* Putin builds a Eurasian Union with ex-Soviet states
* Ukraine scorns EU but may not join Russia-led bloc
* Planned union is struggling to get off the ground
By Timothy Heritage
MOSCOW, Nov 29 Ukraine's refusal to sign a trade
pact drawing it into Europe's orbit marked a victory for
Vladimir Putin, winning him time to lure Kiev into a project for
a trade and political bloc stretching from the frontiers of
China to the edge of the EU.
The Russian president sees his "Eurasian Union", in which
Ukraine would play a central role, as a future rival to China,
the United States and the European Union. Some say he sees it as
the president's personal political legacy - a strong force
emerging from the ashes of the old Soviet Union.
"The Eurasian Union is a very important project for Putin.
Without Ukraine, he will lose all enthusiasm for it," said Gleb
Pavlovsky, a former Kremlin spin doctor who has also worked in
Ukraine. "Without Ukraine, Putin's project is impossible."
Putin also hopes to woo several other former Soviet
republics that were being courted by EU leaders at a summit in
Lithuania on Friday. But none is more important to Putin than
Ukraine, a huge market and the cradle of Russian civilisation.
The opposition-minded Russian newspaper Novaya Gazeta
described the situation as a love triangle in which Ukraine was
a cheating husband, the EU an attractive mistress and Russia an
angry wife. Who would win out in the end was unclear.
For Putin it may be a question of exercising the kind of
'soft power' that comes to a nation as vast as Russia.
Putin is widely thought to have offered Ukraine lower prices
for gas supplies and threatened crippling trade sanctions if it
signed the planned trade pact with the EU in Lithuania, although
he denies this.
President Viktor Yanukovich may also have been 'shopping
around' for the best finance deal to rescue his country. Russia
has clearly offered him better terms than the 600 million euros
the EU has put on the table. He urgently needs money to meet
scheduled debt repayments of more than 8 billion dollars next
year if he is to secure re-election in 2015.
Yanukovich, for whatever reasons, may have backed away from
signing a trade accord at the EU Vilnius summit; but there is no
guarantee his country of 46 million will now follow Putin's
declared will in joining a Moscow-led customs union with Belarus
and Kazakhstan - a precursor of the Eurasian Union which the
Russian president envisages.
Certainly, at home there have been protests against the turn
away from the West.
The Eurasian Union is intended to recoup potential lost when
the Soviet empire collapsed 22 years ago and to group
like-minded states against any meddling by the West or China.
Putin showed his intent by adopting a decree on the first
day of his new presidency last year making it a priority to
develop ties with the former Soviet republics in the
Commonwealth of Independent States (CIS) - the very loose
association of states created after the Soviet collapse.
Putin has looked for ways to reunite former Soviet republics
since becoming prime minister in 1999 and being elected
president the following year. He has capitalised on nostalgia
for stable prices, predictable government and open borders
within the old Union of Soviet Socialist Republics.
He touched a chord among many, mostly elderly Russians in
2005 when he called the Soviet Union's demise "the greatest
geopolitical catastrophe of the 20th century". He said "old
ideals" had been destroyed, although he dismisses any idea he is
seeking any kind of resurrection of the Soviet Union.
Instead, he said, he wants to create a "powerful
supra-national union" of sovereign states based on the EU model,
connecting Europe and the Asia-Pacific, and on an equal footing
with the United States and China.
The aim is to unite economies, legal systems and customs
services, as well as military coordination.
The customs union with Kazakhstan and Belarus, formed in
2010, was a first step to launching the Eurasian Union in 2015.
It has a market of about 165 million and covers about
three-quarters of the post-Soviet region - the Soviet Union
minus the three Baltic states.
The combined gross domestic product of the three economies
is around $2.3 trillion. Both Russia and Kazakhstan are oil
Kyrgyzstan and Armenia say they will join but other former
Soviet republics such as Azerbaijan, Georgia and Moldova, which
are being wooed by the EU, have reservations. So do Uzbekistan,
a large market of 30 million, Turkmenistan and Tajikistan.
Despite Putin's pledges, there are concerns in such states
that Russia will reassert its control over its "near abroad".
Former U.S. Secretary of State Hillary Clinton described the
planned Eurasian Union last year as "a move to re-Sovietize the
region" and added: "We know what the goal is and we are trying
to figure out effective ways to slow down or prevent it."
Some Western states have also noted with concern that Russia
is building up its military at the same time as constructing a
trading and political bloc. Russia announced last year that its
defence budget would rise by about 25 percent, pushing spending
above that of France and Britain.
SOFT AND HARD POWER
Putin's determination to keep the former Soviet republics
out of Brussels' orbit was evident in the sudden decision by
Armenian President Serzh Sarksyan - after talks with the Russian
president in September - to join the customs union.
Diplomats suggest Putin threatened to withdraw military
support for Armenia that it needs in its territorial dispute
with Azerbaijan. Yanukovich was also won round after talks with
Putin, and the other ex-Soviet states are well aware that Moscow
has ways of turning the screws on them as well.
Moldovan wine imports have been suspended by Russia as
Chisinau seeks stronger ties with the EU. Georgia and Ukraine
have suffered Russian trade restrictions and Tbilisi is wary of
Moscow after a five-day war which it lost to Russia in 2008.
But there are limits to Moscow's power and its ability to
attract others. Tough bargaining is not necessarily the best way
to persuade nervous allies to join the Eurasian Union.
The five former Soviet republics in Central Asia have
increased trade with China, despite Moscow's attempts to build
relations in the region. A World Bank report last year concluded
that Russia had gained more from the customs union than Belarus
and Kazakhstan because the tie-up had involved these countries
accepting higher Russian import tariffs.
There are also questions about public support for teaming up
with Russia in other ex-Soviet states. Moscow needs to overcome
public doubts about the merits of integration with struggling
economies such as that of Belarus when its own is stuttering and
could be dragged further down.
"By pushing its plan to build a political Eurasian Union of
neighbouring states, the Kremlin is digging itself even deeper
into a neo-imperialist hole, presumably to appeal to Russian
nationalist sentiments," wrote Anders Aslund of the Peterson
Institute for International Economics in a recent Moscow Times
"It is an offensive to expand this entity of unwilling
allies. This costs Russia large amounts of money, harms its
economy, and alienates the country from the rest of the world."
There are also no guarantees that Russians overwhelmingly
back Putin's idea. Although many want Russia to be a force on
the world stage again, such people resent the flood of migrant
workers from Central Asia who do not need visas - a result of
the push for integration with other CIS countries.
Putin says he opposes introducing visas for CIS citizens.
That is a potentially risky position after a rise in hostility
towards migrants and riots last month by ethnic Russians in an
area of Moscow heavily populated by immigrants.
(Writing by Timothy Heritage, editing by Jason Bush and Ralph