The Customs Union between Russia, Kazakhstan and Belarus, planned to come into full effect this summer, may begin operations without Belarus, Vedomosti business daily reported on Monday.
The Customs Union formally came into existence on January 1, but is unable to start working fully until the three ex-Soviet states settle all disagreements and the Customs Code comes into effect from July 1.
Russian Prime Minister Vladimir Putin said on Friday the premiers of the three countries had failed to agree on the basic parameters of economic cooperation at their meeting in St. Petersburg last week.
The main areas of contention are the import of foreign cars and aircraft into the Union's customs territory and export duties on Russian oil and petroleum products to Belarus.
Belarusian Prime Minister Sergei Sidorsky clarified that it was duties on oil and petroleum products that troubled his country. Moscow and Minsk faced off at the start of the year over tariffs on imports of Russian oil, which Belarus said should be completely duty-free in the Customs Union.
Two Russian officials who participated in the meeting told Vedemosti the negotiations, which lasted several hours, had been very tense.
Vedomosti quoted Yuliya Tseplyayeva from banking group BNP Paribas as saying that Ukraine would make a more desirable strategic partner for Russia in the Customs Union than Belarus.
She said the Belarus economy accounts for just 3% of the economy of the former Soviet Union and Russia and Kazakhstan have similar export and import positions. Both sell energy products and import everything else. Ukraine also exports energy products and imports a large proportion of finished goods, making it a better trade partner for Russia than Belarus.
A Russian official familiar with the negotiations said there were three scenarios for resolving the issue. One is to resolve all disagreements within two or three weeks and launch a fully-fledged Customs Union from July 1. The second option would be to extend discussions by two or three months, and the third is to create a Customs Union between Russia and Kazakhstan, allowing Belarus to join when it is ready to accept the terms.
Vedomosti quoted vice-president of Russian think-tank the Center of Political Technologies Sergei Mikheyev as saying that the disagreements are minor considering it took the European Union 50 years to integrate fully.
MOSCOW, May 24 (RIA Novosti)