MINSK -- The leaders of Russia and Belarus agreed Monday to step up economic integration, announcing that Minsk would adopt the Russian ruble as the national currency on January 1, 2005.

Signalling a new phase in relations after bitter wrangling last year over the Slavic neighbors' stalled plans for union, Russian President Vladimir Putin said that the two countries would forge ahead with deepening ties.

"From January 1, 2005, the Russian ruble is to be used as a common currency. Nothing prevents us from realizing this decision," he told a joint press conference in Minsk after a bilateral summit.

"This will require very difficult preparation. By the end of spring this year we must decide on the next steps and act on them," Putin added.

Authoritarian Belarusian leader Alexander Lukashenko, who has eschewed free-market reforms in his isolated former Soviet Republic, said he was certain that the monetary union would take place.

"The head of states have taken all the necessary decisions, and now they must be implemented rapidly by the governments and central banks of both countries," he noted.

Moscow had until now insisted that monetary union should be introduced in 2004, while Minsk had argued for a longer preparatory period. Most economists view the plan as far-fetched because of the immense disparity between the two countries' economies, AFP reported.

The two leaders also announced that a joint venture to transport Russian gas to Western Europe via Belarus would be set up in July.

Putin, who sparked a bitter row with his Belarusian counterpart last year by dismissing existing proposals for a union as unrealistic, earlier said that the two countries should focus on deepening economic ties.

"Despite our sharp exchanges we managed to make progress in a whole set of crucial areas, in particular harmonizing our legislation and aligning our tax rates and customs tariffs," the Russian president told the summit meeting. He added that implementing agreements on the creation of a single economic area, including in the gas sector, was "of key importance."

Russia is eager for investment opportunities in Belarus, with Lukashenko promising to privatize several state-owned companies coveted by Russian businesses, including the state natural gas pipeline carrier.

The latest talks in Minsk, a meeting of the Belarus-Russia Union's State Council chaired by the two presidents together with their prime ministers, come two months after Lukashenko flew to Moscow to mend ties with Putin.

CAPTION esident Vladimir Putin (L) listens to his Belarussian counterpart Alexander Lukashenko during their meeting in Minsk, January 20, 2003.