Belarus says not pulling out of Russian orbit

ZASLAVL, Belarus (Reuters) - Belarussian President Alexander Lukashenko told Russia on Monday any attempts to improve relations with the West would not come at the expense of ties with Russia.

"Some people have been hinting that we have started thinking about a trade -- Russia for Europe," Lukashenko told reporters before talks with Vladimir Putin, Russia's prime minister, who served two terms as president before stepping down this year.

"We never make such trades with anyone. We would never trade our friendship with the Russians."

Speaking alongside Lukashenko before their meeting near the Belarussian capital, Minsk, Putin said Moscow was ready to bolster its neighbor's financial system.

The government controls much of the economy in ex-Soviet Belarus, which has so far suffered only limited effects from global financial turmoil. The ex-Soviet state, however, has sought help paying an increased bill for imported gas -- the prime reason behind a row with Russia last year.

"Russia is prepared to review questions of deepening our cooperation, of supporting the Belarussian financial system if necessary," Putin said.

Russia also suggested that Belarus use the Russian rouble as a reserve currency, Itar-Tass news agency reported, quoting deputy economy minister Andrei Klepach, accompanying Putin to the Belarussian capital.

In the only concrete agreement that appeared to come out of the meeting, Russia said it was ready to provide Belarus with a loan, Russian news agencies reported, citing a source in the Russian delegation.

"Working relations to lay down the details of the loan will continue," a source said, RIA Novosti reported. No other lending terms were reported.

Last year Russia gave Belarus a 15-year stabilization loan for $1.5 billion at a rate of 0.75 percent over LIBOR. Belarus used the money in part to pay for Russian energy supplies.

Speaking after the talks, Putin said the two men had "taken up the task of creating a unified economic space," referring to a program of tightening trade relations that has been under discussion for more than two years.

The European Union and the United States accuse Belarus of violating fundamental rights during Luskahenko's 14 years in power and have imposed sanctions, including an entry ban on the president and punitive measures against Belarussian companies.

Lukashenko has sought to improve relations with the West since the energy dispute with Moscow. Russia has been seeking to raise prices for ex-Soviet customers to bring them up to market rates.

In August, Belarussian courts freed the last of what the European Union and the United States labeled political prisoners.

Officials in Belarus had also hoped to receive a Western endorsement of a parliamentary election last month, but observers from the Organization for Security and Cooperation in Europe said the vote fell short of accepted standards.

Western states, whose ties with Russia deteriorated after Moscow's brief war with Georgia in August, have signaled to Lukashenko that rapprochement is possible.

(Reporting by Andrei Makhovsky; Writing by Simon Shuster; Editing by Dominic Evans)