European Union leaders questioned Putin on the recent incarceration of Mikhail Khodorkovsky, the former head of oil giant Yukos, on charges of fraud and tax evasion.

"It's crucial to keep the entire (legal) proceedings transparent and in unison with the norms of a constitutional state," EU foreign policy chief Javier Solana told Russian reporters.

Prior to the meeting, EU leaders had already said they would ask Putin to "clarify" the matter.

Critics see the arrest as an attempt to silence Khodorkovsky, a billionaire businessman, who has openly supported Russia's political opposition.

Putin denies allegations of rising authoritarianism

The Russian president denied the allegations that he was trying control the justice system's handling of the Khodorkovsky affair. Instead, he said the arrest should not be seen as a sign of rising authoritarianism.

"Everyone has to obey the law at all times," he told Italian journalists.

Putin also expressed his hope that the Russian authorities for natural resources would not evoke Yukos’ exploration licences. Such an action would lead people to believe that his government was trying to keep Yukos from conducting its business, Putin said.

He added that his government did not plan a general clamping down on Russia's business sector. Questioning the results of privatization in the 1990s was not an option, "even if they are far from ideal," Putin said.

Berlusconi defends Putin

Italian premier Silivo Berlusconi, a close personal friend of Putin's, turned out to be his guest's biggest supporter during the day.

When journalists started asking Putin about the Yukos affair, Berlusconi stepped in and explained that all suspicions against the Russian were unfounded.

Italy, which currently holds the presidency and therefore hosted the summit, considers the Khodorkovsky arrest an internal affair.

"I will charge one euro for this defense," Berlusconi joked after he had finished. "I will gladly pay one euro," Putin responded.

EU leaders will support Russia's WTO application

Despite tensions over the Khodorkovsky issue, EU leaders and Putin also managed to talk about other matters during the summit, the twelfth such biannual meeting.

The EU delegation will support Russia in its efforts to join the World Trade Organization (WTO) by the end of 2004. Russia has been trying to join the organization for more than ten years.

Before that happens, some issues have to be resolved, however.

Most recently, EU demands to raise Russian energy prices to world market levels slowed down the process. Putin has rejected this, saying that higher prices would ruin Russia's economy.

EU officials say that no one is asking Russia to do more than other countries in a similar situation. The EU considers lower prices an unfair advantage for Russian companies who export their goods.

Talks on visa-free travel

Both sides agreed to work toward visa-free travel between EU member states and Russia in the long term.

EU leaders have rejected this idea so far, saying that Russia's border controls are too lax and Russian passports not forgery-proof. Prior to the visit, Putin said he hoped Russian citizens would soon be able to enter EU member states without a visa.