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Russia's Customs Are Major Obstacle To WTO Entry

by Tatiana Smolenskaya, Tax-News.com, Moscow

30 December 2002


Russian Finance Minister Alexei Kudrin told journalists last week that Russia plans to intensify its efforts to become a member of the World Trade Organisation, although it is not ready yet to set a target date for entry. "We do not want to have a Sword of Damocles hanging over us, which would happen if we set dates," he said.

With presidential elections set for 2004, it's possible that President Vladimir Putin may shy away from some of the unpopular measures that might be necessary to open up protected sectors of the Russian economy in order to join the WTO. On the other hand, the continuing strength of the oil price means that Russia is experiencing relatively benign fiscal conditions which would make adjustments to import and export tariffs easier to accommodate - and these conditions may not last for ever.

Speaking in Geneva after meeting WTO chief Supachai Panitchpakdi, Kudrin said that if Russia could prevent Western negotiators from making 'additional demands', the country could join the Geneva-based WTO in the foreseeable future. "We have reached a stage where we can think in terms of intensifying efforts to join the WTO," he said.

Supachai said that Russia and the WTO were planning to hold monthly meetings in future in order to speed up the accession process. A key date is thought to be the WTO's September ministerial conference in Cancun, Mexico, which will try to unblock the log-jammed Doha Round of trade liberalisation negotiations.

Despite optimism from Panitchpakdi and Kudrin, problems on Russia's Western border last week underlined the difficulties facing negotiators when the International Road Transport Union (IRU) said it was suspending Russia from the TIR system which allows trucks to cross frontiers with minimal formalities in its 63 member countries.

IRU officials say that Russian customs has been demanding immediate payment from TIR insurers in Moscow of duties on shipments which had entered the country under the TIR system but which had then disappeared. Such incidents, they said, had soared from a few dozen a year 10 years ago to 2,500 this year alone, and suspension of the insurance cover had become unavoidable.

It is alleged that black market operators in Russia have been working hand-in-glove with the Customs department, one of the last great unreformed bastions of the Soviet system, to take advantage of TIR insurance to avoid payment of customs duties. Former Russian prime minister Yevgeny Primakov, now head of the Chamber of Commerce in Moscow, told Finnish businessman in Helsinki this month that there were "big deficiencies in the work of our customs", and a senior Finnish customs official said earlier this year that corruption was a major problem as Russian customs officials earned only very small salaries.

President Putin has announced a major push in 2003 to reform the organisational structure of the government, including demolition of many of the old 'power' ministries which controlled large swathes of the country's productive capacity, and including the customs ministry. He will face immense resistance from entrenched industrialists, and even perhaps in the Duma, which until now has been sympathetic and helpful towards his reform projects.


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