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6 Feb, 2008 04:50

Ukraine’s accession to WTO a problem for Russia?

Ukraine has sealed a deal to join the World Trade Organisation. The request for acceptance into the 151-member trade body was approved by the WTO General Council in Geneva. WTO membership will mean not only new export opportunities for Ukrainian industrie

It’s taken Ukraine 14 difficult years to enter the World Trade Organisation. A key part of Kiev’s strategy of integrating more closely with the EU, it has involved some painful concessions, including caps on export duties on the country’s highly productive metals and agricultural sectors. 

By entering before Russia – albeit on less favourable terms than it might have hoped for – Ukraine has gained some leverage over Russia’s accession hopes. Under WTO rules each existing member can block new members from joining unless they make trade reforms.

“As a WTO member Ukraine will try to solve a range of problems that are not connected to the organisation, as did Georgia. However, major players, like the United States, the EU, Canada and Japan, which still have issues to discuss regarding Russia's entrance, understand that Russia's admission is in their interests as well as Russia’s,” believes Aleksandr Shokhin, Head of Russia’s Union of Industrialists.

Earlier this week, Ukrainian President Viktor Yushchenko said that membership of the WTO would allow Ukraine to negotiate with Russia over “restrictions” imposed on Ukrainian exports worth up to $US 3 billion.

Russia is currently Ukraine's main trading partner with trade volumes reaching $US 30 billion in 2007. Ukraine exports consist largely of metals, processed steel products and agricultural goods. Russian exports to Ukraine are dominated by energy – more than 60% – but with gas talks not part of the WTO accession, the focus is likely to be on metals.

“The whole issue between Russia and Ukraine with respect to gas negotiations is not part of the bargaining. I think metals will be the key focus points. The key issue will be to make sure that we will not see any dumping, as well as maintaining pricing,” says Aleksandr Kotchubey from the Renaissance investment company.

Ukraine’s WTO membership will take effect only when it has been ratified six months after signing. With the political instability in the country, analysts say that Russia should accelerate its accession talks to be able to enter before Ukraine becomes a full member of WTO, and consequently in a position to more strongly influence Russia’s aims.