EU wants Russia to trade in euros

Romano Prodi hails proposal as "clear sign of closer relations"

MOSCOW, Russia (CNN) -- The European Union has asked Russia to switch from dollars to euros in commerce between the two trading groups.

Russia currently gets paid in dollars for its oil and gas exports to Europe, and the EU wants to pay in euros instead.

At a one-day summit in Moscow, the two sides signed a joint statement agreeing to "examine the use of the euro in their trade and economic relations."

They also discussed moves to increase the euro's share of Russia's $32.5 billion foreign exchange and gold reserves.

Romano Prodi, chairman of the European Commission, hailed the proposal as "a very significant initiative, and both the EU and Russia will benefit from it."

"It is a clear sign of commitment to closer relations between the EU and Russia," Prodi said at a Kremlin press conference with President Vladimir Putin.

Javier Solana, EU foreign policy and security commissioner, and Swedish Prime Minister Goran Persson, whose country holds the rotating chairmanship of the EU, were also at the conference.

Prodi said use of the euro would help boost European trade and investment in the Russian economy.

The final summit document acknowledged progress in economic reform under Putin, who asserted: "European countries have every reason to see Russia as a reliable and promising partner."

Putin told the EU leaders that Russia's economy was growing. He said liberal tax and customs policies and a reduction in red tape should encourage international investors.

And he said that the union's ambition to play a greater role in world affairs was drawing Moscow into closer cooperation with its biggest trading partner.

"The significant role that the EU is playing in European and global policy is pushing us toward closer cooperation," Putin told EU chiefs.

Moscow wants EU support for its bid to join the World Trade Organisation. That could end EU trade barriers on Russian goods.

The two sides swapped views on Russia's crackdown in rebel Chechnya but refused to allow the 20-month conflict to overshadow the one-day summit.

On Chechnya, they agreed on the urgent need for a political solution to the conflict which respected Russia's territorial integrity.

In their joint statement Russia and the EU agreed to inform each other of security and defence developments. Moscow's forces are serving alongside European troops in Bosnia and Kosovo.

Another key part of the talks is expansion of the EU to include Poland and Lithuania.

The EU meanwhile agreed to help develop Russia's impoverished Baltic enclave of Kaliningrad, a former nuclear port closed to outsiders in the Soviet era.

Sandwiched between Poland and Lithuania, it is plagued by organised crime, health and environmental problems.

Western officials have also expressed concerns about the difficulties faced by Russian journalists and what they say is the dwindling number of independent media outlets.