Why did Russia not lose its "most favored nation" status after the annexation of Crimea?

Question

According to CNN, Russia's status as a "most favored nation" is being under scrutiny:

As a member of the World Trade Organization, Russia is treated as a most favored nation, which gives it equal access to all of the WTO members' markets and guarantees equal tariffs.

President Joe Biden announced that the United States, along with the G7 nations and the European Union, aim to strip Russia of its "most favored nation" status. Biden can't do this alone, he requires Congressional approval.

I am wondering how could Russia maintain this rather favorable status for so long after Crimea annexation, especially when compared to Pakistan's situation which lost it over something arguably less important:

This wouldn't be the first time a country has lost its most favored nation status. India revoked Pakistan's label following a 2019 bomb attack that killed 40 Indian paramilitary personnel.

Was the stripping of this status even mentioned as a sanction after the annexation of Crimea or such an action was considered too harsh as an economical sanction?

Answer 1

It is important to understand the terminology here. The World Trade Organization's members commit to treating other members equally so they can all benefit from each other's lowest tariffs, highest import quotas and fewest trade barriers for goods and services. This principle of non-discrimination is known as most favoured nation (MFN) treatment. Thus, by revoking the MFN status from a trade partner, a country indicates that partner could be discriminated against in trade... at least in theory.

All members of WTO are supposed to assign this status to every other member of WTO. That is the purpose of WTO - to facilitate free and equal trade, after all; but that is not the case in reality - for example, Pakistan never extended MFT status to India. Revoking this status is not a formalised procedure - it would be strange if it was, since it kind of undermines the principle WTO was founded on; but, on the other hand, WTO is a strictly consultative organisation and doesn't really put any restrictions on what its members can actually regulate, it only provides a place to talk about these regulations.

Revoking Russia's MFN status is just another step in the chain of economical sanctions applied by NATO states. It won't have any effect by itself - hard to call it a sanction, it is more of a strongly-worded letter. But it will open way for new sanctions, more general than previous ones. On the other hand, it also allows Russia to retaliate in kind - which was probably the main reason this action, just as cutting off SWIFT, was not considered previously.

P.S. A side effect of this situation - it does set an unpleasant precendent for other WTO members. WTO membership is valuable, because it is supposed to assure other members treat you fairly, but current events show that if a reasonably-sized alliance collectively decides it does not like your attitude, the state will be treated just as if it was a non-member. This probably would also be considered as an argument against taking this action.