OFFICIAL SAYS EU EXPANSION COULD HURT RUSSIA

By Adam Tanner

MOSCOW, June 18 (Reuter) - Expansion of the European Union into eastern Europe could hurt Russia's economy unless the EU negotiates with Moscow to lessen the impact, the foreign ministry's official overseeing EU affairs said on Wednesday.

``However you look at it, the European Union is a market with certain privileges internally and certain barriers from the outside,'' said Alexander Fomin, head of the ministry's European Union department.

``If these barriers were to hinder our bilateral economic relations, of course it should be a subject of consultations and economic discussions -- perhaps compensation,'' he told Reuters.

The Treaty of Amsterdam approved by EU leaders at their mid-year summit earlier on Wednesday again raised the thorny issue of expanding into eastern Europe. But they made little progress on reforming the union to prepare for enlargement.

Among the countries the EU has said can eventually join are former Warsaw Pact members Poland, Hungary, the Czech Republic, Slovakia, Romania, Bulgaria and the ex-Soviet Baltic states.

These countries preserve at least some of their traditional economic ties with Moscow and some Russians worry that bringing them into the EU would make bilateral trade less profitable.

``Strong barriers would lead to a direct economic loss,'' Fomin said. ``If duties are three or four times higher for Russian goods than, say, the current standard, of course that would be bad.''

``But they (potential new members) also have an interest in not losing bilateral economic ties. So this will be an area for some kind of compromise.''

The EU's representative in Moscow, Ottokar Hahn, said tariffs in some eastern European countries such as Poland would lessen if they joined the EU, although Russia would lose out with higher prices in sectors such as electricity supplies.

But Hahn said in an interview that Russian officials have not acted to block EU expansion eastwards.

``All the levels of political leaders in Russia tell us that this (expansion) is a fact which they recognise, and a few of them are even convinced it may improve their relationship,'' he said. ``The question which comes up is the question of possible compensation, that means market chances which Russia is losing by the enlargement.''

Moscow has a partnership agreement with the EU designed to forge commercial and other links and liberalise trade but few expect it to lead to Russia itself joining the 15-nation body.

But in March Russian President Boris Yeltsin said Moscow wanted to join too. Russia ``is also aiming to be recognised finally as a full European state and we are also prepared to join the European Union,'' he said.

Russia -- much of whose vast territory lies in Asia -- has not formally applied for membership and has said little since Yeltsin's surprise declaration.

But a Security Council official said on Wednesday that Russian membership in the EU remained a desirable goal.

``Looking at the matter as an economist, I'd say it would be a positive thing,'' said Ruslan Kozhevnikov, who specialises in economic security matters. ``Of course we'd have to look at the conditions of entering this union to see if it would be worth it -- we'd have to study the matter to protect domestic producers.''

The Foreign Ministry's Fomin acknowledged Russian membership was unlikely in the forseeable future but said creation of free-trade zones, as well as building trans-European highways and communication links between Russia and the EU, were realistic goals that could foster closer ties.

In recent days, however, the EU and Russia have experienced some strains as a leading Russian reformer refused to meet the EU's top trade official in protest against EU anti-dumping measures and the EU transport commissioner criticised the high fees Russia charges European airlines overflying Siberia.

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Johnson's Russia List

19 June 1997

djohnson@cdi.org