Putin builds new union on ashes of Soviet empire
* Putin dreams of bloc to rival China, EU, U.S.
* Three ex-Soviet republics sign up for union
* Ukraine and several countries wary, stay out
MOSCOW, May 28 (Reuters) - It won't exactly mean going back to the USSR, but Vladimir Putin is laying the foundations of a huge trading bloc which opponents see as an attempt to recreate at least part of the lost Soviet empire.
The Russian president and the leaders of two other former Soviet republics, Belarus and Kazakhstan, will sign a treaty on Thursday that brings to life his dream of uniting like-minded countries in a Eurasian Economic Union.
With a market of more than 170 million people, the customs and trading bloc is intended by Putin to challenge the economic might of the European Union, the United States and China.
That looks like a distant dream but, despite the former KGB spy's denials, critics see the signing ceremony in the Kazakh capital of Astana as a part of a much bigger plan.
"Mr. Putin has made no secret, and he said it publicly on more than one occasion over the years, that the demise of the Soviet Union was a terrific mistake," U.S. Defence Secretary Chuck Hagel told U.S. public broadcaster PBS.
"Now, I think that's a premise that he truly believes and I think that's where he starts."
Opponents see Russia's reclaiming of Crimea from Ukraine in March - which deepened the worst standoff with the West since the end of the Cold War - as another part of an effort to reassert Russian control of former Soviet territory.
Putin dismisses such talk as a misconception and denies the creation of the Eurasian Economic Union has anything to with reviving the Soviet empire.
"Our ambition is to integrate within the post-Soviet space but not because we want to restore the Soviet Union or an empire, because we would like to use the competitive advantages of these states that are now independent," Putin told journalists in St Petersburg on Saturday.
PUTIN'S PERSONAL LEGACY
What is not in doubt is that the new union has become one of the big ideas of Putin's third term as president and will be part of his personal political legacy.
Putin sees it as a crucial part of his attempts to make Russia a great power again, if not to restore the superpower status lost when the Soviet Union fell apart in 1991.
"It's hardly worth talking about recreating the Soviet Union, as many things have changed in 20 years, but the policy of collecting lands that Russia is now pursuing is obvious," said Dosym Satpayev, a political analyst in Kazakhstan.
He said Russia's political elite was on a geopolitical mission to strengthen the country by forging Moscow-led alliances in the "post Soviet-space".
Putin struck a chord among many Russians in 2005 when he described the Soviet Union's collapse as a geopolitical catastrophe and said "old ideals" had been destroyed.
His dream of a "powerful supra-national union" of sovereign states based on the EU model, connecting Europe and the Asia-Pacific, capitalised on nostalgia for stable prices, predictable government and open borders.
Thursday's treaty, which comes into force on Jan. 1, deepens the ties forged when the three countries took the initial step of creating a customs union in 2010. It will guarantee free transit of goods, services, capital and workforce and coordinate policy for major economic sectors.
The union covers about three-quarters of the post-Soviet region - the Soviet Union minus the three Baltic states - and the combined gross domestic product of the three economies is around $2.7 trillion. Armenia and Kyrgyzstan have also expressed an interest in joining.
But Putin has been forced to water down his dream just to get as far as the signing ceremony.
OBSTACLES ALONG THE WAY
Ukraine dealt a severe blow by deciding not to join the union after its Moscow-backed president was ousted in February, depriving the union of a huge market, a bridge to the EU and the country that is the cradle of Russian civilisation.
Oil-producing Kazakhstan has also fought to ensure the union is a purely economic affair, and does not give its former Soviet overlord any chance to regain political control of it.
"The most important thing is that we got away from the politicisation of the agreement," said Kazakh Deputy Foreign Minister Samat Ordabayev, whose country is led by a wily former Soviet-era leader, President Nursultan Nazarbayev.
"Thanks to Kazakhstan's consistent position, items were excluded such as common citizenship, foreign policy, inter-parliamentary cooperation, the passport and visa section, and common border and export controls."
Even largely loyal, cash-strapped Belarus, under long-serving President Alexander Lukashenko, has put up some resistance on issues that might affect its sovereignty.
Like Ukraine's new leaders, other former Soviet republics see better economic prospects elsewhere or are wary of being sucked in. Azerbaijan, an oil and gas producer, is staying out and Georgia and Moldova are expected to sign agreements next month deepening political and economic ties with the EU.
"For Russia the Eurasian Economic Union is a primarily a political project. All three members pursue completely different, unarticulated goals that are far from the needs of ordinary people and markets," said Aidos Sarym, a political analyst in Kazakhstan. (Additional reporting by Dmitry Solovyov in Almaty and Alexei Anishchuk in Moscow, Editing by Elizabeth Piper and Janet McBride)
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