Back in Russia there was an old joke about a young surgeon right out of college performing his first surgery, then frustrated at his own failure, he started slashing the poor patient yelling "this one doesn't work, bring me another one!" I know: gross, but illustrative. Russia seems to have a problem with getting bilateral agreements to join WTO. In order to join this heir to GATT, any applicant must conclude bilateral negotiations with every single existing member. Russia has been so pushy lately, using economic policy for purposes of political pressure, some countries like Georgia that was hit by a wine and mineral water embargo just seem to balk.
What does a frustrated President of Russia have to do in this situation? Call for another body. Mr. Putin wants to create his own WTO, since he can't get into the real thing. A temper tantrum to be sure; not as gross, but still illustrative.
Naturally, Mr. Putin immediately got supporters for his grandiose idea of setting his own skull and bones: the biggest friend of all Russians (according to the polls, no less) Narsultan Nazarbaev, the democratically self elected President of Kazakhstan wants to join in. Kazakhstan is not currently a WTO member.
Mr. Putin insisted that "International organizations are in need of restructuring and modernization."
"These structures that were created for many active players look outdated, undemocratic and awkward, unable to consider changing balance of power" ... "One can see this in the stalled Doha Round of the WTO" - said the Russian President according to the Vzglyad Business Daily , that adds also that old methods do not work in new conditions, whatever it means. USA Today offers this version :
Putin said the stalled Doha round of global trade talks were a sign of the problems with the organization: "Old methods of decision-making at times don't work.".
Again, whatever it means. Too bad USA Today leaves out some of the more interesting quotes from Vzglyad Business Daily.
Medvedev, Russian First (or is it second) Deputy Prime Minister and at the same time Gazprom Chairman of the Board is in agreement. To be sure, some accusations of protectionism Putin and Medvedev level against developed western economies are quite true and should make the US and Europe feel ashamed. These protectionist barriers need to go.
It is however amusing to hear this from the President of Russia who had presided over a de-facto nationalization program creating a situation in Russia when state investments in the economy just recently surpassed private sector investments. It is also amusing to hear Medvedev's "When someone wants to take something away from somebody; that someone will without exception loose something of his own". No kidding, Sherlock. Go tell this to Shell or BP, mister Chairman of the Board of Gazprom.
Jokes aside, however, Putin's and Medvedev's comments should be taken very seriously. They don't only illustrate frustration of people tired of the slow process; they suggest a certain mindset that an international super body like WTO needs to react to changing balance of power - economic or otherwise. This is exactly the opposite to what WTO needs to be - an impartial arbiter of economic disputes. Putin's suggestion is also quite a bit arrogant, since WTO is not something that was concocted recently. It took half a century to become what it is now. Putin's little plan is nothing but a regional trading setup like NAFTA. Any claim of some grandiose future and an alternative to WTO is yet another example of longing for lost power of the USSR and the bypolar world. To support this general idea Putin seems to be invoking the tried old claim of the decline of the developed capitalism.
"The world is indeed changing before our eyes. Countries that yesterday seemed hopelessly behind are today the fastest growing economies of the world," Putin told a gathering of business leaders and government officials at an economic forum in Russia's second-largest city of St. Petersburg according to AP via CNN.
"If, 50 years ago, 60 percent of the world's GDP came from G-7 countries, then today it is the other way around," he said.
Coming home from the last week G-8 meeting and immediately juxtaposing himself and his country to the old G-7 suggests he received a very cold shoulder in Germany. Mr. Putin needs to decide for himself if he wants to be a member of the good old boys or whether he wants to lead the pitchfork brigade to topple it. If Mr. Putin decides to abandon G-8, he might not get to be the rebel leader. China could easily overshadow Russia's economic prowess and claim the leadership ring, since without China's 15% of World's GDP Mr. Putin's claim would be meaningless.
Putin also said that global financial markets have evolved around "one or two" currencies -- an apparent reference to the euro and the dollar -- and their fluctuations often have highly negative effects on many countries' economies and financial reserves.
"There can be only one answer to this challenge: the creation of several world currencies, several financial centers," he said.
Here is yet another pipe dream. The more I read about Mr. Puttin's speech while writing this piece, the more I see how utterly ignorant he is about the fundamentals of capitalism. He thinks the global financial system can be changed by a decree. He is not alone, of course. Lots of conspiracy theory nutcases think it is run by decrees, but what a company to keep!
Russia's WTO ascension is a very complex issue. On one hand, blocking it from WTO membership will only exacerbate its problems and will reinforce the paranoid view of the West that a lot of people in Russia seem to be developing. On the other hand, if Russia becomes a WTO member before the Ukraine, does anyone have any doubts Russia would try to use its membership as an instrument of political pressure, just like Georgia does now?
With either Medvedev or Ivanov posed to be Putin's heirs, there isn't much one can expect in terms of change. After all, Mr. Medvedev is on record suggesting that preventing Gazprom from becoming an integrated vertical natural gas supplier in UK by blocking its potential takeover of Centrica would "mean the end of real capitalism" The man does not understand that real capitalism is where monopolies like his own Gazprom are legally prevented from existence.
Overall, however, Russia needs to become a WTO member and the sooner the better. WTO membership will help tame the feeling of isolation and weird aspirations of being a counterweight to the capitalist west. It will start molding Russian wild state capitalist kleptocracy into something more humane. In the long run it might help break up state monopolies and with them might help loosen the stranglehold the current crop of Putin's oligarchs has over Russian politics and government. Mr. Putin's current apprehension about the WTO is very easy to understand:
'Globalization does not respect spheres of influence,' said Peter Mandelson, the European Union trade commissioner. 'Membership in the WTO is Russia`s ticket to a rules-based system.'
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