KIEV, March 10 - Ukraine and Russia are close to signing an agreement creating a joint venture to operate gas pipelines in exchange for lower gas prices for Ukraine, a news agency reported Sunday, citing a source.

The joint venture, which is supposed to include Naftogaz Ukrayiny and Gazprom, would rent the Ukrainian pipelines, while the price for gas may be lowered to $260/1,000 cubic meters from $430/1,000 cu m, Unian reported.

The agreement was discussed between President Viktor Yanukovych and his Russian counterpart Vladimir Putin a week ago, but the parties had failed to make any announcement immediately after the talks.

Yanukovych traveled to Russia on March 4 for the meeting with Putin at his residence near Moscow. The meeting lasted several hours longer than expected before Yanukovych had left for Kiev without making any comments.

Days later, however, Yanukovych admitted that Ukraine’s main concern at the talks was to “form a just market-based price for natural gas.”

Yanukovych said that the next round of talks with Putin will be continued in April.

Russia has been insisting on bilateral joint venture to include Gazprom and Naftogaz Ukrayiny, while Yanukovych had earlier suggested the JV should also include a European company.

“Russia is categorically against the trilateral joint venture with the participation of the EU,” Unian reported citing the source. “The decision on the creation of the [bilateral] JV or at least a statement about principle agreement on its creation may be released in the near future.”

Meanwhile, Russia has apparently dropped its earlier demand that Ukraine must join the Customs Union, a Russia-led trade bloc, in order to qualify for lower gas prices.

Ukraine argued that joining the Customs Union would undermine the country’s plans for closer political and trade cooperation with the European Union.

“As of today, all disputable issued have been solved,” Unian reported. “There are reasons to believe the situation will clear up within days.”

The JV is supposed to operate the gas transportation system that moves up to 70% of Russia’s Europe-bound gas supplies and would also invest in its modernization.

Ukraine is capable of shipping up to 120 billion cubic meters/year of Russian natural gas to Europe, but the volume of shipments has declined in 2012, reflecting weaker demand in Europe.

The shipments dropped because Russia had built Nord Stream, a gas pipeline across the Baltic Sea to Germany, in November 2011 to bypass Ukraine on the way to Europe.

Ukraine views Nord Stream, along with a planned South Stream gas pipeline that would cross the Black Sea to Bulgaria, as routes that may undermine the Ukrainian gas transportation business, which earns about $2 billion annually. (tl/ez)