Russia, Belarus and Kazakhstan have abandoned their attempt to join the World Trade Organisation as a single customs union, after WTO members made clear the unprecedented move would add years to the negotiations.
The move is a rare case of Vladimir Putin, prime minister, failing to prevail in a domestic political dispute.
After talks at WTO headquarters in Geneva, Maxim Medvedkov, Russia's veteran WTO negotiator, said the three countries would continue their separate membership talks. However, they would negotiate on the basis of a common customs tariff that is due to be implemented from the beginning of next year, with the aim of joining the WTO simultaneously.
«Today we are back in business,» Mr Medvedkov said. «The earliest completion of accession remains a strategic goal.» However, he would not be drawn on how long the negotiations, launched by all three in the mid-1990s, would take.
Russia is the largest economy to remain outside the 153-member world trade watchdog and, according to Mr Medvedkov, accession talks were close to completion when Mr Putin announced that Moscow was withdrawing its individual WTO application in favour of a joint bid by the members of the putative customs union.
No customs union has ever negotiated WTO accession as a single entity and many people, including Pascal Lamy, WTO director-general, saw the move as signalling a weakening of Russia's desire to join.
In June Mr Putin said Russia would withdraw its application and seek to join the world trade body only together with customs union partners Kazakhstan and Belarus. The move surprised both US and European Union negotiators who had hoped at least Russia's long-time bid could be completed this year.
But a month later Dmitry Medvedev, the Russian president, who is generally regarded as less powerful than Mr Putin, seemed to reverse the prime minister's position, saying separate entry was «simpler» and «more realistic». The disagreement resulted in an impasse, leaving powerful ministers dumbfounded about what to do.
«It was complete confusion,» said Fedor Lukyanov, editor of the journal Russia in Global Affairs, in Moscow. «The reasons are unclear, and probably one can find differences in approach between Medvedev and Putin just in this case.»
Andrew Kuchins, a Russia expert at the Center for Strategic and International Studies in Washington, said the WTO confusion «suggested that there are really some differences in the Kremlin between those who are more in favour of economic reform and integration into the global economy and those who are less inclined».
Mr Medvedkov said there would be no increase in the maximum tariffs Moscow has already agreed with trading partners in the bilateral talks that are part of the accession negotiations. Kazakhstan will have to revisit some of its bilateral accords where it previously agreed to lower duties than the planned common customs tariff.
By Frances Williams in Geneva and Charles Clover in,Moscow