The Russian President Boris Yeltsin and his Belarussian counterpart, Alexander Lukashenko, have signed a declaration, aimed at creating a unified state next year.

Reports from Moscow say the move will have to be put to referendums in both countries.

Belarussian officials say it envisages merging the two countries, with common political, economic and defence institutions.

Correspondents say liberal politicians in Moscow do not share Belarus's enthusiasm for the union, as it will put further strain on Russia's exhausted economy and slowed-down pro-market reforms.

In April last year the two countries signed a largely symbolic union charter.