* Costs seen coming down from Pentagon projections
* Dutch F-16s being phased out by 2023
* Netherlands joins six countries in Lockheed project
By Anthony Deutsch and Andrea Shalal-Esa
AMSTERDAM/WASHINGTON, Sept 17 (Reuters) - The Netherlands said it will buy 37 F-35 Joint Strike Fighter planes and may order more if funds become available, in a decision that should end years of political wrangling over ballooning costs and delays.
The Dutch government's announcement in its budget for next year was a boost for Lockheed Martin and Washington, which had urged the Netherlands in April not to turn to other suppliers because of fears of rising costs in a project that has been blighted by technical faults and delays.
"The government has decided, on operational, financial and economic grounds, to select the F-35 as the new fighter aircraft for the Netherlands armed forces," Defence Minister Jeanine Hennis-Plasschaert said in a policy paper setting out her long-term vision for the armed forces.
She said the government had the resources to order 37 fighters initially and could add more, finances permitting.
"If, within the given financial parameters, room is created in the coming years to purchase more aircraft, the Defence organisation will do so. This may be the case if the contingency reserve is not used in full and if the price per unit of the F-35 turns out to be lower than is currently expected."
The decision brings the number of countries with firm commitments to purchase the F-35 to seven after Britain, Australia, Italy, Norway, Israel and Japan also placed orders.
The F-35 is designed to be the next-generation fighter for decades to come for U.S. forces and their allies in NATO.
The F-35 programme, hit by technical faults, is several years behind schedule and 70 percent above early cost estimates.
The Dutch, who are phasing out their F-16s by 2023, had initially planned to buy 85 F-35s, but people close to the discussions said earlier this year they wanted to scale back the order to between 52 and 68 amid deep budget cuts.
Some Dutch politicians, concerned about rising costs, had suggested going for an alternative such as Saab AB's Gripen, Boeing Co's F/A-18 E/F Super Hornet, or the EADS Eurofighter.
The reluctance by the Netherlands prompted the U.S. Department of Defense in April to urge The Hague to reconsider, saying it could end up paying more in the long run.
The price of the jets would be around $85 million, including inflation, according to the most recent Pentagon projections.
But actual prices for the F-35 have been coming in about 10 percent lower than that figure, one source familiar with the programme said.
The Dutch government has budgeted 4.5 billion euros ($6.01 billion) for the warplanes and an additional 270 million euros per year in operating costs.
The Dutch announcement could help strengthen Belgium's interest in the F-35.
A Belgian defence ministry spokesman said existing jets would have to be replaced at some stage, but no decision would be taken before the new government took office.
Belgium had not joined the Netherlands, Denmark and Norway in helping fund development of the F-35, although it was one of the first NATO countries to buy the Lockheed F-16 fighter.
Richard Aboulafia, aerospace analyst with the Virginia-based Teal Group, said the Dutch announcement and news of Belgium's interest in the F-35 were good news for Lockheed, which has sought to shore up commitments from international partners despite moves by the U.S. government to defer production in recent years, leading to some price increases.
It also comes as South Korea is nearing a decision to buy Boeing Co's F-15 fighter, and while Denmark and Canada, two countries that helped fund the jet's development, have restarted their fighter competitions.
"It's a boost to the program to have the Netherlands back in the fold," Aboulafia said, noting that the real threat had been that the Netherlands would follow Denmark's lead and launch a fresh competition.