Ukraine quotas may hit WTO bid - president's ally

KIEV, June 21 (Reuters) Fresh government moves to restrict grain exports make a mockery of Ukraine's pledges to build a market economy and could imperil its bid to join the WTO, a official close to President Viktor Yushchenko said today.

The government led Yushchenko's rival, Prime Minister Viktor Yanukovich, reintroduced stiff quotas on exports this week to guard against bread price increases linked to a severe drought as the ex-Soviet state prepares for a September election.

Quotas introduced last year angered traders and Ukraine's international partners, who said it was no way to run a market economy.

The new limits are even tougher, cutting to 3,000 tonnes shipments of each type of grain over three months compared with exports of 20 million tonnes over the past two seasons.

''The president is appealing to the government: please review your approach, do not create artificial crises,'' Viktor Bondar, the president's deputy chief of staff, told journalists.

''He has said over and over that that the government's use of quotas and similar methods puts under threat our bid to join the World Trade Organisation.'' Western criticism was not long in coming.

US ambassador William Taylor told Fifth Channel television that he had told ministers to stick to the principles of a market economy.

''If you stop grain exports, you hurt farmers in the first instance,'' he said.

Yushchenko promised to secure membership of the Word Trade Organisation, part of efforts to move Ukraine closer to the West, within a year of sweeping into office in 2005 in the aftermath of ''Orange Revolution'' protests.

The membership drive, 14 years old, hit obstacles. The final required laws were only approved earlier this month.

Yushchenko, interviewed by Reuters in Brussels where he was meeting European Union and other officials, said WTO membership now required only a formal decision the end of the year.

''Ukraine has done all the homework in adapting customs excise and trade regulations,'' he said. ''This gives new economic opportunities, new legal procedures and new protection of Ukrainian interests.'' Bread prices are now centre stage as campaigning gets under way in one of Europe's poorest countries.

REUTERS DS RAI2143