Russia to convoke panel of arbiters on complaint to WTO over EU energy adjustments late March

Russia will convoke a panel of arbiters to assess a complaint to the World Trade Organization (WTO) over EU energy adjustments at the end of March, Alexei Likhachev, a deputy Russian economic development minister, told reporters.

Russia will convoke a panel of arbiters to assess a complaint to the World Trade Organization (WTO) over EU energy adjustments at the end of March, Alexei Likhachev, a deputy Russian economic development minister, told reporters.

"Our decision should be reached at the end of March," he said, adding that the Europeans were not proposing any "out of court settlements."

Likhachev said that after Russia has requested a sitting of the panel, the EU would have an initial opportunity to ask for it to be withdrawn, and that is probably what they will do. That would be followed by consultations between the sides, and Russia and the EU would return to resolving the dispute by judicial proceedings at the end of April.

"But if you analyze the situation on the same lines as the [automobile] recycling fee [when the EU and other countries filed a complaint against Russia], then you'll recall that the Europeans first requested [a sitting of the arbitration panel] and we refused and then, following consultations, they formed this panel on a mandatory basis," he said.

As of today, the EU has not put its own representatives on the panel, and we might conclude from this that Russia's "promise that it kept to make the recycling fee applicable to all importers and manufacturers from January 1 has had a fundamental impact on this process," Likhachev said.

"The Europeans could in theory take other steps that would satisfy us," he said.

Asked when a complaint might be filed in the WTO framework against the EU over its Third Energy Package, Likhachev said the next consultations on this issue were planned for this week and that a decision would be reached following them.

Reports said at the end of January that this complaint would be filed during the first quarter of this year.

Russia filed its first ever lawsuit with the WTO over the so-called energy adjustment issue arising during anti-dumping investigations on December 23. A request for formal consultations is the first step in the WTO's dispute settlement mechanism.

The consultations must take place in the course of 60 days from the date of the request, which in this case meant before February 22, 2014. In the event that the sides fail to resolve the issue by the deadline, Russia can demand that a WTO panel hear the case.

"The EU's unfair dumping practices were the discussion topic at numerous expert consultations, at virtually every high-level meeting, at EU courts, but it never led to a change in the position of our main trading partner. In circumstances when other means of settling the issue have been exhausted, appeal to WTO procedures is a forced, but necessary measure for restoring normal trade terms with the EU," an Economic Development Ministry source told Interfax at the time.

Dumping occurs when goods are exported abroad at a price below prevailing prices on the exporter's domestic market. If the dumping is determined to have harmed industry in the importing country, special protectionist measures - as a rule, higher import tariffs - may be imposed.

Before 2002, whenever the EU charged Russia with dumping violations, it did not take into account prices on the Russian domestic market, as required by international trade law. Viewing Russia as a country with a non-market economy, the EU determined whether dumping had occurred by comparing the price of the Russian exports with prices on the domestic markets in third countries.

This approach hurt Russian exporters and, from Russia's standpoint, violated EU commitments under the 1994 EU-Russia partnership and cooperation agreement. Under that agreement, the EU was to apply anti-dumping measures in accordance with the requirements of GATT and take into account Russia's natural competitive advantages, including access to cheap feedstock.

Even after 2002, when Russia received market economy status, the EU continued to apply an approach - unfair in Russia's view - that determined whether dumping had occurred by applying the so-called energy adjustments.

Instead of looking at the actual price that a Russian exporter paid for gas or electricity, the EU calculated the value of a Russian export based on the higher costs prevailing in other countries with no access to those resources. That approach automatically shifted Russian exports into the dumping category, enabling imposition of tariffs that substantially limited or even prohibited exports to the EU.

The EU initiated 17 anti-dumping cases against Russia in the 1995-2012 period, according to the Economic Development Ministry, the majority of them in violation of international law, in the Russian view. As a result, producers of Russian fertilizer, steel-alloy, cable, pipe, various other steel manufactures and aluminum foil suffered damages amounting to hundreds of millions of dollars, the ministry said.

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