Putin’s Misleading Rebuke of Sanctions and Trade Rules
On August 1, Russian President Vladimir Putin said Western economic sanctions imposed during its war against Ukraine were inconsistent with World Trade Organization obligations.
Attacking the United States, the European Union and others, Putin said:
“[S]things like adherence to the principles of the World Trade Organization; they are simply scrapped. Apparently some of our Western partners don’t even want to remember these principles anymore, because it’s just embarrassing to talk about them.”
This is a misleading claim. In fact, the The WTO has methods for resolving trade disputes that Russia can use. While the Kremlin has threatened to challenge the sanctions, it has so far failed to do so. It is reasonable to assume that the United States and others are fully within their rights under WTO rules.
First, a little background.
The World Trade Organization (WTO) is an international body that regulates and facilitates trade between nations. Its primary goal is “to ensure that trade flows are as smooth, predictable and free as possible,” the organization’s website states.
The WTO was created on January 1, 1995 and today has 164 members representing 98% of world trade. It has a Dispute Settlement Body (DSB) and the dispute settlement work of the WTO is one of its most important functions.
Russia became a member of the WTO August 22, 2012. Over the past five months, Russia has made several announcements indicating that it plans to challenge Western sanctions at the WTO.
In a March 9 interview with the state news agency RIA Novostia senior Russian Foreign Ministry official, Dmitry Birichevsky, cited “illegal trade restrictions imposed by other member countries”.
Judging by official statements, Russia believes that any sanction that puts it at a disadvantage compared to other WTO members is illegal. For example, the Kremlin is very unhappy with the West’s ban on exporting high-tech products to Russia – especially communication systems, electronics, semiconductors, aviation and components spatial. But what hurts the Russian economy the most was the decision of Western countries to freeze some 300 billion dollars assets of the Russian central bank.
On April 20, Putin instructed the government Assess measures taken by WTO member states that have restricted trade with Russia and propose challenges by June 1.
On June 15, the Chairman of the Financial Markets Committee of the Russian State Duma, Anatoly Aksakov, claimed that Russia was prepared to challenge the sanctions at the WTO. “This is the most legally prepared and least politicized group of referees,” he said.
Nothing has happened so far, however. Here’s why.
According to experts and researchers from the British Institute of International and Comparative Lawchances are that the WTO will recognize the sanctions as legitimate.
On March 2, the The United Nations General Assembly voted to demand that Russia cease its military aggression against Ukraine and immediately withdraw all its troops. The resolution was adopted by 141 votes to 5, with 35 abstentions.
Thus, the international community has confirmed that Russia’s military intervention in Ukraine violates international law. Article 2(4) of the Charter of the United Nations requires UN member states refrain “from resorting to the threat or use of force against the territorial integrity or political independence of any state”.
Based on this resolution, in a WTO dispute with Russia, Western countries can establish that the sanctions were taken “in time of war or other emergency in international relations”.
Provisions of the WTO’s General Trade Agreement 1994 allow WTO members to “justify actions taken in breach of WTO obligations” under a “security exception”.
The The 1994 provisions state that “[n]nothing in this Agreement shall be construed…to prevent any [WTO member] to take any action it deems necessary for the protection of its essential security interests…taken in time of war or other emergency in international relations.
Ironically, Russia used this “security exception” to his advantage after Putin annexed Crimea in 2014 and started a war in eastern Ukraine. Ukraine went to the WTO in 2016 to challenge restrictions imposed by Russia on Ukrainian goods transported by road and rail through Russia to third countries.
Ukraine argued that the measures appeared to be inconsistent with Russia’s obligations under Article V of GATT 1994 and with its commitments under its accession protocol. (The GATT, the General Agreement on Tariffs and Trade, was the predecessor of the WTO.)
A The WTO panel ruled that Russia’s actions were justified under the security exception.
Putin’s claim that WTO procedures have been “thrown in the trash” is, to say the least, exaggerated.