In from the cold – at last

A deal with Georgia

The agreement reached by Russia and Georgia last week (2 November) marks a major step forward in relations between the two countries.

Russia's main concession was that a private company, contracted by Switzerland (which helped broker the deal), will monitor trade at border crossings between Georgia and Russia. This is significant because some of these borders lie in Abkhazia and South Ossetia, two territories within Georgia over which the government lost control in the early 1990s.

In August 2008, a Georgian move on South Ossetia prompted a brief Russian campaign against Georgia, followed by Russia's recognition of the two breakaway territories as independent countries.

Under last week's deal, trade between Russia and the two territories would – for the first time in almost two decades – be carried out under a mutually agreed monitoring regime. Direct trade between Russia and the two territories would also fall under the border-monitoring regime.

Mikheil Saakashvili, Georgia's president, called the agreement a “diplomatic victory” for his country. He added that the real victory would be Georgia's full control of its border with Russia. Under the deal, he said, “we will know what kind of cargo is moving there, and it has not only economic but also a huge security importance”.

José Manuel Barroso, the president of the European Commission, welcomed the agreement. He said: “The EU appreciates the flexibility shown by both Georgia and Russia to find a compromise on a highly complex issue, and encourages both parties to overcome the very last technical hurdles in order to formalise the deal.”

A deal with the EU

On 21 October, Russia and the EU finalised a bilateral agreement on Russia's WTO membership. Among the sticking points had been Russian incentives to its automotive manufacturers – the sector in Europe, which,along with aircraft manufacturers, most vociferously opposed Russia's accession to the WTO. The EU will put in place a compensation through which to provide compensation if jobs in the EU car and car-parts industries move to Russia.

Rules for exports of agricultural products and foodstuffs to Russia – a frequent source of friction – have been clarified, and a quota system for wood exports will be introduced.

Russia has agreed to change the way it taxes European airlines seeking to fly over Siberia, which should reduce the tax burden for the airlines, which is currently estimated to be around €320 million a year.