Trade

EU takes billion-euro battle to Russia

Brussels is ratcheting up pressure on Russia in a tit-for-tat sanctions battle that has raged since the early days of the Ukraine crisis in 2014.

The European Union is now pressing to claw back €1.4 billion each year from Moscow, arguing that the Kremlin unlawfully banned imports of pork meat from Europe in January 2014, just as President Vladmir Putin’s relations with the West slid into a precipitous decline.

People familiar with the dispute said the European Commission’s demand for compensation shifted into a significant new phase this week, when the World Trade Organization referred the “EU’s request to retaliate against Russia” to arbitration. An EU official explained this arbitration process would decide whether the value of the EU’s claim was justified, before a further procedure would determine whether the measure could be enforced against Moscow.

Russia’s ban on European pigmeat was imposed before Russian forces annexed Crimea, while protesters packed the Maidan square in Kiev to call for the ouster of President Viktor Yanukovych. Moscow justified the measures as a response to cases of African swine fever in Poland and Lithuania. The EU retorted that an outright ban on all European bacon and pork was disproportionate, while Lithuanian officials also complained that swine fever was rife in Russia, and was probably spread by wild boar originating there.

The EU additionally seeks 15 percent interest on sums recouped from Russia in subsequent years | Damien Meyer/AFP via Getty Images

The pigmeat ban came several months before Russia’s wider political embargo on all fresh food imports from the EU, which Moscow imposed in retaliation to the European sanctions package of July 2014. In December 2017, EU sanctions were rolled over for another six months.

Last year, the WTO ruled that Russia had acted illegally by imposing its pigmeat ban, which dealt a heavy blow to farmers in Denmark, Germany and the Netherlands.

Europe is basing its retaliation claim on the value of its pork exports to Russia ahead of the sanctions. The total value of the claim was made clear for the first time in a document filed at the WTO in late December. The EU not only raised the €1.4 billion figure, but said that it would additionally seek 15 percent interest on sums recouped from Russia in subsequent years.

The money would not be levied as a fine, but would be accumulated through extra tariffs on Russian goods that would normally have been exempted from duties.

Russian veterinary authorities said in December that the January 2014 measures had been dropped, but the EU complains that Moscow effectively upheld the ban by then including pork in its broader food embargo from summer 2014, which was justified for reasons of national security. Russia also styled sanctions as an opportunity to build up domestic meat production after foreign competition was removed from the market.

The EU’s continued moves against Russia mean that Brussels is now effectively beginning to challenge the legitimacy of the broader politically motivated food sanctions against the EU.

“So far there was reluctance [at the WTO] to challenge such a political embargo,” a Geneva-based EU trade diplomat said, adding that it was still unclear whether the trade body could prevent countries from stopping imports that had been banned for national security reasons, rather than over phytosanitary concerns such as claims of swine fever. “This will be an interesting dispute year in Geneva.”

Peter Ungphakorn, a former WTO official, also noted that the case reached further than would normally be expected for a conventional dispute over phytosanitary issues.

“It is a big deal in a sense that usually only a minority of animal health-related issues become a full-blown legal dispute at the WTO,” he said.

Jacopo Barigazzi contributed reporting.

Original Article

Politico

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