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Russia Reaches Accord With Georgia on WTO, Negotiator Says

Nov. 3 (Bloomberg) -- Russia reached an accord with Georgia that may clear its way to the World Trade Organization, helping Prime Minister Vladimir Putin near his goal of turning the economy into one of the world’s five largest.

“Now we have only some little technical details to approve our bid,” Russia’s chief negotiator, Maxim Medvedkov, said by telephone today. “The most important things are left behind.”

Improved market access and gains for exporters may bolster Putin’s plan to achieve faster growth of 6 percent to 7 percent annually. Joining the WTO may boost Russia’s $1.5 trillion economy by more than 3 percent in the medium term, according to the World Bank. Gross domestic product expanded 4 percent in 2010 after a record 7.8 percent contraction the previous year.

Chemicals producers and steelmakers such as OAO Severstal and OAO Novolipetsk Steel may gain the most, according to Otkritie Capital. The RTS Index may soar as much as 20 percent when Russia joins the trade arbiter, Moscow-based brokerage Renaissance Capital predicts. The dollar-denominated RTS slid 0.7 percent to 1,514.93 at 3:48 p.m. in Moscow and the 30-stock Micex Index lost 0.6 percent to 1,480.07.

‘Reform Agenda’

“The main reason to cheer accession is that it will lock in Russia’s commitment to a more liberal reform agenda, open its economy further, encourage greater levels of foreign investment, and facilitate the country’s transition to a more knowledge-based economy,” Tom Mundy, a Moscow-based equity strategist at Otkritie Capital, said in an e-mailed report.

Russia, the world’s largest oil producer and the biggest exporter of natural gas, nickel and palladium, with 2 percent of global gross domestic product, is the biggest economy and the only Group of 20 nation outside the WTO, whose members carry out 97 percent of world trade.

The agreement with Georgia caps Russia’s quest that stretches back to 1993, exceeding China’s 15-year wait to join the 153-member WTO. Putin, who plans to swap jobs with Medvedev next year, initially made WTO membership a priority during his first presidential term in 2000.

Basis for Development

“WTO membership must be the basis for further development of relations with the European Union for Russia,” Deputy Economy Minister Alexei Likhachev said by phone today, adding that the country’s accession is a priority for its economic policy. “WTO rules will serve as fundamental principles for our relationship. This can also evolve in strategic agreements between Russia and the EU in the future.”

Georgia is the final member yet to give its approval after the European Union backed Russia’s bid last month. The two former Soviet states fought a five-day war in 2008 and ties soured further after Russia recognized the breakaway Georgian regions of South Ossetia and Abkhazia as independent states.

Swiss President Micheline Calmy-Rey met her Russian counterpart Dmitry Medvedev Oct. 30 before flying to Georgia for talks with President Mikheil Saakashvili. The WTO’s working party on Russia’s accession will meet Nov. 10-11 and may recommend giving the go-ahead for membership at a ministerial conference in December.

Russia is counting on WTO entry to help lure foreign investment and reverse capital flight, which may reach $70 billion this year, according to the central bank. The government targets matching the pre-crisis level of foreign direct investment “soon” at $60 billion to $70 billion a year, with “emphasis on the quality of long-term investments,” Putin has said.

Swiss Proposal

Georgia said last month it was close to an agreement on Russia’s entry after it accepted Switzerland’s proposal for a compromise between the governments on international monitoring at the borders. Representatives from the United States Trade Representative and the State Department said today they were pleased with progress in the Georgia-Russia negotiations even as the accord was yet to be made final.

Georgian Deputy Foreign Minister Sergi Kapanadze said he welcomed Russia’s acceptance of international monitoring. He predicted that Russia could join the WTO soon.

“Now we are traveling to Geneva to hold meetings where the agreement can be signed by Nov. 10,” Kapanadze said by phone today.

To contact the reporters on this story: Alena Chechel in Moscow at achechel@bloomberg.net; Helena Bedwell in Tbilisi at hbedwell@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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