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This report considers Russia's recent accession to the WTO, assessing the implications that accession is likely to have on Russia's domestic economy and on its economic relations with the EU. The first section argues that despite the fact that Russia has experienced a fundamental transformation over the past two decades it faces a number of serious challenges. Overcoming these challenges successfully is likely to require the implementation of a significant economic reform package, with WTO accession representing only a small part of what is required. The second section outlines the most important commitments made by Russia as part of the accession agreement. A third section describes the likely effects on the Russian economy of accession. It is argued that the most important effects will be felt through increased flows of foreign direct investment in business services sectors. However, serious benefits will only accrue to Russia if it improves its investment climate. A fourth section argues that the nature of EU-Russia relations is unlikely to change dramatically unless the Russian economy experiences significant structural transformation. The conclusion suggests that WTO accession should be part of broader economic reform package if it is to result in any serious improvement in Russia's investment climate.