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Russia/Belarus: Premier Casts Doubt On Future Of Currency Union

Russian Prime Minister Mikhail Kasyanov says Russia and Belarus have so far failed to reach agreement on adopting the Russian ruble as the common currency of both countries. Kasyanov said a meeting yesterday that was meant to iron out differences between the two countries ended in failure, and he signaled that unless quick agreement is reached, Belarus's adoption of the ruble by the year 2005 will be impossible.

Prague, 2 October 2003 (RFE/RL) -- Relations between Russia and Belarus further soured this week, with both sides continuing to bicker publicly over the terms of their proposed integration.

Following a meeting of the two countries' premiers in Minsk on 1 October, Prime Minister Kasyanov blamed the Belarusian side for derailing plans to adopt the Russian ruble as their joint currency by 1 January 2005. Kasyanov warned that if the two sides did not manage to reach agreement by the end of this year, the proposed date could just as well be forgotten.

Belarusian President Alyaksandr Lukashenka says his country stands to lose hundreds of millions of dollars in revenues by adopting the ruble, partly due to lost tax income, and he has pressed Russia for compensation. But Kasyanov, clearly in no mood to compromise, told reporters Lukashenka had got it backwards.

"I don't really understand what this is about. We the Russian government didn't confirm any figures to anyone. And as regards compensation for the introduction of a single currency, I don't know what this means, and I think this is worded incorrectly because we are convinced that introducing the Russian ruble into Belarus will be a benefit for the Belarusian economy. And you don't pay for that," Kasyanov said.

Belarus's acting prime minister, Syarhey Sidorski, disputed the contention that Minsk was to blame for the talks' failure. But Anatoly Drazdov, spokesman for the Belarusian Central Bank, told RFE/RL that Moscow was forcing the currency issue prematurely. Drozdov said a genuine common market between the two countries first has to be created.

"This is what a unifying Europe did. At first they created a common market of goods, labor, and services and only after that did they introduce a common currency. This is the same. We are not thinking up anything new. But Russia says, 'Let's introduce the ruble and the ruble, like a locomotive, will pull all the rest along.' That's their theory," Drozdov said.

Experts say the main bone of contention between the two sides continues to be the issue of natural gas prices. In September, Russian gas producer Gazprom announced it was abandoning its agreement to sell Belarusian natural gas at a subsidized rate of 40 dollars per 1,000 cubic meters. Instead, Gazprom said it would move to a market price of $80 per 1,000 cubic meters. The Russian government expressed no opposition to the shift, citing Minsk's failure to create a joint-stock company for transporting gas with Gazprom as well as its failure to sell Russia a stake in the Belarusian gas transit company Beltranshaz.

Kasyanov, in his talks yesterday, left no doubt that Russia means to press the issue, saying Moscow might agree to return to cheap gas supplies for Minsk if the joint-stock deal goes through.

Andrey Fyodorov, an analyst at Minsk's International Institute of Political Studies, says Lukashenka is left with few options, now that Moscow has decided to play hardball. The Belarusian president has personally met with his Russian counterpart Vladimir Putin twice in the past two weeks, first in Sochi and then on 30 September in Moscow -- clearly to no avail.

"In Sochi, certain statements were made about how we would be able to cope with the new market prices, etcetera," Fyodorov said. "But after returning to Minsk and adding up all the figures and talking to Gazprom, it became clear that this would be very, very difficult and Lukashenka is faced with a choice between a bad option and a very bad option."

Those two options appear to be either to accept Russia's demand on the privatization of Beltranshaz and the introduction of the ruble -- or face an energy crisis this winter as the result of Minsk's inability to pay for Russian natural gas.

(RFE/RL's Belarusian Service contributed to this report.)