Russia, Belarus and Kazakhstan announced the launch of the second stage of a customs union that could pave the way for an unprecedented joint accession bid to the World Trade Organization.

But confused signals from officials and a lukewarm reception by Belarussian leader Alexander Lukashenko, smarting over a gas war with Moscow that briefly disrupted flows to Europe, suggest Moscow and Minsk still have differences to settle on trade.

Talks to create a free trade zone between Russia, Belarus and Kazakhstan gained momentum last year when Russian Prime Minister Vladimir Putin said Moscow would delay its entry to the WTO until the creation of such a customs union.

The three states, whose leaders were attending a meeting of the Evrazes grouping of ex-Soviet republics in the Kazakh capital Astana, said in a joint statement that the second phase of the customs union came into effect on July 1.

“Our formation has reached an advanced stage of integration and the Russian Federation is happy about it,” Russian President Dmitry Medvedev told reporters.

The project, which analysts said was reignited by Putin’s frustration over dragging WTO talks, ran into difficulties when Belarus asked Russia to sell duty-free oil and gas and declined to raise import duties on used cars to Russian levels.

Multiple stand-offs on trade issues have turned Lukashenko from Moscow’s closest ally on Russia’s Western flank into one of the Kremlin’s biggest foes, culminating in a full-blown gas dispute last month.

Lukashenko said he hoped all countries would benefit from a customs union, but refused to be drawn on his commitments.

“Let’s wait and see,” he said.

Medvedev, who had earlier met one-on-one with Kazakh President Nursultan Nazarbayev, did not have a separate meeting with Lukashehko. The Belarussian and Kazakh leaders had met the previous evening.

Moscow’s Demands
Analysts say the gas war between Russia and Belarus was triggered by Moscow to punish Lukashenko for not bowing to Kremlin demands on the customs union and for giving refuge to former Kyrgyz president Kurmanbek Bakiyev.

Though ultimately solved, prompting Lukashenko on Saturday to say the Belarussian parliament had ratified all documents necessary to set up the customs union, the Belarussian leader also accused Moscow of “lies” and “falsifications”.

Nazarbayev said the three states would now bid together to join the WTO, as proposed by Putin. “We have agreed on entering the WTO on the conditions agreed earlier,” he said.

Trade experts and both U.S. and EU officials have warned the process of multilateral accession could be complicated, while Russian officials—including Medvedev—have signalled Moscow is keen to embark once again on unilateral talks.

“The Russian Federation has the least differences with our trade partners (in the WTO),” Russian First Deputy Prime Minister Igor Shuvalov told reporters in Astana. “We have a good chance of removing them fully in the coming weeks.”

Shuvalov also said Minsk had insisted on removing all export duties in bilateral trade, while Russia wanted to retain them. He said the three states planned to remove all remaining differences by 2011—a further six-month extension to the initial deadline of January 2010. (Reuters)