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US Tariffs Anger Russia, Threaten Relations - 2002-03-06

The decision by President Bush to impose tariffs as high as 30 percent on several types of imported steel has drawn an angry reaction from Moscow, which stands to lose $1 billion a year and thousands of jobs because of the tariffs. And there are rumblings that Russia might retaliate by taking action against a major American export to Russia - poultry.

Russian reaction was quick and to the point. U.S. Ambassador Alexander Vershbow was summoned to the Foreign Ministry on Tuesday and told the tariffs could seriously affect U.S. Russian relations.

Then on Wednesday. German Gref, Russia's economics minister, threatened to scrap all U.S. Russian trade agreements.

He said that if the new tariffs mean Russia can no longer export steel to the United States, then Russia might as well tear up all bilateral trade agreements between the two countries.

For its part the United States has warned Russia that it risks doing serious harm to economic relations between the two countries if it imposes a ban, as it has threatened, on poultry imports from the United States.

Last week, before President Bush announced the steel tariffs, Russia's agriculture ministry raised the possibility that all imports of American poultry might be banned - due, they say, to health concerns about the use of antibiotics by some American poultry producers. But some analysts here see such a move as pure retaliation for the steel tariffs.

Economics Minister German Gref has said that's not so.

Mr. Gref said the question of banning U.S. poultry products from the Russian market has nothing to do with bilateral trade relations and cannot be regarded as retaliation. He said if a review by the agriculture ministry finds everything in order then there will be no sanctions against U.S. poultry.

Russian Prime Minister Mikhail Kasyanov has also downplayed the likelihood that Russia would retaliate. He said, despite the losses Russia is likely to suffer, there will not be a trade war.

But it is no surprise that the Russians are upset by U.S. tariffs since they stand to lose $1 billion a year because of them. Such losses are also likely to mean thousands of Russian steel workers will lose their jobs.

Alexei Mordashov, speaking on behalf of Russian steel producers, said the tariffs will also lead to a further erosion in already tumbling world steel prices.

Mr. Mordashov said the American tariffs are illegal and violate the U.S. Russian trade agreement on steel, which he says requires consultations before such measures are implemented.

Ever since the terrorist attacks on New York and Washington relations between Russia and the United States have followed a curious path.

Russian President Vladimir Putin threw his full support behind America in its war on terror voicing no objection to the stationing of American troops on Russia's doorstep first in Central Asia and later in Georgia.

But the new disputes over poultry and steel are being seen here as a real test of the new relationship between Moscow and Washington.