Western governments are drawing up plans to impose punitive tariffs on Russian trade amid efforts to further isolate Moscow from the global economy after the invasion of Ukraine.
In a development aimed at ratcheting up the pressure on Vladimir Putin, the G7 group of wealthy nations is considering options to strip Russia of “most favoured nation” (MFN) status under World Trade Organization (WTO) rules.
Such a move would mean imposing tariffs – border taxes paid by importers – on Russian products such as vodka and other goods. Designed to raise the price of goods to discourage trade, tariffs hit exporters but can also add to consumer costs.
Sources said an announcement by the G7 could come as early as Friday, although they also stressed that a desire to maintain international unity and to coordinate sanctions could see the details announced at a later stage.
It comes as the US pushes for tougher action against the Kremlin, with sources telling the Reuters news agency that Joe Biden would use a statement on Friday to remove Russia’s “permanent normal trading relations” with the US – the term used by Washington for MFN status.
The US currently only excludes two countries from this designation: Cuba and North Korea. Rather than tariffs at the current applied rate in the US of about 3% on average across Russian goods, the border tax would increase to more than 10 times that level.
Imposing punitive tariffs on goods sold by Russia to the west would be designed to increase the pressure on the Kremlin, in a move similar to tactics used by the former US president Donald Trump to exert pressure on China amid a bitter dispute between Washington and Beijing.
The move would be largely symbolic for the US given the relatively limited export volumes involved, with the world’s biggest economy importing less than $30bn (£23bn) from Russia last year. Western leaders have also already announced plans to phase out Russian oil and gas imports.
The consequences would, however, be bigger in the EU, which is Russia’s biggest trading partner accounting for more than a third of total imports and exports. Russia sold about €95.3bn (£80bn) of goods to EU nations in 2020, with more than 70% of this figure dominated by fuel and mining products.
Trade with the UK is also limited outside of oil and gas, with Russia accounting for 1.5% of total imports and 0.7% of exports. Nevertheless, those imports include popular products such as vodka, meaning higher tariffs would push up the cost of goods for British consumers.
The development follows steps taken by Canada to remove MFN status for Russia, while experts said other nations following suit could prelude a broader push to rescind the country’s membership of the WTO – the global arbiter for trading disputes.
Analysts at Goldman Sachs noted that just over three-quarters of WTO members supported a UN resolution censuring Russia, although they said this might not guarantee they would vote the same way on stripping the Kremlin of membership.
A spokesperson for the UK Department for International Trade said: “Russia’s assault on Ukraine is a barbaric attack against a sovereign democratic state, and the UK has implemented wide-ranging sanctions that are inflicting significant economic pain on Vladimir Putin’s regime.
“We are discussing further steps to ramp up pressure on Russia’s economy and nothing is off the table until Russia reverses its illegal invasion of Ukraine.”