- The Washington Times - Friday, February 17, 2006

MOSCOW (Reuters) — Russian Economy Minister German Gref expressed frustration with the United States yesterday over Russia’s stalled effort to join the World Trade Organization.

“Unfortunately, we see that the only country with which we do not have a final agreement is the United States, which has promised [to be] the driving force behind Russia’s bid for WTO membership,” Mr. Gref told a conference in Moscow.

He said he still hoped Russia would be able to join the WTO in 2006, “but of course that will depend on the political will of our partner countries.”

Russian officials have long predicted that the talks — which have stumbled over issues ranging from energy pricing to farm tariffs — would be over soon.

But along with violations of intellectual-property rights, access to financial markets remains a key sticking point.

President Vladimir Putin alarmed financial markets in December when he said the activity of branches of foreign banks working in Russia must be banned, a remark seen by the business community as threatening to foreign operators in Russia.

Mr. Gref said Russia had difficulty understanding the U.S. side at times and had exhausted its potential for compromises.

He said Russia particularly did not understand the U.S. position on financial services. “We see this stubborn position not being resolved for now,” he said.

Washington wants Moscow to allow foreign bank branches in Russia, but Moscow says it will only endorse banking subsidiaries to protect its weak and fragmented financial sector.

Finance Minister Alexei Kudrin said this week that Russia would raise the share of foreign ownership of banks to 50 percent of its banking system’s aggregate capital, but that Moscow was not ready yet to allow foreign banks to establish local branches.

Mr. Kudrin said Moscow could make concessions to foreign insurance companies and in particular was ready to discuss access by U.S. insurance firms to this market segment.

“We have used up our negotiating resources in terms of getting further compromises from industry groups, and our own ministries, in terms of finding compromises to move forward,” Mr. Gref said.

Russia, a major energy producer that has seen its trade weight boom amid soaring world oil prices, is the biggest power still outside the currently 149-member WTO, which acts as a forum for international negotiations and as a trade watchdog.

Mr. Putin has said it is one of his top economic priorities to bring Russia into the Geneva-based body, a move that would ensure its exports would not face barriers in key markets.

While appearing to the Russians to be offering a cold shoulder, the United States in a separate development yesterday recognized Ukraine as a market economy.

It was a step seen as a boost for President Viktor Yushchenko’s administration in advance of a parliamentary election next month.

Mr. Yushchenko, who rose to power after the Orange Revolution, saw market status as a critical stage in his drive to push the ex-Soviet state closer to the West. He said the decision confirmed his administration was on the right course.

The news on the largely symbolic measure was brought to Ukraine by U.S. Commerce Deputy Secretary David Simpson.

“I congratulate all Ukrainians for making positive changes and achieving market-economy status,” he said in a statement.

Mr. Yushchenko, who has kept membership of the European Union and NATO his main focus despite a difficult first year in office, said the recognition “will help boost economic ties, expand trade between the countries; in particular it will facilitate access of the Ukrainian goods to the U.S. market.”

Mr. Yushchenko is now battling widespread public disappointment after his first year in power was marred by a serious economic slowdown and constant infighting within the government team.

His party, Our Ukraine, is running second in opinion polls for the parliamentary election on March 26, behind Regions of Ukraine, led by Viktor Yanukovich, whom Mr. Yushchenko defeated in the presidential election in 2004.

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