Russian President Dmitry Medvedev said Russia and Ukraine were not talking about Russia`s energy giant Gazprom and Ukrainian Naftogaz merger, however consolidation of some assets is possible, according to RIA Novosti.

Russian Prime Minister Vladimir Putin first put forward the idea of a Gazprom-Naftogaz merger at the end of April, after Moscow and Kiev agreed an extension to Russia`s lease on a key naval base in Ukraine in exchange for discounted prices for Russian gas. The Russian government`s press service later said Moscow was not proposing a takeover but the creation of a new company.

Medvedev said a simple merger may be problematic both for Russia`s Ukrainian partners and for work generally. "But if we talk about some kind of joint projects, joint enterprises where different gas and gas transportation assets were consolidated not in a way of a direct merger, but in a way of consolidation, for example, of separate parts, then, I think, this would be possible," Medvedev said adding that such consolidation would be beneficial for both countries.

Medvedev said he had not yet discussed the issue with his Ukrainian counterpart Viktor Yanukovych, however he is intended to do so.

Russian president said any kind of merger is possible only on pragmatic bases. "Whatever sympathy we have towards each other, whatever love we feel, we can consolidate only basing on purely pragmatic considerations," Medvedev said. "But alliances are not only possible, but also are necessary in some situations."

Medvedev is due in Ukraine on May 17 for his second visit since Viktor Yanukovych was elected president in February. The Ukrainian president has twice visited Russia as the two former Soviet neighbors have remade their relations over the past three months.