By James Schofield in Moscow

Despite the announcement this week that the European Union intends to recognise that Russia has a market economy, significant obstacles remain to the country's accession to the World Trade Organisation.

Alexei Portanski, Director of the WTO office in Moscow, told BBC News Online on Thursday that gaining market economy status from the European Union reflects Russia's progress in pushing through economic reforms.

But the news is no prerequisite for entry. "It will have no direct impact on negotiations," he said.

As this week's EU-Russia summit in Moscow draws to a close, a number of problematic trade issues remain under intense debate.

Obstacles

Key among these are limits on foreign ownership that Moscow wishes to impose in a number of economic sectors, including banking, insurance and telecommunications.

Government price controls, which cut the cost of domestic gas supplies for strategic government bodies and business, is another contentious issue.

Those price controls are seen by EU officials as an indirect subsidy to industry, giving Russian companies an unfair advantage over their European competitors.

But gaining market economy status will allow Russia to benefit from lower trade tariffs and give it greater leverage to fight trade sanctions.

"Russia has insisted on market status before joining the WTO because otherwise it would not be able to fully benefit from the advantages of membership," said Portanski.

Encouragement

Russia's economy, which relies heavily on exports of metals and oil, is particularly vulnerable to European anti-dumping legislation.

Speaking in Washington earlier this week, Don Evans, the US Commerce Secretary, said that Russia could realistically join the 144 member-strong WTO by the end of 2003.

And last month, WTO Director General Mike Moore said Russia could accede in time for the next WTO ministerial meeting in Mexico, scheduled for late next year.

Evans also confirmed that the US will soon make its own announcement regarding Russia's market economy status, with a decision expected by June 14th.