Three Slav republics to found union replacing CIS: The trio of countries that split the Soviet Union apart plan to push ahead with a new free-market treaty

THE three Slav republics that founded, dominated and demolished the USSR have pledged to form a new economic union that would re-establish some of the ties broken since December 1991 when Boris Yeltsin met the presidents of Ukraine and Belarus at a hunting lodge near the Polish border.

In an echo of the forest meeting 19 months ago that dismantled the Soviet empire, the prime ministers of Russia, Ukraine and Belarus met on Saturday at Gorky-9, a wooded dacha area outside Moscow, to try to repair some of the damage.

It ended with a statement calling for a 'single economic space' that, if formed, would reverse the centrifugal forces that have played havoc with the economies of the three former Soviet republics.

It also seems to mark the end of the Commonwealth of Independent States (CIS), set up to replace the Soviet Union amid ringing promises of a closely co-ordinated march towards free-market prosperity. The CIS, now embracing 10 former Soviet republics, disbanded its joint military command last month. Saturday's economic deal between the former Slav republics, which accounted for 70 per cent of the Soviet population and the bulk of its production, strips the CIS of its economic purpose too.

According to Interfax news agency, money-supply and credit policy in Russia, Ukraine and Belarus will be 'tightly co-ordinated'. Limits will also be fixed for budget deficits in each country. The accord, to be formalised with a full treaty ready for signature by 1 September, also demands the lifting of customs and other restrictions put on trade since the collapse of the Soviet Union.

'Common sense has got the upper hand at last,' said Vyacheslav Kebich, Prime Minister of Belarus. Viktor Chernomyrdin, the Russian Prime Minister, described the accord as a 'historic event' and said a treaty to be drafted in coming weeks by experts 'would go much further' than earlier plans for economic co-ordination within CIS.

Ukraine, the most prickly of the former Soviet republics, also gave its backing, though did so in more muted terms. Leonid Kuchma, the Prime Minister, was quoted as describing Saturday's agreement as a 'natural process'.

The obstacles, however, are immense. The CIS made repeated stabs at economic co-operation, all of them still-born. As recently as May, nine out of 10 members declared an 'economic union' and President Yeltsin hailed the move as a breakthrough. It got nowhere. The three Slavic countries have more in common, but they also have more to fight over.

Moscow and Kiev have squabbled about everything from fuel prices to nuclear warheads and division of the Black Sea fleet. Relations have improved in recent weeks, but remain raw, as illustrated by the resolution adopted by the Russian parliament on Friday claiming the Crimean port of Sevastopol.

If Saturday's accord is to be more than just another scrap of paper, it will require political as well as economic co-ordination - and a fundamental restructuring of the post-Soviet order. Credit policy, with its implications for inflation and unemployment, has been one of the most contentious issues in all three countries, leading to deep political rifts. In Russia it took over a year of debate before the Central Bank and the government could reach a fragile accord. In Ukraine and Belarus economic reform has barely started and credit policy is out of control. The customs pledge will be easier to implement.

There are no details of how Moscow, Kiev and Minsk propose to co- ordinate their economic policies, beyond a vague pledge to set up 'joint co-ordinating bodies with appropriate powers'.

Russia's Finance Minister, Boris Fyodorov, has complained frequently that former Soviet republics want the benefits but none of the burdens of economic co-operation. Before leaving for the G7 summit in Tokyo, he said Moscow had lost dollars 18bn ( pounds 12.3bn) last year through supplies of cheap fuel and other assistance to former republics and insisted that such a 'black hole in the pockets of our people' could not continue.

(Photograph omitted)