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Published: Friday July 25, 2014 MYT 5:35:03 AM
Updated: Friday July 25, 2014 MYT 5:35:05 AM

Russia says U.S. sanctions break WTO rules, may cause trade dispute

GENEVA (Reuters) - The latest U.S. sanctions against Russia violate World Trade Organisation rules and may force Moscow into a destabilising trade dispute, Russia's ambassador told the Geneva-based trade body on Thursday.

"It looks like we are being forced to seek the protection of our legitimate rights and interests through the WTO mechanisms," said Russian Ambassador Gennady Ovechko, adding that Russia was also concerned by sanctions imposed by other WTO members.

In response to the conflict in Ukraine, the United States has for several months been levelled sanctions on Russian individuals and smaller companies. But on July 16, Washington also hit Russia's largest oil producer, Rosneft; its second largest gas producer, Novatek; and its third largest bank, Gazprombank. All three companies are run by Putin allies who have become wealthy during his tenure.

Canada said on Thursday that it would sanction a range of Russian firms including Gazprombank and Novatek.

The European Union is also considering further sanctions after the downing of a Malaysian airliner in an area of eastern Ukraine controlled by Russia-backed separatist rebels.

Russia deeply regretted the U.S.' latest step, Ovechko said. "We consider all these destructive actions by the U.S. as interference with business operations of the companies which the U.S. authorities are trying to situate in the political context, which they neither belong to nor are in any way part of," he said.

In response, U.S. Ambassador to the WTO Michael Punke said the United States took its WTO obligations very seriously and it had carefully considered whether the latest sanctions were in line with WTO rules before announcing them on July 16.

"We remain confident that all of these actions are consistent with our WTO obligations," Punke said in an emailed statement.

Countries enforcing trade sanctions do not have to justify them at the WTO unless they are challenged in a trade dispute. Justifications for restricting trade can range from environmental and health reasons to religious scruples.

But some diplomats fear that wide-ranging sanctions against Russia could only be explained by national security concerns. That would be a legitimate argument, but one that has never been invoked in a WTO dispute and could unravel mutual trust.

"Thus, the U.S. actions might cause the unfortunate chain of events that would ultimately undermine the credibility of the multilateral trading system," Ovechko said.

Ovechko's comments at a meeting of the WTO's General Council were supported by Cuba, Nicaragua, Venezuela, Argentina, Bolivia, Zimbabwe and Ecuador.

(Reporting by Tom Miles; Editing by Alison Williams, Larry King, G Crosse)

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