Gas merger?

Russian Prime Minister Vladimir Putin made a surprising suggestion at a meeting with Ukrainian government officials in Sochi on Friday afternoon: merging Russia's largest natural gas company, Gazprom, with Ukraine's state-run natural gas provider Naftogaz.

The idea is the latest in a series of cooperative efforts to take form between the two countries after the recent election of Viktor Yanukovich as Ukraine's president. Yanukovich supports better ties with Moscow.

Last week, Ukraine agreed to keep a key Russian naval base open for the next 32 years in exchange for a thirty percent discount on gas, which is imported from Russia exclusively through Naftogaz.

Earlier on Friday, the head of Russia's state nuclear corporation, Sergei Kiriyenko, said the two countries were also discussing joint nuclear power projects.

Impromptu announcement

Putin's plan to merge the gas companies seemed to take many off guard, including Ukrainian Prime Minister Mykola Azarov. He said Putin's remarks were "impromptu" and had not been previously discussed. But, he added through a spokesman, Ukraine would begin assessing concrete proposals.

Western European countries are likely to keep a close eye on this deal as it develops. Around 20 percent of Europe's natural gas is delivered from Russia through Ukraine.

This has led to disputes in the past. In January 2009, Russia switched off gas deliveries to Ukraine over a supply dispute, leaving thousands of Europeans without heat for weeks during a cold snap.

Plausible or political?

Gazprom head Alexei Miller indicated his company's willingness to explore Putin's suggested deal.

"We are ready to examine the possibility of exchanging assets [of the two companies]," he said. "In essence, this is a question of merging the two."

However, some analysts are sceptical that such a deal could ever take place and suggest that Putin may just be playing politics.

mz/Reuters/afp
Editor: Susan Houlton