it's eight thirty pm here in moscow the headlines live from nato admits it may have been behind the air strike that killed twenty eight pakistani soldiers in some threatens to felt the strain relations with the u.s. and pakistan is already more vital military supply routes opposed to afghanistan and other top stories chaos in cairo fresh clashes flare up in tire you square is tens of thousands keep up the protests against egypt's military rulers the demonstrators a fall from satisfied with a newly appointed prime minister and a beam started forming their own salvation government. on the world's biggest and

most expensive rover mission to mazas blast to go from cape canaveral in florida now says probes equipped with a russian designed water detects of the could be critical in the quest to determine if there's ever been i phone the red. this is ati. hello and welcome to on the money with the business of russia is business i'm peter lavelle today we're talking about russia in a global economic context. discuss this i'm joined by years of

the chief economist at deutsche bank also in the studio with me is nick poole he's archy's business editor and anatoly we look off he is head to head of asset management at gazprom back but first and when let's have a look at the impact of the w t o entry for russia's economy. eighteen here is the pros and cons and overcoming obstacles before russia has made it clear it will join the w t o the benefits range from russia's expats potential to attracting more a d. and engine internet sector is likely to get the most out of the w t o extension well agricultural and want to industries and predicted to break ground as foreign companies production will be my competitor so far this secretaries have been able to survive due to protective measures taken by the russian government as you know the whole point of the world trade organization is to reduce this is to level the playing field for the world so you've got an apparent contradiction on the one hand

the long term future of the russian industry has been secured by this level application persons times but on the other hand and free to lead to these taking the same steps. so clearly apparent pirates but the deadly trio membership doesn't mean that companies will instantly have to play but they're going to say chanst rules the entrance implies a transition period that would allow companies to smoothly just have a w o provisions opening up means industries will have to face piece competition from international companies and a very will to succeed the w. to offer the new critic markets and for him no harm and more competitive environment could contribute to the government's plan to modernize and diversify the economy in addition to that russian business will operate within a new legal framework. if for instance dumping presence by the european commission with a double to a commission on. the russian businesses to international

means of defending them globally on the trade minister it's not only could russia stands to benefit from the entrance but are they going to get expanded their expert capacity as begin access to one of the largest markets in the world with russian consumers. of products cheaper prices and time with me from russian producers who will find themselves unprepared as a high quality. into russia in the long run however global competition. in the first in international level has become a knowledge based economy and that's a big struggle for on the money team. ok if i go to you first it's been eight teen years ok i remember what was it four years ago if i told me but i don't want to talk about it anymore because totally we get is it worth it

is it worth it and the way i think this is the biggest thing for russia in the past twenty years in terms of the quality of economic policy i think. it is going to contribute to the creation of a better investment climate is going to put russia into a different legal framework until global legal framework whereby a russian producer is finally made able to play on a level playing field with other companies globally would foreign pures abroad and if there are restrictions against russian exports abroad why should the cyprus lead finally and that means that the intensity of foreign protection of protectionism against russia i think will subside now that russia is likely to become a w t o member but most importantly i think the most important issue. is the legal framework russia playing by the rules being more predictable and liberalizing in a predictable way in the next five seven nine years. what industries are going to

benefit the most who's going to hurt the most who's going to hurt the most probably easiest to say it's going to be the carmakers negra culture particularly since agriculture has caught on competitive the car makers and the auto industry are going to suffer from increased competition from a poor people doesn't that make better cars rush will have to make better car it does make better cars eventually it takes a long time to make a good car and so you have to wait until your industry is competitive perhaps before you came to terms here and so the eighteen year time lag we might not have been such a bad thing i mean. we all know the grocery in the ninety's was a part of state it's entering now and from a position of strength in spain and italy if i can go to you one of the things that i you know being a resident of our of moscow living in russia for so long how much should we as consumers welcome the entry of russia into the debate here with a good feel in how fast will it take them to feel it. well we all hope.

for the consumers make it. better products and. cheaper prices that we're consumers are really need. that will help to lower inflation and seems like it's a great thing will. wait to see how exactly it plays out but again theoretically and everywhere else in the world they work when countries join w t o it actually helped us traverse a lot and helped increase the quality and put a cap on the price pressures so it's going to be good ok i'm sorry you thought if i could stay with you it would push this out for consumers because moscow is an amazingly expensive city to live in ok some of the areas that you mean

would you think is going to we will see the consumer benefit from entry to different you know i think. obviously in the services sector this is something that is very important for moscow which is probably be capital of russia services sector in terms of the time for banking a real estate etc this is going to be a significant issue and i think we will see greater penetration of insurance companies for an insurance companies foreign banks which is likely to boost competition and render the price of services lower. including in other regions i think this is probably even going to be more pronounced where there is more of an element of monopolism from from the russian side and then we tailors food retailers prices on food prices from food retailers i think are going to be lower the competition between retailers is likely to intensify as new entrants come in and then on top of this you're going to have the effect of agricultural goods being

likely cheaper. because of the reduction and which in turn will have a direct effect on the prices of goods that are sold in russia and how well are businesses prepared for this the entry because i mean as i pointed out there's a lot of rules and regulations right now russia will have recourse to to go to the world the world trade organization if it feels that it's not being treated well as a trading partner a bit our business is prepared for well the very eighteen years to prepare so. i think it's important to point out that it's not a silver bullet secure russia's economic ills the history of other come on trees within the w t o if they complain perhaps especially the smaller ones that favors the larger nations and the resolving trade disputes for the w t o and those sorts of things is quite a tricky process since you do get. permission i suppose to enforce sanctions reciprocal sanctions however you're

a small country and you're trying to put sanctions against the e.u. it doesn't really work as in the case of ecuador and bananas and italy where do you think the one industry that is going to benefit the most you think is we talk about the car automotive sectors are going to be very very difficult for them but what sector is going to be probably the biggest beneficiary from entry into the debate here. well we know that there are lots of protective measures around the world against russian still producers russian chemical products exporters so probably those two search areas would benefit the most. or all the. all the exporters who really how this inefficient business in russia can now rely on this w t o framework to make sure you know they have a fair access to the international markets so they can sell more you know they can develop better and basically it's a great boost to the efficiency industries and makes it competitive product

internationally competitive product but actually i wouldn't be that skeptical about you know the losers because again unless you you cannot prepare for the w.g. or completely you know unless you start competing on the you know on the same rule in the same rules with international producers you don't get better so you you need to start at some point and also you know we all know that in the united states and in western europe every culture producers get state support you know car producers get sometimes they support so it doesn't mean that's you know the the support and support now it would be completely out for those two sectors ok russia. is going to do it with russia in entering the debate you would encourage foreign investment i think so. we've seen some of the c.e.o.'s of large companies in the u.s. for example proclaiming that their entry and to russia would be conditioned on

russia becoming w.q. member and we've seen some of the big deals that have taken place recently possibly being timed for size lean towards that w t o accession so we're starting i think to see some of these first signs of the. coming in to russia. and some of the examples out there include china has a witness and increase in of the inflows of nearly twenty two twenty five percent during the first stages of w t o accession and i think a similar effect we may expect in russia with one condition however that things lobel e will stabilize because currently one of the factors that will only makes things difficult and in terms of this positive effect on ever the eye is the global financial situation and this is really the one factor that makes it a bit more questionable initially when you know something's up here i want to talk

about the crisis later on the program but the. intrinsic lowers the risk to invest in this country and this is something that investors will probably be give russia still another look still another look even though we have all this tsunami afflicting the world economy i have to agree with years like it's very difficult to judge exactly how that will have an impact until the. turbo financial storm that sort of circulation the world cup abates goes away and then we'll see the net impact it should have to rush of the economic growth were considerably in the end i think in the short term but it's not about the growth and we come back after a short break we'll continue our discussion on russia and the global economy stay with r.t. . wealthy

british scientists long. time buyers. market why not. come to. find out what's really happening to the global economy with mike stronger for a no holds barred look at the global financial headlines tune into cars a report on our key. is.

to. welcome back to on the money i'm peter hart we're going to continue what discussion on russia in the global economy you know what i want to ask you going to what how many percentage points will russia's economy grow because a number of estimates out there one two three five percent what's your estimate although our estimates on those suggest that over the course of the next five to ten years russia's g.d.p. growth will be getting an additional impetus. of probably one percentage point or more in terms of g.d.p. growth i think it's not even so much the quantity of course but the quality of quoting and really the best thing out of this could be that russia's wealth is moot . driven by other sectors of the economy not just oil the thing about w.t.

accession is that step by step in the longer term it will lead to a greater diversification of russia's economy by allowing more breathing space for sectors outside of the oil and gas sector for such competitive sectors such as. steel chemicals agricultural goods as well so i think this is the most important aspect that has to be emphasized a lot of experts are talking about whether it's one percent three percent five percent it's the quality of growth going to even go to your to very interesting comment here because there's always been criticism of russia's economic policy that it doesn't diversify away from energy enough energy exports do you think the w t o is actually and if it is an outside impetus that will actually push forward the agenda of diversifying away from energy. well as was rightly said. well i think it's a it's a great boost because if you have in russia a competitive business which can produce efficiently and compete globally then

those businesses get an additional supports through promoting their products in the international markets so the competitive industries competitive businesses will definitely benefit because of the access to international markets because we can produce more and actually. you know you can not. unless you want to build this efficient business that you cannot avoid international competition it will be here somehow so the if we in the w g o just gives. you know a much much more organized. way to compete and competition is good and especially for the north you know well and gas related industries you know make it into being as a competition it's one of the things i regret there isn't enough of in the marketplace here how do you think it is some of the bigger companies are going to take it a little bit more seriously now that we'll have

a medium sized players that can actually have access to outside markets and smaller players coming in here you think will kind of shake up the works because there's a lot of complacency with some of the big guys there is. also in the world and gas sector actually is well aware that if you don't have much of an effect and that is the biggest industry in russia. that will soon need to become more efficient. one hopes that certainly it will make these industries more efficient total told as always if they don't then the the end result is they'll cease to exist i mean that if you get a level playing field the best team wins. there are mechanisms that within the woods here to maintain terrorists to maintain. sort of border controls in that regard so it's not quite as simple as saying well it's all going to be you know what is on the same page spacing the same since. because i think we have to make clear to our viewers here is the term jerk just because rush will be in the debate here doesn't mean you don't snap your fingers in the office and everything it kicks

into gear it's a number of years for different industries are a lot more complicated so we have had eighteen years yet we have a number of more years exactly how exactly so as was rightly. eighteen years was a transition period in a way already and they're now out for rough as w.t. accession for some of the sectors you will have long transition periods precisely in order to attenuate to soften the impact of growing foreign competition for example for the car sector or the reduction in poor duty's. most from thirty percent to fifteen percent roughly world the gun over the course of a seven year period and sold out will give additional time for russian producers to adjust and sell the sectors like an insurance or transition periods or even greater up to nine years so this is precisely the issue to understand right after russia's w.t. obsession it's not like everything changes in one go. and in italy one of the

things that are also russia has been working on is a customs union and greater. trading efficiency with projects and giru so this interview keogh intreat is this change that kind of dynamic it all can you do both at the same time. well. i don't see what. why there would be a problem because the custom duty has actually designed you know at least from what we. understand about it is designed to ward of the trade barriers to alarm the most efficient producers in each of these searchers. are for the products to the consumers so it's pretty much in the same spirit of lowering the trade barriers of granting access to the markets for the most efficient products so i although i think there would be some illegal issues and some difficulties. i think in the spirit is the same in that direction is the same so i don't see any contradiction

directionally in those due process is the wu obsession any custom ok when it finishes with it if you and they want to talk about the general issues here right now and what is the next big ticket issue for russia after w t o entries is it meted out to the pantheon or is it will to next up afterwards the next step that there will be a lot of steps basically entry into the w t o allows for russia to finally target but we see the extension. the construction the creation of a free trade area with the european union and finally greater freedom at creating these free trade areas across the globe because previously until recently it was all about w.t. accession it was all about russia making unilateral concessions to w t o members in order for russia to get into the club only now russia gets the possibility of the interims of trade accession concessions and it can build alliances trade alliances

across the globe already new zealand vietnam as a young country its free trade area with european union far greater possibilities this is yet another major benefit that i see for the quality of russia's trade us ok nick no it's good. turn to the beyond happy news ok we're actually getting in the duty of a what's it worth if the world world economy is in this huge slump right now russia's most important trading partner is the european union and the european union has the euro what's going on there i mean russia has been very hesitant to get involved in any kind of rescue of the euro doesn't trust the euro and is interested for most important trading partner will it something doesn't trust some of the countries in europe they are in a terrible terrible state and they would be upset you no reason to trust them whatsoever i mean the market doesn't trust them and russia shouldn't either. it does want to help out the eurozone because without your approaching well russia doesn't function terribly well it's not its biggest customer so it needs to be

whatever it can the question is is there anything you can do is really think anybody can do and i think i mean yours are probably going to spend the night but the answer seems to be no i mean at the moment as he has absolutely no solution anybody's got seems to be able to work every time they put something forward the market then responds with the idea that it's not enough. there's insufficient political will to push it forward anyway and i thought if i can go to you a lot there's been some talk russia would be interested in helping to bail out the euro if it were allowed to mount vise on specific assets financial assets in the european union what do you think is that a possibility or is russia still be very much in a defensive posture when it looks at the euro. well i guess it's all about you know the european members you know the members of the e.u. you know making clear of what exactly the design of the new system would be because it's obvious that all the countries have their own view of how exactly the

post-crisis europe being treated in going going to be structured you know if is do what we want it will be fiscal union in any way you know how actually they are going to pm to the crisis because we see that the contagion is is there you know when we do we see it's actually accelerate the speed accelerating so results you know to drew a greece took almost two years then spain and italy in a. you know a couple of months you know to get their interest rates in the crisis territory now it was a question about france so basically i don't think russia or china or any other country would really answered saying you know substantial investment in the euro zone alas there is a cure here you know and agreed upon a proposition of what exactly the euro you know this investment would be used for and exactly the crisis would be n.c.o.

but the reason so far it doesn't seem there is a plan because the interests are too different and i think it will take some time for the you know for the major countries to agree on exact plan how the issues are going to be resolved but before that i'm not sure anybody any huge sovereign wealth fund or any country. in union would want to jump into the crisis and invest the money it is i mean it looks like to me that russia will only go through the i.m.f. if that's what it's going to be any kind of rescue of the euro and if we do you agree with that because that clear because i mean why would you want to buy an asset in make its currency that would be worth anything having to. to make any sense i think doing it through the. renders a more orderly i think and more efficient use of the century the framework of the i.m.f. and colluding i.m.f. conditionality in order to make sure that that kind of financial assistance is provided in a way that willie elicits generates clear response from the countries that receive

that kind of help and i completely agree with anatoly in the end it's not about financial assistance in the end it's all about what these countries do to adjust their fiscal paths their budgets that's what is really important it's whether russia gives help or not in the end this is not going to solve the issue it's really about europe. who would have thought the european union would be under a conditionality of the i.m.f. because so many countries in the world complained about that in the past well. you know he quite a lot of people actually predicted this would happen that. it wasn't beyond people sort of understanding they will for the euro is seriously flawed for exactly the reasons that have come about ok gentlemen we've run out of time and i want to thank all of my guests and thanks to our viewers for watching us here on on the money stayed with party.

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