Russia threatens retaliation if Union imposes trade sanctions

Date: 20/01/2000

By Simon Taylor

RUSSIA is threatening to take retaliatory action if the EU goes ahead with plans to impose trade sanctions on Moscow because of its failure to protect civilians from the effects of its military campaign in Chechnya.

Russian diplomats have warned that Moscow "would be obliged to take adequate measures which could affect trade" if Union governments carry out plans to suspend the country's preferential terms for trade with the EU.

The warning comes after External Relations Commissioner Chris Patten said the Commission was considering scrapping Russia's Most Favoured Nation trade status.

"The most likely response would be to increase customs tariffs proportionately, which would seriously affect the interests of EU exporters," said one Russian diplomat, who added that because his country's import duties were generally higher than those imposed by the Union, a proportionate increase could mean a massive rise in the cost of exporting goods to Russia.

EU foreign ministers will discuss a list of possible sanctions to be imposed on Moscow drawn up by the European Commission at a meeting next Monday (24 January), in line with the commitment made by Union leaders at their summit in Helsinki last month.

There is some disagreement between member states over which of the suggested measures should be introduced, amid concern in some national capitals that being too tough on Moscow could be counter-productive.

But ministers are expected to press ahead, at the very least, with plans to limit aid money to human rights and democracy projects.

Russia has strongly attacked the EU's plan to impose sanctions because of events in Chechnya, insisting that its military campaign is justified by the need to suppress terrorism and defend its territorial integrity. "Russia finds it unacceptable to link economic and commercial relations with the purely political question of Chechnya," said one official.

Russian diplomats are also warning against the EU's plan to restrict aid under the Union's technical-assistance Tacis programme to human rights and democracy schemes.

"Cutting the programme would make it impossible to realise very important projects such as assistance to help restructure the banking sector or efforts to make Russian banks comply with international accounting rules," said one, pointing out that these projects would improve conditions for western investors and were recommended by the International Monetary Fund.

Officials also reject Patten's claims that Russia has built up a €10-billion trade surplus with the Union by failing to honour a range of bilateral agreements, insisting that this is a result of the financial crisis in Russia last year and not "the non-respect of commitments".

In particular, they dismiss suggestions that Moscow broke any agreements by introducing a tariff on exports of scrap metal last April - a move which sparked bitter protests from the EU and threats of tit-for-tat measures - insisting that Russia had acted within the terms of the country's Partnership and Cooperation Agreement (PCA) with the Union.

Diplomats say that Moscow also has a number of trade concerns about areas the EU has allegedly failed to live up to its commitments under the PCA, including limited access to the Union for Russian nuclear products and anti-dumping duties imposed by the EU on Russian goods.

Russia is threatening to take retaliatory action if the EU goes ahead with plans to impose trade sanctions on Moscow because of its failure to protect civilians from the effects of its military campaign in Chechnya.