Arctic in, Gazprom out for Kiev?

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KIEV, Ukraine, Oct. 26 (UPI) -- Kiev ruled out merging its state gas company with Russia's but could work with Moscow on arctic reserves, the Ukrainian prime minister said.

Ukrainian Prime Minister Mykola Azarov told Russia's state-run news agency RIA Novosti that what Gazprom wants out of any deal is to control, not cooperate with, Ukraine's energy company Naftogaz.

"The merger in conditions when the companies have incompatible capitalization or, to be more exact, incomparable with each other is called a takeover rather than a merger," Azarov was quoted as saying. "No country possessing such a prize asset as its gas transportation system, its gas and oil refining capacities would agree to such a merger."

Russian Prime Minister Vladimir Putin said in April a merger was advantageous for Ukraine, which is struggling to reform its natural gas system after lingering rows with Moscow.

Gazprom cut gas supplies to Ukraine most recently in January 2009, leaving European consumers in the cold for weeks as most of their Russian gas travels through Ukraine.

Azarov, meanwhile, said that both companies could work together to tap into oil and gas reserves emerging from the melting sea ice in the Russian arctic.

"These are good deposits," he said. "If these deposits are used as the basis for a joint venture and an asset swap, I believe we'll be able to agree."