UPDATE 1-Russia, Slovenia ink South Stream gas pipeline deal

*South Stream pipeline will run through Slovenia

*Russian natural gas is free to reach Italian border

(Adds, quotes, background)

MOSCOW, Nov 14 (Reuters) - Russia's Energy Minister Sergei Shmatko and Slovenian Economy Minister Matej Lahovnik signed a deal on Saturday ensuring Slovenia's participation in the South Stream pipeline that will transport Russian gas to Europe.

The deal was signed in front of the reporters and in the presence of Russian Prime Minister Vladimir Putin and his Slovenian counterpart Borut Pahor.

"We have signed the deal with all the European partners needed for this project to be completed," Putin said.

Russia's Energy Ministry said in a news release Slovenia was the fifth country to support the pipeline at government level.

"Thanks to Slovenia's participation Russian natural gas reaches the Italian border, the main target market for the project," a Russian government source told reporters.

Russia has previously signed similar agreements with Bulgaria, Serbia, Hungary and Greece.

"That means that all the necessary elements for the South Stream construction are present now," the source said.

Russia's gas export monopoly Gazprom (GAZP.MM) will create a joint venture with Slovenian firm Geoplin Plinovodi.

Under the deal the pipeline will run through Slovenia. It will transport gas under the Black Sea, skirting Ukraine, and is intended also to cross Bulgaria, Serbia, Hungary, Greece, Austria and Italy.

Disputes over payments between Russia and Ukraine, through which most of Russia's gas exports to European markets now flow, have caused disruptions and gas shortages in Europe during recent winters.

The pipeline, which is expected to become operational in 2015, will have a capacity of up to 63 billion cubic metres per year and will be built by Gazprom and Italian oil major Eni (ENI.MI).

Slovenia had said in the past it also supports the Western-backed Nabucco pipeline project, which would take gas from Central Asia and the Caspian Sea and bypass Russia entirely. (Reporting by Gleb Bryanski; Writing by Dmitry Sergeyev; Editing by Keiron Henderson)