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Customs Union With Belarus, Kazakhstan Is in Doubt

Prime Minister Vladimir Putin, left, listening to Finance Minister Alexei Kudrin during a May 21 meeting of the Customs Union of Russia, Belarus and Kazakhstan. Dmitry Lovetsky

Prime Minister Vladimir Putin on Saturday conceded that a Russian-led customs union with Belarus and Kazakhstan would not come into force by a planned July 1 deadline, casting serious doubts on Moscow's commitment to the plan.

Several key disagreements were not resolved Friday when Putin met with the Belarussian and Kazakh prime ministers in St. Petersburg, including Moscow's desire to keep protectionist measures for its auto and aerospace industries.

The union "cannot come into full force," Putin told Mir, a television channel for the Commonwealth of Independent States, in an interview posted on the government's web site.

"If we allow this or that product into our customs zone, de facto without import duties, this will have long-term effects. … In essence, it would jeopardize whole industries in Russia," Putin said.

Analysts had been skeptical about the union's chances for success, often citing Russia's intermittent enthusiasm for joining the World Trade Organization. Moscow submitted its application to join the WTO in June 1993 — nearly 17 years ago — and remains the largest economy outside the bloc.

Regular trade disputes with Belarus have also hampered negotiations on the customs union.

On Friday, Putin said 18 more agreements would need to be signed before the July 1 deadline. The three states previously agreed to introduce a common external tariff and set up rules and customs duties by that time.

Now, Moscow will seek to establish the common economic zone by July 1, 2012, six months later than previously planned, Putin said in the interview.

The remarks indicate that his suggestion a day earlier to enlarge the customs union, potentially to include six new states, may have been premature.

"I don't know of a single Eurasian Economic Community member who would not want to join the work of the customs union," Putin said at a meeting of the group in St. Petersburg on Friday.

Besides Belarus and Kazakhstan, the EEC's members are Kyrgyzstan, Uzbekistan and Tajikistan. Armenia, Moldova and Ukraine have observer status.

In comments at the meeting, Ukrainian Prime Minister Mykola Azarov did not express any eagerness to join the customs union, saying only that he hoped bilateral trade with its members "would not change for the worse," Interfax reported.

Ukrainian President Viktor Yanukovych indicated last week during a meeting with President Dmitry Medvedev that Ukraine, a WTO member, would pursue further economic integration with the European Union rather than with Russia.

Kazakh Prime Minister Karim Masimov said the union helped increase his country's trade with Belarus by 50 percent since last year.

"Not everyone supports the customs union, and there are opposing viewpoints in Kazakhstan as well, but I and the president of Kazakhstan are sure that it will benefit our economies and honest entrepreneurs," he said.

Putin praised the union's progress, saying it "has grown out of its purely economic format and is becoming a new geopolitical reality." He also called it the main driving force of integration between CIS countries.

Russia will gradually remove barriers to free migration of labor within the zone and "measures to protect the domestic market that were introduced during the crisis," he said.

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