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UZBEKISTAN REAFFIRMS MEMBERSHIP OF GUUAM... The foreign ministers of Azerbaijan and Ukraine, Vilayat Guliev and Anatoliy Zlenko, together with senior diplomats from Moldova and Uzbekistan, attended a meeting in Tbilisi on 24-25 May hosted by Georgian Foreign Minister Irakli Menagharishvili to discuss preparations for the planned July summit of GUUAM, of which all five countries are members, Caucasus Press reported on 26 May. Also present was U.S. Deputy Assistant Secretary of State for European and Eurasian Affairs Lynn Pascoe. Topics discussed included cooperation between GUUAM and the United States, joint efforts to combat terrorism and organized crime, and the need for tighter border controls, according to Interfax. Abdugafur Abdurakhmanov, who is Uzbekistan's ambassador to Azerbaijan and Georgia, told journalists that his country will not quit the organization, Caucasus Press reported on 26 May. Uzbekistan's position vis-a-vis GUUAM has been unclear since Tashkent announced in June 2002 that it was "suspending" its participation (see "RFE/RL Newsline," 26 June 2002). LF
Russia has been trying for eight years to gain admission to the WTO, and President Vladimir Putin has pursued this as one of his primary goals. Following the February accession of Armenia to that organization, Moscow was faced with the growing possibility that other fellow CIS states might be admitted before Russia. To cope with this situation, the Kremlin is now seeking to persuade them to coordinate their admission campaigns.
Some of the difficulties Russia faces in its drawn-out negotiation process are part of the normal rites of WTO accession -- the painstaking process of negotiating market access and tariffs with the 146 countries that have already joined. Russia has wrangled for years with a negotiating group of 65 countries over access to its banking, insurance, and telecommunications markets, but such issues fall within the normal zone. More problematic, however, is the European Union's demand that Russia end its practice of subsidizing cheap natural-gas rates at home by charging at least five times more for gas exports to the EU.
The gas problem is crucial, as few issues have such consequences for both Russia and the EU. The EU, which buys one-fourth of its gas from Russia, sees the huge difference in gas prices as a massive subsidy for Russian consumers. But Putin has been loath to allow a major rise in domestic prices because of the social and inflationary fallout it would entail.
The EU has recently proposed a compromise. In an article published on 6 May in "The Moscow Times," Richard Wright, who is head of the European Commission's delegation in Russia, sought to defend the EU against charges made the previous month in the Russian-language business daily "Vedomosti" that it is seeking protection for its own products. Wright insisted that the EU only wants the gas-sector reforms that Russia itself has promised.
Rather than demanding an abrupt jump to EU-level prices, Wright said the EU has suggested the "gradual elimination of distorting state pricing restrictions," allowing Russian gas producers to cover their costs. Russia would be free to raise prices only for industry, exempting household consumers. More price liberalization could come later in a second stage. In the meantime, Wright implied, Russia could be admitted to the WTO.
But that compromise would still have far-reaching effects because higher-priced gas for industrial users would mean higher-priced goods. Russian consumers would soon feel the costs, even if their own gas bills stay the same. Power prices could also be affected because electricity generation relies heavily on gas for fuel. The rate hikes also carry political costs. During May Day celebrations this month, Moscow Mayor Yurii Luzhkov slammed the government for its WTO bid, saying it will "benefit resource-based sectors, which effectively means the oligarchs," Interfax reported.
On 20 May, Russia's WTO negotiator Maxim Medvedkov told a Moscow seminar that agreement has been reached on 75-80 percent of tariff issues, the "Financial Times" reported. But outstanding disputes on gas and agriculture will still prevent Russia from joining the organization this year. Although Medvedkov believes Russia might join in 2004, the deadlock over gas prices could mean a much longer delay. Medvedkov made clear in February that "a compromise is not really possible in this area."
The ongoing gas stalemate might be one reason for Russia's new initiative, which relies on co-opting other CIS states seeking admission. In addition, Russia's Duma has just passed a package of trade laws to bring the country into compliance with WTO rules. If the Kremlin follows separate tracks with its CIS partners, the process could create more problems for Russia.
But Russia's new strategy might also be defensive. If Moscow's neighbors succeed in becoming WTO members first, it would risk both embarrassment and the possibility that they could impose their own trade demands, which would compound existing obstacles to Russian membership. Under the WTO's admission procedures, all current members are entitled to seek concessions in bilateral negotiations. A concerted CIS bid would reduce that danger.
So, at a Kremlin meeting on 16 April, Putin proposed to envoys from Kazakhstan, Belarus, and Ukraine -- Russia's partners in a proposed unified economic area -- that the four countries coordinate their bids for WTO membership. Kazakhstan and Belarus agreed in principle, apparently hoping there is more bargaining power in numbers. Eleven days later, on 27 April, Putin made a similar appeal to his counterparts in the Eurasian Economic Community, which includes Tajikistan, Kazakhstan, Belarus, and Kyrgyzstan. "We are convinced that if we coordinate our work, we will be able to ensure that our countries will be able to join the WTO on good and optimal terms," "The Moscow Times" quoted Putin as telling them. Tajikistan too has reportedly agreed to Putin's proposal. Kyrgyzstan was admitted to the WTO in 1998.
But Ukraine already appears to be having second thoughts about the effectiveness of Putin's proposed strategy. In an interview with the daily "Holos Ukrainiy," Economics Minister Valeriy Khoroshkovskyy said, "As far as synchronization [of WTO membership bids] is concerned, Russia and ourselves are in different stages in the negotiations. So what are we to do, go backward?" While comparing progress is difficult, Ukraine's Finance Minister Mykola Azarov believes that his country has a good chance of joining in 2004, Interfax reported. Kyiv's hopes are running high, despite a warning from the United States in May that Ukraine remains the world's worst violator of intellectual-property rights.
Ukrainian Economics Ministry State Secretary Valeriy Pyatnytskyy, for his part, complained to the weekly "Zerkalo nedeli/Dzerkalo tyzhnya" that Russia has pressed Ukraine to reveal confidential protocols it signed with the European Union. In remarks quoted by the BBC, Pyatnytskyy said: "Russia tells us that since it is the strongest of the four nations and has the most diversified economy, all we have to do is relax and let it do everything for us. We can't accept that." "If we accepted Russia's terms," he added, "we would bury our hopes for membership in the WTO and signal clearly that we don't need economic sovereignty." Pyatnytskyy blasted Kazakhstan and Belarus for joining the Russian initiative, calling them "completely submissive."
Russia's appeal to its neighbors could be a measure of its problems in winning WTO membership. But by joining with Russia, other CIS countries could risk delaying their own admission for years.
UKRAINE, POLAND GET EU MONEY TO WORK ON JOINT PIPELINE PROJECT. Ukraine, Poland, and the European Union signed a declaration on 27 May to work toward extending the Odesa-Brody oil pipeline to the Polish port of Gdansk in order to transport Caspian oil to Europe, Ukrainian and Polish news agencies reported. The European Commission will contribute 3 million euros ($3.6 million) for a feasibility study of the Odesa-Brody-Gdansk pipeline. Polish Deputy Prime Minister Marek Pol told PAP that construction of the Polish section of the pipeline can only be financed on commercial terms. "We have decided to set up a working team including representatives from Poland, Ukraine, and the EU who will coordinate work on the project," he said. A Brody-Plock-Gdansk stretch that is expected to take three to five years to build and to cost some 500 million euros ($589 million) is needed to complete the pipeline. JM