EU pledges to recognize market status of Russia

MOSCOW -- Russian President Vladimir Putin, taking a tougher approach than he had in meetings with President Bush and NATO leaders, won a major victory Wednesday as the European Union agreed to recognize Russia as a market economy.

Relations between Russia and its biggest trading partner, however, remained tense with the Kremlin fearing EU expansion into Central Europe could further isolate Kaliningrad, Russia's Baltic enclave, separated from the rest of the country by Lithuania, Latvia and Belarus.

The EU also wants Russia to use its geographic location straddling Europe and Asia to crack down on illegal immigration, an issue that dominates voter concern throughout western Europe, and to move quicker in reforming its monopolistic natural gas industry.

"At present, we are witnessing only the beginning of real, mutual cooperation," European Commission President Romano Prodi said at the end of the one-day summit. "We can get closer."

EUtaken to task

Putin, who has aggressively pursued closer ties with the West since the Sept. 11 terrorist attacks, opened the summit complaining talks with the EU have been "going around in circles." He focused on the EU's refusal to acknowledge Russia's capitalist market system more than a decade after the collapse of the Soviet Union and its command economy.

The criticism was in sharp contrast to Putin's friendly visit with Bush last week, and the harmonious ceremony Tuesday when Russia became a junior partner in NATO, the military alliance created more than a half century ago to contain Moscow.

But the mood of the EU summit was quickly lightened when Prodi announced the EU's intention to grant Russia market status. The announcement was met with applause. Later Spanish Prime Minister Jose Maria Aznar's pledged that the EU will "take steps" to support Russia in its 7-year-old bid to join the World Trade Organization.

"It is very clear that Russia's economy is developing as a market economy," said Aznar, who holds the rotating EU presidency.

Putin pushed for similar pledges from Bush during his summit earlier this week, but came away empty-handed despite the smiles and friendly words. The U.S. Commerce Department, however, said it will consider the issue of granting Russia market-economy status next month.

One key area that Russian and EU leaders failed to agree on was Kaliningrad, a Baltic Sea enclave that the Soviet Union acquired from the defeated Nazis at the end of World War II.

Russia fears that Kaliningrad will be completely shut off from the rest of the country when its neighbors Poland and Lithuania join the EU. Now, residents are allowed visa-free transit through those countries to Russia, but all that will end with the EU's expansion in 2004.

"Without exaggeration, one can say that how our relations with the European Union develop depends on" how this dispute is settled, Putin said.

Prodi and Putin signed an agreement saying they would "continue to seek mutually acceptable solutions" to the issue.

"We are fully aware of the specific situation that this region finds itself in," Aznar said after the summit's conclusion, but neither he nor Prodi said they were ready with a solution.

Russia and the EU leaders also signed documents on energy cooperation, an issue that has become an irritant for EU countries. Europe is highly dependent on supplies of Russian natural gas, and the EU complains that the Russian government's economic policies and the lack of reform at the gas monopoly, Gazprom, have made export prices artificially high.

"Common rules of behavior are needed," Prodi said.

The EU and Russia agreed to cooperate in fighting international terrorism, and on the conflicts in the Middle East and between India and Pakistan. Prodi also made an appeal to Russia to help Europe crack down on illegal immigrants, particularly from Central Asian nations who cross Russia to Western Europe.