Russia, Ukraine talk up cooperation as ties with EU unravel

(DONETSK) - Russian President Dmitry Medvedev said on Tuesday the controversial jailing of Ukraine's opposition leader was Kiev's "internal affair" as the Kremlin courted Ukraine smarting from a rift with the EU.

Medvedev's comments in the Ukrainian President Viktor Yanukovych's power base of Donetsk came hours after the European Union postponed a summit with the Ukrainian leader over his refusal to release his rival and former prime minister Yulia Tymoshenko.

"This is an internal affair of Ukraine," Medvedev said after economic talks with Yanukovych in the industrial city in Ukraine's Russian-speaking east.

"I proceed from a recognition of Ukraine's sovereignty in respect to its leaders' decisions," he added, reiterating his main concern was for the criminal case not to have political or anti-Russian undertones.

By contrast, the European Union has said that the Tymoshenko verdict risked having "profound implications" for Kiev's EU membership aspirations and noted it was inconsistent with Western democratic values.

Analysts say a widening rift between Kiev and Brussels makes Ukraine more vulnerable to the Kremlin's advances amid months-long pressure to join a Moscow-led customs union that includes Belarus and Kazakhstan.

Yanukovych, who is forced to perform a tight balancing act as he seeks to contain damage from the EU crisis while seeking to renegotiate cheaper gas prices with Russia, struck a cautious note.

"We will always do everything that agrees with our national interests at this or that stage," Yanukovych said, adding he was open for talks with Brussels despite the embarrassing snub.

"Everything depends on the progress we achieve in the immediate future."

The crisis with the EU flared last week when Ukraine sentenced the fiery Tymoshenko to seven years in prison for signing a gas deal with Russia in 2009 which Kiev says forced it to overpay by up to $8 billion every year.

Ahead of his talks with Medvedev, Yanukovych, speaking in an interview with several US and other Western newspapers, rejected calls to review the jailing of Tymoshenko, insisting on the independence of the country's courts.

Ukraine was hoping to sign off on an association agreement with the European Union at a December summit in Kiev, a first step towards membership, but that plan is now in limbo.

Medvedev, whose country analysts say is seeking to take advantage of Ukraine's diplomatic crisis, meanwhile called for closer cooperation and officials in both countries said talks to renegotiate the 2009 gas deal were at an advanced stage.

The two leaders met ahead of a football match between Ukraine's Shakhtar Donetsk and Russian club Zenit St Petersburg that Donetsk hosts on Wednesday.

"I would like to wish our teams -- in a broad sense of the word, not only football ones -- stability and good luck," Medvedev said.

"We expect that all the events will facilitate rapprochement between our countries," he said. "A significant number of joint plans lie ahead of us."

Yanukovych said the two countries would announce the results of gas talks in the near future, while officials said they were hopeful.

"The search for compromise is going on. There is encouraging information, let's be patient," Russian Prime Minister Vladimir Putin's spokesman Dmitry Peskov told AFP.

Putin was expected to meet his Ukrainian counterpart Mykola Azarov during a regional summit in the Russian city of Saint Petersburg later Tuesday. Talks were previously scheduled for Wednesday.

Yevhen Bakulin, chief executive of Ukrainian state energy firm Naftogaz, said on the sidelines of talks between Yanukovych and Medvedev that he hoped to reach a compromise in "the very near future".

Ukrainian Energy Minister Yury Boiko said a new price would be the result of a compromise.

Russia has repeatedly said it could agree to sell Kiev gas at lower prices if Ukraine ceded control of its prized Soviet-era pipeline grid.