The media reported that the European Union has appealed to the World Trade Organization (WTO), allegedly claiming €290 billion against Russia concerning Russian import substitution measures, which were adopted in response to Western sanctions
Later, the Ministry of Economic Development clarified that the EU does demand the repeal or modification of certain measures, but the EU’s €290bn estimate is for Russia’s procurement market, not for the damage caused to the Union’s countries.
In this situation, everything is new to the WTO: both the historically record size of the claims and the huge overhang of mutual sanctions and anti-sanctions measures, which were adopted outside WTO norms and cannot be settled in any way within this association. There is simply no such practice in the WTO and with more and more frequent use of sanctions instruments by some members, I think the WTO simply would not want such a practice – it could completely discredit the organization, which has not worked very well as it is in recent years and has raised many questions among its members.
Do import substitution measures violate the norms of free international trade? I think initially the answer is obvious. If you imagine an absolutely ideal world where there is really free trade between countries, which is not restricted in any way, then of course these measures do not fit into that model. But in practice, free trade is a myth. And almost no WTO member respects these principles. Many countries impose prohibitive duties, subsidies and preferences on their manufacturers, close entire markets, and say nothing of sanctions. If we start digging in this direction and demanding all countries to fully respect WTO principles and norms in their everyday work, the WTO will probably not even last a few months.
I have always been and will always be in favour of a free economy and free international investment, but this situation shows that in some political moments organisations like the WTO suddenly become a tool of pressure in someone’s hands. And this can have a very negative impact on the economy of the state against which this tool is used.
We are confronted with two opposing trends in international politics: on the one hand, supranational associations are trying to deprive countries of their sovereignty in certain areas, while on the other, countries are trying by all means to preserve and strengthen this sovereignty. When it is beneficial for countries, they work according to international principles and use the tools of international organisations to exert pressure on other actors, and when it is not, they launch unilateral sanctions without even discussing them within the framework of these same international organisations.
Even if there are no direct economic consequences for Russia, indirect ones are possible. Such lawsuits, multiplied by the active work of the Western media, are likely to cause serious damage to the investment attractiveness of our country. We are in a really negative phase of information pressure on Russia. The result, I think, can be seen as early as this week on our stock markets. However, they are already used to such information collisions and it is unlikely that the consequences of the WTO lawsuit will be more serious than the very recent accusations of planning an attack on Ukraine. Again, even if we have to miss the traditional Christmas rally this year as a result of these actions, by January and February, when the hype dies down and the risks prove to be unconfirmed, our market will just as traditionally and quickly regrow and recover from the current negative. It is now clear that the market has adapted to the constant external political risks and is reacting to new events less sharp each time and recovering faster and faster. The Russian equity market, despite all its problems, still has a number of indisputable advantages, such as high dividends, which make it attractive to investors.
Egor Klopenko, Izvestia