The Russian and Ukrainian prime ministers have discussed in a phone conversation resuming talks suspended after Kyiv signed a deal with the EU on modernizing the country`s ageing gas pipeline network, RIA Novosti reported.

Talks between Russian Prime Minister Vladimir Putin and his Ukrainian counterpart, Yulia Tymoshenko, were due last week, but were put off by Moscow until it received "clarification" of Kyiv`s natural gas pipeline declaration with the EU, signed in late March.

Putin and Tymoshenko also discussed "Russian-Ukrainian trade and economic cooperation and the results of a meeting between the countries` energy ministers," the Russian premier`s spokesman, Dmitry Peskov, said.

The pledge of cooperation signed by Ukraine, the EU and several banks aims to encourage investment and avoid a repeat of the dispute at the start of the year, which resulted in a temporary cutoff in Russian gas supplies. Russia, which transits about 80% of its Europe-bound gas via Ukraine, says the EU deliberately excluded it from the talks.

Under the agreement, the EU endorsed Ukraine`s plan to modernize its Soviet-era pipelines and underground storage facilities, and to build new gas metering stations. The EU pledged 2.5 billion euros ($3.4 billion) on the condition Kyiv reform the sector to make it more open and transparent.

Ukraine also asked the EU to help build two more pipelines to increase the network`s capacity by about 60 billion cubic meters to 200 billion cu m, a project it earlier estimated at $5.5 billion. Kyiv says this would be cheaper than building long-distance gas pipelines, such as Nabucco promoted by Europe and the Nord Stream and South Stream projects Russia has been pushing for.

After the signing of the agreement, Putin also warned that ties with the EU could be reviewed.

RIA Novosti