Russia, Ukraine eye joint oil production

ISTANBUL (Commodity Online) : Russia and Ukraine have decided to cooperate in oil and gas sector by allowing swap assets with each other.

Speaking to newsmen here after meeting Russian president Vladimir Putin, Ukraine President Viktor Yanukovych said, We could swap some assets with Russia to cooperate in oil and gas production in Russia,

We would like to see Russia as partners not only in the transit and consumption of gas, but also in co-production. he added.

Putin said Russia was ready to draw up regulations on a free trade zone with Ukraine.

Yanukovych said Ukraine had managed to balance its budget thanks to a recent deal guaranteeing a discount on Russia gas prices.

In the deal, signed in May, Russia gave Ukraine a 30% discount for gas supplies in exchange for extending a lease on the Russian Black Sea Fleet base in the Ukrainian port of Sevastopol for 25 years after the current lease expires in 2017.

Putin proposed a merger between Russian gas monopoly Gazprom and Ukrainian Naftogaz on April 30. His spokesman said this meant the creation of a new company and not the absorption of Ukraine's gas monopoly, as some critics suggested.

Russian President Dmitry Medvedev said the deal would either consist of an asset swap or the establishment of a joint venture. Yanukovych said he agreed to a fifty-fifty deal.

The Ukrainian opposition claims the creation of the joint venture means the de-facto acquisition of Naftogaz by Gazprom and thus the loss of Ukrainian energy independence.