Ukrainian Prime Minister Mykola Azarov`s office said on Wednesday his government would not agree to a takeover of state energy firm Naftogaz by Russia`s Gazprom or a merger Uof the two as proposed by Moscow, according to Reuters.

Ukraine is seeking a new discount on the gas it buys from Russia, while Moscow says it could be achieved by merging the two energy firms, which would effectively give Gazprom control over Ukraine`s gas pipelines.

Ukraine has instead proposed setting up a joint venture in which Gazprom and Naftogaz would have equal stakes and which could develop Russian gas fields to supply Ukraine.

"The prime minister`s position remains unchanged -- no merger or acquisition is being discussed," Azarov`s spokesman Vitaly Lukyanenko said.

"What is being discussed are market mechanisms for creating an efficient joint venture that would equally account for the rights and interests of both sides."

Reviving memories of previous "gas wars" between the two nations that disrupted supplies to Europe, Azarov said this month that Ukraine had to negotiate its current 10-year gas deal with Russia.

The January 2009 agreement between Gazprom and Naftogaz set a base formula for the price of Russian gas, which the Ukrainians say is onerous despite a discount agreed this year.

In April, President Viktor Yanukovich`s administration secured a $100 discount on the price of 1,000 cubic metres of gas in exchange for allowing Russia to keep its Black Sea fleet in a Ukrainian port until 2042.

Under pressure from the International Monetary Fund, which last month opened a $15 billion credit line to Ukraine, the Azarov government has announced austerity measures including a 50 percent rise in the price of gas for households.