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Russia/Belarus: Putin, Lukashenka Struggle To Put On Happy Face After Talks

Russian President Vladimir Putin and Belarusian leader Alyaksandr Lukashenka struggled yesterday to hide apparent differences over a proposed currency union. Putin came out strongly in favor of the union, while Lukashenka -- also agreeing to the union -- appeared to be less enthusiastic. He would not publicly commit to adopting the Russian ruble by a proposed date of the start of 2005. The summit comes as tensions between the countries mount over plans by Russia to stop selling Belarus natural gas at subsidized prices. RFE/RL's Sophie Lambroschini reports from Moscow that Lukashenka may see the currency union as eroding his power.

Moscow, 16 September 2003 (RFE/RL) -- Russian President Vladimir Putin and Belarusian President Alyaksandr Lukashenka struggled to present a happy face yesterday after talks in Sochi.

The discussions centered around a proposed currency union between the two countries based on the Russian ruble -- something both leaders say they support but which analysts say may serve Russia's needs better than Belarus's.

Putin told a news conference after the talks that his government strongly favored a currency union with Belarus based on the Russian ruble.

"As far as the common currency -- the Russian ruble -- is concerned, we believe that the document prepared by the ministries of finance and the central banks of Russia and Belarus has been made on a very high [professional] level. It meets our goals and satisfies the interests of both Russia and Belarus."

Lukashenka confirmed that the currency union is indeed moving forward, but appeared to be less enthusiastic about the idea. He stopped short of publicly agreeing to a date of 1 January 2005 to put the union into effect.

"Yes, our union is indeed moving forward with difficulty," he said. "And that is natural because we have come close to trying to solve the most important issues that will determine the future of our countries and our people."

Putin admitted that Belarus had concerns about the proposed union, but said the concerns had been taken into account.

"Our Belarusian colleagues have certain concerns regarding the transition to the Russian ruble and we understand that," Putin said. "However, we believe that all of these concerns have been taken into account in the documents that are being offered."

Earlier Lukashenka had reportedly said adopting the Russian ruble would cost his country as much as $1 billion in lost tax revenue and had demanded compensation. Neither president mentioned this objection at the press conference.

It's not clear why Lukashenka is now hesitant to move forward on an idea that he had earlier supported. But analysts speculated that the Belarusian leader may fear a currency union could erode some of his power.

UFG investment bank analyst Vladislav Oreshkin tells RFE/RL that introducing the Russian ruble could mean what he called the "soft annexation" of Belarus.

"The Russian central bank would be issuing [rubles] for Belarus," he said. "There will be discussions setting a certain limit, then the money will be printed. Naturally, Lukashenka won't have any money and no resources for unforeseen expenses. In other words, he won't be able to arbitrarily raise salaries, pensions. So of course he is automatically stripped of some of his sovereignty in making decisions as a politician."

Putin, in fact, tried to downplay Lukashenka's apparent concerns over losing key economic powers. The Russian leader said the introduction of the ruble would have nothing to do with sovereignty.

He then went on to compare the introduction of the Russian ruble to the introduction of the euro as a single currency in parts of the European Union. However, he omitted mentioning that while a common European national bank was responsible for European monetary policy, in Belarus's case, Russia's central bank would make the decisions.

Oreshkin spells out why Russia might be interested in further integration with Belarus. He says closer union with Belarus would bring Russia closer to the energy markets of the European Union.

"If Russia gets more economic and political power in Belarus, then a lot of problems regarding the transport of oil and gas will just disappear. Russia would get direct access to the borders of Western Europe.... I think Lukashenka is now in a very weak position," Oreshkin says. "I think he is trying to negotiate good conditions for himself. It's possible that he is negotiating his political future."

Yesterday's summit comes amid rising tensions between the two countries. Two days before the summit, Belarus authorities questioned Russia's property rights concerning an oil refinery and pipelines.

Moscow, in turn, allowed its main natural gas supplier Gazprom to drastically raise the prices of Russian gas supplied to Belarus. At the news conference, Putin confirmed that gas relations would be "market based."

Some Russian observers note that it may be important to Moscow to appear to be conciliatory because of another upcoming summit -- this one with Ukraine, Belarus, and Kazakhstan over the development of a "free economic zone."

This summit is due to begin later this week (18 September) in Yalta, but disagreements over the principles of such a zone seem to be complicating talks with Ukraine.

Today, Ukrainian Foreign Minister Konstantin Grishenko said his country would be careful not to allow any economic agreement with Russia to interfere with its ties with Western Europe and the European Union.