On August 1, Russian President Vladimir Putin claimed Western economic sanctions imposed over his war on Ukraine were out of step with World Trade Organization obligations.
The Kremlin has been on a tear criticizing sanctions, which have ripped a huge chunk out of the Russian economy, with thousands of companies fleeing, shortages of goods and rising inflation.
Attacking the United States, European Union and others, Putin said:
“[S]uch things as adherence to the principles of the World Trade Organization; they are simply thrown on the scrap heap. Apparently, some of our Western partners do not even want to remember these principles anymore, because it is simply embarrassing to talk about it."
It’s a misleading claim. In fact, the WTO has methods for resolving trade disputes that Russia can employ. While the Kremlin has threatened to challenge the sanctions, it hasn’t so far. There’s a reasonable case the U.S. and others are fully within their rights under WTO rules.
First, some background.
The World Trade Organization (WTO) is an international body that regulates and facilitates trade between nations. Its main goal is "to ensure that trade flows as smoothly, predictably and freely as possible," says the organization's website.
The WTO was established on January 1, 1995, and now comprises 164 members that account for 98 percent of world trade. It has a dispute settlement body (DSB), and the WTO’s job of settling disputes is one of its most important functions.
Russia became a WTO member on August 22, 2012. Over the past five months, Russia has made several announcements saying it plans to challenge Western sanctions at the WTO.
In a March 9 interview with the RIA Novosti state news agency, a senior Russian Foreign Ministry official, Dmitry Birichevsky, cited “unlawful trade restrictions imposed by other member countries.”
Judging by official statements, Russia believes any sanctions that put it at a disadvantage in relation to other WTO members are illegal. For example, the Kremlin is very unhappy about the West's ban on the export of high-tech products to Russia - in particular, communications systems, electronics, semiconductors, aviation and space components. But what hurt the Russian economy the most was the decision of Western countries to freeze some $300 billion of the Russian central bank’s assets.
On April 20, Putin instructed the government to assess the measures taken by WTO member states that restricted trade with Russia and to propose challenges by June 1.
On June 15, the chairman of the Russian State Duma’s financial market committee, Anatoly Aksakov, claimed that Russia was ready to challenge the sanctions at the WTO. “This is the most legally prepared and least politicized panel of arbitrators,” he said.
Nothing has happened so far, though. Here’s why.
According to experts and research fellows of the British Institute of International and Comparative Law, the chances are high that the WTO will recognize the sanctions as legitimate.
On March 2, the United Nations General Assembly voted to demand that Russia stop its military aggression against Ukraine and immediately withdraw all troops. The resolution passed 141-5, with 35 abstentions.
Thus, the international community has confirmed that Russia’s military intervention in Ukraine violated international law. Article 2(4) of the U.N. Charter requires U.N. member states to refrain "from 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 will be able to establish that the sanctions were taken "in time of war or other emergency in international relations."
Provisions in the WTO’s 1994 general agreement on trade allow WTO members to “justify actions taken in violation of WTO obligations” under a “security exception.”
The 1994 provisions state that “[n]othing in this Agreement shall be construed … to prevent any [WTO member] 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.”
Ironically, Russia used this “security exception” to its benefit after Putin annexed Crimea in 2014 and instigated a war in Ukraine’s east. Ukraine went to the WTO in 2016 to dispute restrictions that Russia had imposed 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 its commitments under its Accession Protocol. (GATT, the General Agreement on Tariffs and Trade, was the WTO’s predecessor.)
A WTO panel ruled that Russia’s actions were justified under the security exception.
While it’s hard to know what specific arguments Russia will make at the WTO, it’s clear from the group’s rules and at least one recent decision that sanctions during a war can be upheld.
Putin’s claim that the WTO’s procedures were “ thrown on the scrap heap” are, at a minimum, exaggerated.