Russia and Serbia on Monday signed an agreement to create a joint company that will build the Serbian stretch of the South Stream gas pipeline.

The new company would draft all details for the pipeline over the next 18 months, including the rights and obligations of the Russian-Serbian enterprise, according to the agreement signed by Gazprom CEO Alexei Miller and his Srbijagas counterpart Sasa Ilic.

"We allocate three months for the creation of the company, and another 18 months for the feasibility study," Gazprom's spokesman Sergei Kupriyanov told reporters in Belgrade.

"We expect construction to start no later than 24 months after the feasibility study has been completed," the spokesman added.

He said it is important to negotiate with all the countries participating in the pipeline project -- so far Russia, Italy, Bulgaria and Serbia, with Bosnia and Greece as possible partners -- "so that the feasibility study is integrated."

The 10-billion-euro (US$14.65-billion) South Stream project by Gazprom and Italy's ENI is designed to carry Siberian gas to Western Europe at a capacity of at least 10 billion cubic meters every year.

Taxes alone from the natural gas transit could bring an annual US$200 million to Serbia, where the pipeline is to run 400 km.

The signing ceremony was attended by Serbian Prime Minister Vojislav Kostunica and Russian First Deputy Prime Minister Dmitry Medvedev, who is also Gazprom's chairman of the board of directors.

The deal formalizes a strategic agreement on oil and gas cooperation signed in Moscow on Jan. 25 by Russian President Vladimir Putin and Serbian President Boris Tadic.

Under the deal, Serbia joins the South Stream project and allows Gazprom to buy a controlling stake in the Serbian oil monopoly NIS. It is widely seen as a politically motivated agreement in appreciation of Russia's support for Serbia on the issue of Kosovo.

Moscow is Belgrade's main ally in fighting the secession of its southern province and blocking recognition of its independence in world bodies.

Copyright 2008 XINHUA NEWS AGENCY.