Russian Prime Minister Dmitry Medvedev announced on 20 June that Russia intends to request consultations with the US at the World Trade Organization (WTO), as a result of US sanctions filed against 19 Russian corporate entities, according to Matthew Clements, Deputy Head of Europe and CIS Analysis, IHS Country Risk.
Consultations are the first stage of the WTO’s dispute resolution process. However, WTO rules allow for significant exceptions, including in sensitive areas such as national security, which the US government could invoke in the event of a dispute. Medvedev’s comments were likely intended, in part, as a message to the EU, which will reportedly be debating Phase 3 (sectoral) sanctions against Russia at its upcoming 26 June summit.
The announcements of additional US sanctions against seven Ukrainian secessionist leaders on 20 June, as well as statements by the three Baltic republics of their support for sectoral sanctions against Russia are raising pressure on Moscow.
Russia’s threat at the WTO is unlikely to have a major impact on the decisions of the EU. Given differing views among EU member states on the prospect of sanctions on Russia, IHS maintains that broad sectoral sanctions remain unlikely without direct Russian military intervention in Ukraine or proof that the Russian government is supporting separatist insurgents. The real issue here is that Russia is once again using trade as an instrument of foreign policy, and its actions are likely to be perceived as such by WTO members. Russia faced its first dispute at the WTO last year, launched by the EU over alleged protectionism of Russian car producers. The US Trade Representative’s first annual report on Russia’s WTO accession, in December 2013, highlighted a number of areas of persistent concern in the implementation of WTO rules, notably in the protection of intellectual property.
Should the ongoing deterioration in relations between Russia and the West be played out at the WTO, Russia is likely to be further alienated within the organisation, and the political will of the Kremlin to continue improving on the points raised in the USTR’s report is likely to wane, damaging the business environment.