UPDATE 3-Russia raps Ukraine over EU gas investment pitch

* Russia says postponing talks with Ukraine government

* Battle over Ukraine pipeline system heats up

* Ukraine PM says Russia welcome to invest in network

* Austrian energy regulator warns of new gas row

(Adds analyst comment, details on talks)

By Oleg Shchedrov and Pavel Polityuk

MOSCOW/KIEV, March 24 (Reuters) - The Kremlin on Tuesday broke off talks with Ukraine on a possible $5 billion loan to shore up its economy after Kiev angered Russia by turning to the EU for help in modernising its gas pipelines.

The spat revived fears of a repeat of a January gas dispute between Russia and Ukraine, when major EU customers were left without gas for nearly two weeks in the dead of winter.

European officials on Monday welcomed a Ukrainian plan to modernise its gas network but Russia, which is interested in co-managing the pipeline system, is dismayed that it was not included in the discussions. [ID:nLN551872]

Prime Minister Vladimir Putin threatened to review ties with the European Union and officials said the risk of gas supply disruptions would rise if Russian interests were ignored.

President Dmitry Medvedev said Russia was postponing talks with Ukraine's government that were expected to include discussions on a $5 billion Russian loan to Ukraine to help Kiev service its gas bill.

"We had planned to hold inter-governmental consultations next week," Medvedev told a meeting of senior officials at the Russian security council.

"We need to think about postponing them. Such consultations will take place only after the Russian side clarifies a number of issues," he said.

Ukraine said the overhaul of the gas transit system that supplies one fifth of Europe's gas needs was not aimed against Russia and talks on the issue had also been held with Moscow.

STRATEGIC ASSET

But the force of the Russian reaction indicates how sensitive Moscow is to the question of who wields leverage over Ukraine's gas pipeline network. Russia supplies a quarter of the EU's gas, and four-fifths of that is pumped across Ukraine.

Ukraine says the gas pipelines are a strategic asset.

Some officials in Kiev saw Russia's bid for a role in managing the network as an attempt to win control of it.

Analysts also said Russia was seeking to exert influence over Ukraine in the run-up to a presidential election there, due by the end of January 2010.

"There is a large strategic gas game going on and Russia saw a potentially great strategic threat (from the EU deal) and that is why it answered straight away with such public overtures," said Volodymyr Fesenko, director of the Penta thinktank.

Ukraine passed a law several years ago banning the sale or privatisation of the pipeline system.

President Viktor Yushchenko's chief energy advisor, Bohdan Sokolovsky, said although a consortium with Russia controlling the pipelines was out of the question, Russian was welcome to invest and help modernise the transit system.

Ukrainian Prime Minister Yulia Tymoshenko, who is locked in a battle with Yushchenko, tried to allay Russian concerns.

"Neither Russia nor Europe lost yesterday. Ukraine simply defended its national interests," Tymoshenko told a news conference. "Russia can also take part in investment projects, in reconstruction and modernisation."

Gas insiders have warned that a new gas row could be on the horizon as Ukraine, grappling with a deepening economic crisis and political deadlock, struggles to find the money to pay for higher gas prices charged by Russia. [ID:nLK564265]

Austria's energy regulator said on Tuesday that there was a realistic chance that political tensions between the two neighbours could create new supply disruptions. [ID:nLO946488]

A Ukrainian source said that negotiations between Gazprom (GAZP.MM) and Ukraine's state gas company, Naftogaz, about the price of gas in the second quarter of this year could be complicated by Russia's reaction. (Additional reporting by Sabina Zawadzki and Yuri Kulikov) (Writing by Guy Faulconbridge and Dmitry Zhdannikov; editing by Myra MacDonald)