Russia's largest oil producer, state-run Rosneft, and Azerbaijan's SOCAR state energy company have signed a broad oil and gas cooperation agreement.
The deal was signed on the sidelines of talks between Russian President Vladimir Putin and Azerbaijani President Ilham Aliyev in Baku on August 13.
Neither side disclosed the full details of the deal, which is seen as a step toward increasing Russia's presence in resource-rich Azerbaijan, seen by EU nations as an alternative to Russian energy supplies.
Aliyev said the agreements marked "a new stage" in energy cooperation.
A Rosneft statement said the two sides have agreed to set up a joint venture on a parity basis to develop oil and gas projects in Russia and Azerbaijan, as well as other countries.
Previous media reports had said that Rosneft was interested in acquiring a stake in the Absheron natural gas field in Azerbaijan's section of the Caspian Sea but there was no mention of this in the cooperation agreement.
Putin himself did not address energy issues at a news conference after his talks with Aliyev.
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However, he did confirm that issues related to the legal status of the Caspian Sea have been high on the agenda of the meeting.
"During the talks we paid a lot of attention to the issues of the Caspian region," he said. "We want this region to be a region of peace and cooperation. There really are a very great number of unresolved problems, including security, border delimitation, preservation of biological diversity of the Caspian Sea, etc. We have a vested interest in seeing all of these issues solved."
Putin also urged Azerbaijan to find a political resolution to its dispute with Armenia over Nagorno-Karabakh, the ethnic Armenian-populated breakaway Azerbaijani territory.
"In the process of our negotiations we touched upon international issues, including, obviously, the problem of Nagorno-Karabakh," he said. "I want to stress that Russia is actively facilitating the search for the fastest possible conflict resolution, which is only attainable through peaceful means."
The conflict ended with a ceasefire in 1994 after six years of fighting but years of negotiations under the auspices of the OSCE have made little progress.
Aliyev said a solution should be based on "historical justice, on international law and international resolutions."
With reporting by AFP, Interfax, and Reuters