use its veto right as much as possible in order to revenge its northern neighbor for the lost territories of Abkhazia and Southern Ossetia. In order to do that Georgia demands clearly surreal things, like establishment of its customs stations at the borders of Russia, Abkhazia and Southern Ossetia. This conditions completely impracticable from any standpoint (even from the purely technical one) and Saakashvili is perfectly aware of that. He desires a revanche by any means necessary and this is a wall Russia wouldn’t be able to leap over. The only way to go is to ask Uncle Sam for help.

            Last week, First Russian Deputy Prime Minister Igor Shuvalov negotiated with Lawrence Summers — Economic Council for President Barack Obama. When the negotiations were completed, Mr. Summers declared „the need for creative decisions, capable of excluding the Georgian influence on Russian integration.” After that Mr. Summers — who also chairs the National Economic Council — said that he awaits for the negotiations to be finished in 12 months. Last year they were broken off due to the Russian initiative of creating a Customs Union with Byelorussia and Kazakhstan but afterwards this decision was changed and at the present time the negotiations are under way again.

            In October, during his U.S. visit, Georgian Prime Minister Nikoloz Giłauri proclaimed that Georgia wouldn’t accept Russian membership in the WTO, until Georgian customs officers wouldn’t be placed at the borders between Russia and the republics that Georgia didn’t recognize. However, right on the next day he changed his opinion and said that Georgia doesn’t consider these two issues to be interconnected. We may just assume that anonymous Uncle Sam functionaries advised Mr. Giłauri not to chatter too much on that delicate issue. The only question still remains: how much the Georgian consent in such a subtle matter would cost the USA?