SIGNPOST: Belarus puts nail in coffin of Russian union

By bne IntelliNews February 1, 2007

Ben Aris in Berlin -

The long-mooted union between Russia and Belarus is effectively dead after the chairman of the National Bank of Belarus, Pyotr Prakapovich, said Wednesday that the creation of a single currency with Russia had been "postponed indefinitely."

"We have always said that the single currency introduction is the final stage of integration after the establishment of a single economic and customs space. Certainly, the latest actions by our colleagues have resulted in the fact that the single currency introduction has been postponed indefinitely," Prakapovich said.

The announcement marks the end of President Alexander Lukashenko's hopes of eventually uniting the two countries into a mini-Soviet Union.

Prakapovich said that the introduction of the single currency is not possible until a single customs and economic space, as well as equal conditions for business entities and the population, have been created.

"Therefore, it is difficult to say today how long it will take to achieve these results. Time will tell," Prakapovich told a news conference.

Economic relationship

Lukashenko is thought to be pursuing the union with the idea that he would become the president of the united countries – or at least significantly increasing his political clout on the world stage. The Kremlin has been stringing him along, as the prospect of a reunion plays very well with Russia's electorate.

However, Russian President Vladimir Putin effectively killed the idea of a union when he turned off oil supplies to Belarus in January and rammed through price hikes to gas tariffs, effectively changing the basis of the two countries' relationship from a political one to an economic one.

Putin's decision highlights the Kremlin's growing confidence in the upcoming parliamentary and presidential elections, as for the first time it doesn't feel the need to play the Belarus-union card.

The timing is advantageous from a Russian point of view, as this card has been steadily losing losing its potency.

Russians in the 1990s yearned for a return to the Soviet-era because of the economic chaos and loss of prestige that Russia suffered after falling off its superpower pedestal.

However, with disposable incomes rising at about 10% a year, life for the average Russian has got noticeably better. Moreover, since the Kremlin started flexing its muscles in the last year through the aggressive use of energy in its foreign policy, some of Russia's pride has been restored. The idea of going back to the Soviet Union is rapidly loosing its appeal.

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