Officially, Belarussian President Alexander Lukashenko's last-minute decision earlier this month to delay the introduction of the Russian ruble in business-to-business transactions was due to "technical difficulties."
But observers say that the much-touted currency union between the two former Soviet states will likely be scuttled altogether because it would require the Belarussian strongman to relinquish some of his power.
Belarus, Russia's neighbour to the West, was scheduled to partially introduce the ruble July 1, but analysts now say that the project may likely be shelved altogether as Lukashenko uses the issue to bargain for Kremlin support to violate the Belarussian Constitution and serve a third term as president.
"The [delay] is an entirely domestic issue," said Sergei Dubkov, an assistant to the board chairperson of the Belarussian Central Bank.
In addition to its bilateral agreements with Russia on adopting the ruble, Minsk not only committed to using the currency in business-to-business payments as of July, but also to begin pegging its currency to Russia's as of January next year.
Officials in Minsk now say that the July deadline was not part of the bilateral package. But whatever the divergence of view is over implementation, Belarus has committed itself to introduce the ruble on all monetary transactions from 2005 and fully switch to a joint currency in 2008.
However, observers agree almost unanimously that Lukashenko will try to use the currency union as leverage in his talks with President Vladimir Putin.
"Should Lukashenko introduce the Russian ruble, he will have to give away some of his powers," said a Belarussian analyst who asked not to be identified, given his involvement in a government-sponsored project. "The only criteria for policymaking in Belarus is Lukashenko's personal gain or loss. For that reason, the ruble project was abandoned."
"This is a clear signal that Putin will not score easy victories in the former Soviet Union," said Leonid Zaika, head of the Strategy think tank in Minsk.
The key issue for Lukashenko now is Russia's agreement to his third presidential term.
In pursuit of this goal, analysts said, Lukashenko may start throwing dirt on Putin's foreign policies on the eve of the presidential election in Russia, scheduled for March 2004.
According to Zaika's estimates, Putin may lose as much as 10 percent or 15 percent of the domestic vote if he can be linked to failed policies in the former Soviet Union.
Already, a small public outcry has followed the recent gas deal Putin struck with Turkmen President Saparmurat Niyazov that resulted in Russians in the Central Asian state being ordered to leave the country if they chose to hold onto their Russian passports.
Economically, Belarussian companies could save on transaction costs if the ruble is introduced without strings attached.
Belarus last year exported 50.1 percent of its output to Russia and bought 65.1 percent of its imports from Russia, posting a deficit of $1.8 billion.
Local companies have to sell 30 percent of their export proceeds to the Central Bank and submit import contracts to justify the purchase of foreign currency, including the ruble.
About 70 percent of foreign-trade contracts in Belarus are written in U.S. dollars, 21 percent are fixed in Russian rubles, while the remaining 9 percent are euro-denominated, according to estimates made by Priorbank, a subsidiary of Austria's Raiffeisenbank.
Earlier this year, MAZ truck-maker managers said that the company, which exports 80 percent of its $4000-million annual output to Russia, lost between $500,000 and $600,000 to convert those rubles into the local currency.
If the currency union moves ahead as planned, those costs to companies would disappear.
But the economic cost of a ruble peg or joint currency could be substantial since Belarus would no longer be able to prop up its exports with a weak currency.
Inflation amounted to 15.1 percent in Russia in 2002 versus 34.8 percent in Belarus. In 2001, prices in Russia grew 18.6 percent compared to 61.1 percent in Belarus.
"If the ruble is introduced, Belarus will follow the trail blazed by Russia's regions too heavily dependent on manufacturing," said Leonid Zlotnikov, head of the NISEPI think tank in Minsk. "The Dutch disease will take its toll on local businesses."
The first symptom of the Dutch disease is an overvalued exchange rate, which makes a country's manufacturing exports uncompetitive, reinforcing its reliance on commodities exports.
Major manufacturing industries in Russia collapsed in the early 1990s after facing tight competition from imported goods. This destroyed the economies of entire regions, the most notable being the Ivanovo region with its heavy concentration of textile-industry firms.
Belarus will face several restrictions should it finally opt for a joint currency with Russia.
First, it will have the right to print only 4 percent of the amount of shared currency notes that Russia prints, as Moscow seeks to rein in Minsk's appetite for minting money and stem the inflation it inevitably causes.