Gazprom offers incentives for Naftogaz

KIEV, Ukraine, May 18 (UPI) -- Russia's gas monopoly would fund upgrades to the Ukrainian natural gas transit network if a bilateral merger takes place, Gazprom officials said.

"If Gazprom and (Ukrainian energy company) Naftogaz merge, Gazprom may fund the full modernization of the Ukrainian gas transport (sector)," state-run news agency RIA Novosti quoted Gazprom chief Alexei Miller as saying.

Russian Prime Minister Vladimir Putin in April made the proposal to merge the two energy companies following a revised deal that gives Kiev a 30-percent discount for natural gas from Russia.

Kiev is struggling to improve its reputation in the regional energy sector following a series of spats with Moscow over contracts and debt. Gazprom in 2009 cut gas supplies to Ukraine briefly, leaving European consumers in the cold as 80 percent of their Russian gas passes through Soviet-era pipelines in Ukraine.

Russian President Dmitry Medvedev during talks this week in Kiev downplayed the likelihood of the merger, saying it could be problematic for both sides.

Miller, however, said the merger was consistent with market developments.

"The proposal of merging the two companies is completely in line with the global trend of mergers in the energy sector," he said.