By Denis Dyomkin and Yuri Kulikov
KIEV (Reuters) - Russian President Dmitry Medvedev on Monday threw his country's weight behind an economic recovery in Ukraine, pledging during an official visit to back support for international lending to the ex-Soviet republic.
Medvedev's first official visit to Ukraine took place as ties markedly improve under President Viktor Yanukovich, after turning sour with his pro-Western predecessor, and the Kremlin leader said he was glad a new page had been turned.
"Russia as a participant in the G20 and the G8 is ready, as a partner, to advance all issues relating to Ukraine, including International Monetary Fund and World Bank support," he told journalists
"Russia is ready to help in the modernisation of Ukraine's economy," he added.
The new Yanukovich leadership is hoping to secure a new $19 billion (13 billion pounds) credit programme from the IMF for its struggling economy after ramming through parliament a 2010 budget with a relatively tight deficit target of 5.3 percent of GDP.
Yanukovich has tilted Kiev's policy firmly towards Moscow since following Viktor Yushchenko -- who had chilly relations with the Kremlin -- into office in late February.
Medvedev expressed satisfaction that there was now a Ukrainian leadership he could do business with. "Trade, business contacts, are becoming more active and this is due in no small part to the fact that the Ukrainian state now has another administration," he said before talks with Yanukovich.
Yanukovich last month extended the lease of the Russian navy in Ukraine's port of Sevastopol until 2042 in return for cheaper gas -- a move that caused an outcry among his opponents.
His opposition to membership of the U.S.-led NATO military alliance, ardently pursued by Yushchenko, has also endeared him to Moscow.
But Yanukovich's pro-Russian moves have re-invigorated the political opposition around his old rival, former Prime Minister Yulia Tymoshenko.
The Ukrainian nationalist group, Svoboda, gathered a few score of protesters in a small demonstration near the city centre in protest at what it said was the sell-out of the country's sovereignty.
SIGNING AGREEMENTS
Medvedev and Yanukovich signed agreements on border demarcation, European security, cooperation between their respective intelligence services and on moves towards the frozen conflict in the Moldovan rebel region of Transdniestria which has a border with Ukraine.
All the same, the Medvedev visit was likely to stake out the limits of the new relationship between the two powers.
Yanukovich, who says he also sees European integration as a priority for Ukraine, has been cool to a proposal from Moscow for a merger between Ukraine's energy holding Naftogas and Russia's state gas giant Gazprom.
Ukraine wants to retain control of a network that is a conduit for 80 percent of Russian gas supplies to the European Union and has noted that Russian Prime Minister Vladimir Putin made his merger proposal with no advance warning to Kiev.
Gazprom chief Alexei Miller on Monday stepped up pressure on Kiev, saying Russia would be ready to fund a complete overhaul of Ukraine's gas network if it agreed to the merger.
"The proposal to merge the two companies is fully in line with global trends to merge energy firms," Miller told reporters. "If Gazprom and Naftogaz merge, Gazprom can rely on its financial resources to fully modernise Ukraine's gas transportation system," he said.
Yanukovich, to Moscow's irritation, has suggested the EU should be involved in any talk of a merger. Asked about the issue last Thursday, Yanukovich said only Ukraine's fully equal participation in such a joint venture could be envisaged. "Fifty-fifty -- that would be the only way," he said.
The Yanukovich leadership is rather pushing for creation of a consortium involving the European Union as well as Russia to modernise the ageing pipelines.
(Additional reporting by Dmitry Zhdannikov; Writing by Richard Balmforth; Editing by Jon Boyle)
