The first step towards a free trade agreement (FTA) between Singapore and the countries of the Eurasian Economic Union (EAEU) was taken yesterday, with the signing of a memorandum of understanding to deepen ties between them.

Prime Minister Lee Hsien Loong, who witnessed the signing at the office of the Eurasian Economic Commission (EEC), noted that an FTA will intensify economic cooperation and urged both sides to work closely to start the negotiations.

"Our two economies will benefit greatly from a free trade agreement between the Eurasian Economic Union and Singapore, because such an FTA will reduce the obstacles to trade and establish a conducive strategic environment for business and bilateral cooperation," said Mr Lee.

"So I hope both sides will work closely together to study the possibilities and opportunities, and hopefully, to work towards launching negotiations for the FTA," he added.

The MOU was signed by Minister of State for Trade and Industry Koh Poh Koon and EEC Minister for Development of Integration and Macroeconomics Tatyana Valovaya. It will provide a platform for regular interactions and facilitate closer collaboration between the EEC and Singapore in areas such as customs administration, trade in services and investments, and information technology.

The need to negotiate for an FTA between Singapore and the EAEU was mooted last November at a meeting of top officials from Singapore and Russia. The EEC is the regulatory body of the EAEU, which groups Russia and former Soviet states Armenia, Belarus, Kazakhstan and Kyrgyzstan in a common market of 180 million people, with a total gross domestic product of US$4.2 trillion (S$5.8 trillion).

Before the signing, Mr Lee met EEC chairman Tigran Sargsyan, a former prime minister of Armenia, and discussed the untapped potential in ties between Singapore and the Eurasian Union. Mr Lee noted that with the MOU, the more frequent interactions will help find new trade and investment opportunities in each other's markets that companies can take advantage of.

Mr Sargsyan said a working group will be set up to look at how ties can be developed further.

He also thanked Singapore for its interest in economic cooperation with the Eurasian Economic Union and said the MOU with Singapore represents "a new age of relations".

Trade between Singapore and Russia grew at a compounded annual growth rate of 13.1 per cent between 2011 and 2015, rising from $4.68 billion to $7.66 billion.

But it is still not in proportion to its potential, Mr Lee said earlier.

Yesterday, he said the signing of the MOU represents "a positive and concrete step towards deepening engagement between Singapore and the EEC".

Mr Lee was hosted to lunch by Mr Ruben Vardanyan, a founding member of the Skolkovo Moscow School of Management.

He also met Moscow Mayor Sergei Sobyanin, who updated him on his plans for the city. They had a fruitful exchange on urban planning and development, and agreed there was much that Singapore and Moscow could exchange experiences on, Mr Lee's press secretary Chang Li Lin said. They also discussed business and investment opportunities in Moscow and welcomed greater participation from Singapore.

Today, Mr Lee will meet Prime Minister Dmitry Medvedev before flying to the Black Sea city of Sochi.