* Medvedev's visit to Kiev marks improvement in ties
* But Yanukovich may stake out limits in relations
* Ukraine cool on Gazprom-Naftogaz merger
By Denis Dyomkin and Yuri Kulikov
Medvedev's first official visit to Russia's ex-Soviet neighbour takes place as ties markedly improve under President Viktor Yanukovich's leadership after turning sour with his pro-Western predecessor.
Yanukovich appeared to tilt Kiev's policy firmly towards Moscow last month when he 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.
And his opposition to membership of the U.S.-led NATO military alliance, ardently pursued by ex-president Viktor Yushchenko, has endeared him to Moscow, too.
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, said it planned to demonstrate near the city centre in protest at what it said was the sell-out of the country's sovereignty.
SIGNING AGREEMENTS
On arrival on Monday, Medvedev was to head to meet Yanukovich at the Kiev's Tomb of the Unknown Soldier and -- unusually -- was then due to attend a ceremony at a memorial to victims of the Great Famine of 1932-33.
The pro-Western Yushchenko, to the anger of Moscow, sought international recognition of the famine as genocide by Soviet dictator Josef Stalin, though Yanukovich has shied away from this line.
Medvedev and Yanukovich are expected to sign agreements on border demarcation, nuclear cooperation, aircraft development and may discuss Moldova's rebel region of Transdniestria, which borders Ukraine, and European security issues.
But 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 (GAZP.MM).
Ukraine is eager to retain control of a network that serves as a conduit for 80 percent of Russian gas supplies to the European Union and has dwelt on the fact that Russian Prime Minister Vladimir Putin made his merger proposal off-the-cuff with no advance warning to Kiev.
Yanukovich, to Moscow's irritation, has suggested the EU should be involved in any talk of a merger. And, 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.
Medvedev has urged Ukraine to be cautious in seeking to join the EU, given the bloc's current economic woes. "If the Ukrainian people want to push for EU membership, that is your choice," he said.
"In any case I would carefully track what happens in the EU because one should aim towards things that are good and calm. And now our European colleagues still need to cope with those difficulties they are experiencing, including the euro zone."
While the chance of a gas merger looks remote, progress on nuclear cooperation is likely.
Putin has separately suggested unifying assets in some projects of the nuclear energy industry and said Russia might lend $5-6 billion to its ex-Soviet neighbour to build two new nuclear reactors at its Rivne and Khmelnytsky plants. (Writing by Richard Balmforth; Editing by Matthew Jones)
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