Anton Ivanitsky, Konstantin Smirnov, Olga Pavlikova
The Russia-EU Summit starts tomorrow.
A regular Russia-European Union summit will be held in the French resort town of Nice on November 14. The main topics to be discussed are a new long-term Partnership and Cooperation Agreement (the previous agreement expired on December 1, 2007), anti-crisis measures within the Group of 20, and European security.
The agenda has long been agreed on and will not be changed. However, Prime Minister Vladimir Putin (who will not go to Nice - the Russian delegation will be led by President Dmitry Medvedev) caused a sensation yesterday by suggesting another vital topic for the summit. He said, "The Europeans must decide whether they need gas in the amounts that they are getting. If not, we will not build the pipeline (Nord Stream - Gazeta), we will build liquefied gas plants and ship gas to the world markets by tanker." And he added, "Only, it will cost you more. You can easily calculate it on the computer".
Mr Putin's remarks were prompted by the dilly-dallying attitude of his Finnish counterpart, Matti Vanhanen, who the Russian Prime Minister received in Moscow yesterday. They went smoothly over many topics, but got stuck on the topic of gas. The Finnish Government has yet to give permission to lay the Nord Stream pipeline on the bottom of its territorial waters in the Gulf of Finland, and experts believe it is practically impossible to bypass them.
Mr Vanhanen continued to be evasive yesterday: "Nord Stream will present us with the environmental test results in January-February 2009, whereupon we will solve the issue without delay".
Mr Putin was annoyed by his guest's indecision. "We have heard all sorts of excuses: seals, navigation, migrant birds, cables, ammunition surviving since World War II," he said, taking a jab at Vanhanen, and repeated the assurance, "All agencies and structures concerned will soon get all the ecological information and, as responsible members of the European community, we will act in accordance with European interests." Nord Stream has already spent $100 million on ecological studies.
Mr Putin said he would not press for a decision on the pipeline. The main thing is to satisfy the interests of all the countries concerned. Still, it is obvious that his mention of higher prices for liquefied gas compared with gas delivered by pipeline is his last warning to Western consumers. By the way, a similar approach worked two years ago. In May 2006, European Commission President Jose Manuel Barroso warned that Gazprom might be prosecuted on antimonopoly grounds. In August, Russia responded asymmetrically. The head of Gazprom Alexei Miller told EU ambassadors that Russia could export gas to China, which was enough to rescue the idea of building the North European gas pipeline.
A NEW ROUND
The negotiating process on a new framework long-term agreement between Russia and the EU began at the Russia-EU summit in Khanty-Mansiisk on June 27. However, on September 1, the talks were postponed as Europe waited for the Medvedev-Sarkozy plan for South Ossetian settlement to be fulfilled. The French President (whose country chairs the EU during the current six months) said he was satisfied with the way Russia was complying with this plan. France was backed by 25 EU countries, which made it possible for the talks to resume.
Lithuania is categorically opposed to the talks, but its opinion cannot make any difference to the process. If the EU had suspended the talks on September 1, the consent of all 27 EU members would have been required to resume them now. Instead, it merely put them off, and according to the European Union's norms, a consensus is not required. A high-ranking diplomatic source in Europe told Gazeta that the issue of the Georgian-South Ossetian conflict would not influence the discussion of the framework agreement.
It became clear as early as last summer that about 70% of the articles devoted to economics would be dropped from the draft agreement, as there would be no need to spell them out because by the time of signing the document, Russia would hopefully join the WTO.
BARONESS COMMISSIONER
High export duties for timber are a stumbling block in the economic cooperation between Russia and the EU, Gazeta's source in European diplomatic circles claims. They will be discussed by Russian Minister of Economic Development Elvira Nabiullina and European Trade Commissioner Baroness Catherine Margaret Ashton.
Some EU members, especially Finland and Sweden, are unhappy that starting from July 1, 2007, the Russian Government has been raising export duties for round coniferous timber, as well as for birch and aspen pulpwood. Initially, the round timber export duty was raised from 4 to 10 euros per cubic meter. Aspen, for which no duties were charged, was taxed at 5 euros per cubic meter. On April 1, 2008, the duty on round timber was raised to 25% of the customs value (but no less than 15 euros per cubic meter). Finally, on January 1, 2009, timber export duties will be raised to 80% of the customs value (no less than 50 euros per cubic meter).
As a result, Russia will cease exporting unprocessed timber, which is the goal the Russian government has been working toward. The government has calculated that the export of sawn timber instead of round timber will add at least $2 billion to the annual budget. While the duties on the export of wood materials are lower (for example, the export duty on chipboard is 10 euros per cubic meter), their customs value after VAT is much higher. Besides that, production needs to be diversified to make the industry less dependent on raw materials.
Instead of exporting round timber, foreign investors are invited to build timber processing facilities on location. This is already being done: the Finns are ready to build several pulp and paper plants in Russia, but cannot yet totally renounce Russian timber supplies. Finnish Prime Minister Matti Vanhanen, who visited Moscow yesterday, was urging his Russian counterpart, Mr Putin, to give up prohibitive export duties on round timber. His host did not budge. One has to pay for cheap round timber.
Ms Nabiullina and Mr Ashton will discuss the price of the deal between Russia and the EU on Friday. Needless to say, the negotiating positions of the Minister and the Commissioner will not be known until their meeting. However, Gazeta has learned about the basic Russian stance.
Ms Nabiullina will offer Mr Ashton the chance to discuss the reduction of the prohibitive timber duties along with Russia's membership in the World Trade Organisation (WTO). Birch and aspen pulpwood may be exempt from duties altogether. Round coniferous timber will be taxed at a higher rate than before 2007, but much less than 80%. However, Russia will make these concessions only after it is admitted to the WTO.
The EU signed an agreement on the bilateral terms of Russia's accession to the WTO in May 2004. Brussels plays a key role in the multilateral working group on Russia's accession to the WTO, which is based in Geneva. The timber issue is the main stumbling block in the group's work.
The group will have its last meeting this year on November 24. If the timber agreement is reached in Nice, the decision on ending Russia's accession talks with the WTO may be made before January 1, 2009.
FROM NICE TO WASHINGTON
The three main topics at the G20 summit in Washington, where the leaders will head after the Nice meeting, are short-term measures to improve global financial monitoring, reform of international financial institutions, and the agenda of future economic summits. In Nice, Russia and the EU will "synchronise watches", i.e. discuss the proposals they will bring to the American capital.
The EU's response to the three topics proposed by Washington will be the four principles the EU heads of state outlined last Friday. First, no market segment and no financial institution should be left outside the regulatory field. Second, the financial market must be more transparent and must function more efficiently. Third, the activities of international financial institutions should be closely watched in order to properly assess risks. Finally, the IMF resources must be increased and the institution is to play the central role in the new and more effective world financial architecture. The European Union proposes to hold another summit devoted to the financial crisis a hundred days after the Washington summit.
Russia's position was announced by Mr Medvedev back on October 31, at a meeting to prepare Russia's participation in the G20 Summit: greater legitimacy of the institutions, that is, the legal framework within which international financial institutions operate, as well as their greater effectiveness; overall strengthening of the international financial system by introducing multiple world financial centers and several reserve currencies; and forming a risk management system that meets modern technologies, not the principles historically built into the Bretton Woods system, but modern monetary management technologies; putting in place a system of incentives for financial market agents to behave rationally.
HOW TO MAKE EUROPE SAFE
Presidential aide Sergei Prikhodko told RIA Novosti yesterday that a new European security treaty would be one of the central topics at the upcoming summit. "It is to be a fundamentally new compendium of rules that are the same for all the states, without isolating anyone and without double standards," said Mr Prikhodko.
The idea of a new comprehensive European security treaty was proposed by Dmitry Medvedev at a meeting with government and non-governmental representatives in Germany in June of this year.
Gazeta's European source, however, says that the European Union has yet to reach a common stance on Moscow's proposals, because Russia has not submitted the details of the treaty.
However, according to the Deputy Chairman of the State Duma Foreign Affairs Committee, Andrei Klimov, at the summit Russia will not propose a new European Security structure to the West, nor is it going to position itself as the creator of the new world order.
"Everybody understands that the creation of a new international agreement is a long process. You will remember that the preparation of the Helsinki Final Act, which is still in force, took more than seven years," Mr Klimov says.
The MP notes that many delegates at the summit will invoke the Helsinki document, although it was signed back in 1975. What is more, it was signed during the time of the confrontation between the Eastern and Western blocs. Mr Klimov believes that if the talks in Nice are successful and Russia's proposal is not rejected, a new international architecture may be discussed, if only at the level of international experts, in one of the European countries within the next few weeks.
Gazeta's European source does not rule out that the summit may discuss the possible deployment of Iskander missile systems in the Kaliningrad region. However, the issue is not among the key topics of the upcoming summit.
