UPDATE 1-Russia watchdog says could reopen to U.S. poultry

* Watchdog says "stunning" progress in talks

* U.S. chicken has "a chance" of returning to Russia

* Russia watchdog says sides need to finalise draft

(Adds details, quotes, background)

By Aleksandras Budrys

MOSCOW, March 15 (Reuters) - Russia could reopen its market to U.S. poultry, worth $800 million in 2008, if both countries can build on "stunning" progress during talks in Moscow this month, Russia's lead negotiator in the dispute said on Monday.

"American chicken has a chance of returning to the Russian market. Conditions will be mutually satisfactory," Gennady Onishchenko, head of Russian consumer protection watchdog Rospotrebnadzor, told a news conference.

Russia, the biggest export market for U.S. poultry, banned supplies from Jan. 19 after saying a chlorine wash used routinely in U.S. processing plants was in violation of its food safety standards. Washington says its poultry is safe.

Two rounds of talks, both held under tight secrecy in Moscow, have failed to yield an agreement. Onishchenko, who has said little about the negotiations, said on Friday: "Progress is evident and stunning."

Asked about the latest round of talks in early March, he said: "We finished our talks late at night, with a certain draft that we have now to finalise."

He declined to say if Washington had agreed to stop using chlorine in poultry processing, or to give any more details, saying that both sides had agreed not to disclose them.

The Russian ban has obstructed exports from major U.S. producers such as Tyson Foods Inc (TSN.N) and Sanderson Farms Inc (SAFM.O).

The U.S. Agriculture Department said on March 5 the second round of talks was constructive, and that technical discussions would continue in the next few weeks. [ID:nN04191234]

In a separate trade spat, Russia agreed to reopen its market to pork from most U.S. plants after Washington agreed to Moscow's food safety demands. [ID:nLDE622216] (Writing by Robin Paxton; editing by Sue Thomas)