Russian Prime Minister Vladimir Putin said Friday that Russia and Kazakhstan will formally launch the Code of the customs union starting July 1 on the bilateral basis, news agencies reported.

"We agreed with the Kazakh side to put the customs union's customs Code into effect on a bilateral basis starting July 1," said Putin at a Friday press conference in St. Petersburg.

He also said the two countries were willing "to set up a common customs territory."

"We are open to Belarus joining all agreements and decisions made within the framework of the second phase of the customs union 's formation," Putin said.

Belarusian Prime Minister Sergei Sidorsky earlier dropped out of the Friday meeting supposedly to be held within the three parties, citing "many unresolved issues."

Putin, in turn, confirmed that these issues were connected to oil export duties but he stated that oil and gas export duties were not linked with the mechanism of the customs union.

"Russian position on this issue remains unchanged," he stressed.

Putin acknowledged that Sidorsky had conveyed to him the Belarusian President Alexander Lukashenko's intention to keep their niche in the customs union.

"Unfortunately, Belarus was not ready to sign the necessary documents at present time," he said.

He later said Russia and Kazakhstan have prepared to join the World Trade Organization in bilateral format should Minsk not join the agreements of the customs union.

"The moment Belarus approves its domestic legal procedures, the documents will be signed, I hope, and we will move forward in a trilateral format. If that doesn't happen, we (Russia and Kazakhstan) will act on our own," said Putin.

However, one agreement has been reached between the three sides as to temporarily keep in effect current rules related to individual import of foreign-made cars, he added.

"We are prepared to make an exception concerning the import of automobiles by citizens of countries that are our partners, and there must be a transition period for this that has a strict time limit," said the Russian prime minister as quoted by the Interfax news agency.

Minsk insists that Russia should sell gas to Belarus at domestic prices, but Moscow demands Minsk pay international market prices. This was widely believed to be the main obstacle for the launch of the three-side customs union.