G7 nations have moved to strip Russia of its World Trade Organisation (WTO) membership privileges. The Group of Seven, comprising the world’s seven wealthiest liberal democracies, will no longer treat Russia as a “most favoured nation”.
This will mean that regulation will be re-introduced on Russian goods and services in western markets, and that preferential tariff regimes will be removed. In the long term, it will lead to a reduction in Russian trade with some of the world’s most lucrative nations.
The move comes after a fourth round of sanctions from the EU banned Russian steel imports and the UK added 361 additional individuals to its sanctions list on March 15.
In co-operation with the G7, the European Union will also revoke Russia’s Most Favoured Nation (MFN) status. Executive Vice President of the European Commission Valdis Dombrovskis announced the move on March 15, saying: “this unprecedented decision sends a political signal of the highest magnitude. In practice, it deprives Russia of key trade advantages as a WTO member, by ensuring that the products of Russian companies no longer receive Most Favoured Nation treatment in our economies.”
“We will keep imposing sanctions on Putin’s regime, leaving no stone unturned as we ramp up the economic consequences for Russia of this brutal invasion,” Dombrovskis continued. “The only way Russia can avoid this financial, economic and reputational disaster is to immediately end its barbaric and illegal invasion of Ukraine,” he added.
The EU has also suspended Belarus’ accession to the WTO in retaliation for its participation in the invasion of Ukraine. Belarus’ border with Ukraine was used as a base from which Russian troops began their assault on Kyiv and Ukraine’s northern territories.
The move by the EU and G7 nations has a legal basis in the security exemptions of the WTO agreement on tariffs and trade, which asserts that “nothing in this agreement shall be construed to prevent any [member country] from taking any action which it considers necessary for the protection of its essential security interests taken in time of war or other emergency in international relations.”
As well as the G7 nations and the EU, several other nations have supported the decision to stop treating Russia as an MFN, including Australia, Iceland, South Korea and Norway.
Russia joined the WTO in 2012, but violated its WTO commitments imposing tariffs on imports of paper, palm oil and refrigerators in 2014 as counter-sanctions following its annexation of Crimea.
This move by G7 nations, the EU and other allies will further exacerbate Russia’s economic isolation following four rounds of severe sanctions against Russian business, oligarchs and military-industrial complex by the US, UK, Canada, EU and others.