June 26, 2015 / 5:30 PM / 4 years ago

UPDATE 1-Russia backs down from abandoning gas transit through Ukraine

* Gazprom previously said no gas transit after 2019 via Ukraine

* New talks on Russian gas for Ukraine due to start on Tuesday

* Turkey’s Botas threatens Gazprom with court action (Writes through)

By Denis Pinchuk and Vladimir Soldatkin

MOSCOW, June 26 (Reuters) - Kremlin-controlled gas producer Gazprom is rethinking plans to stop transporting gas to Europe via Ukraine after 2019, a change of tack that comes just days before talks on supplies to Ukraine are due to resume.

Gazprom’s about-face also comes as its plans to build an underwater gas pipeline to Turkey to bypass Ukraine have hit a snag.

Moscow and Kiev signed the current 10-year contract in the winter of 2009, when Russian gas transit through Ukraine to Europe was halted for a few weeks over a pricing dispute.

Gazprom had previously said - as recently as earlier this month - that it would stop transporting gas to European customers via Ukraine once the contract expired at the end of 2019.

However, Chief Executive Alexei Miller said on Friday that the company was ready for talks about continuing to use the supply route.

“When the contract is coming to an end, we ... will hold talks on a transit deal with our Ukrainian colleagues,” he told a news briefing after Gazprom’s annual general meeting.

“I can tell you that we have a direct order from the President of the Russian Federation, Vladimir Vladimirovich Putin,” he said.

Since signing a supply deal in 2009, disputes over pricing and debts have flared between Kiev and Moscow, intensified by a wider conflict between the two countries after Russia annexed the Black Sea peninsula of Crimea last year.

Russia has been gradually reducing Ukraine’s role as a key transit country, cutting the proportion of shipments to Europe that go via the former Soviet republic to 40 percent, from about 75 percent just a few years ago, and investing in alternative supply routes.

The Nord Stream pipeline along the bottom of the Baltic Sea now has a capacity to supply Germany and Europe with 55 billion cubic metres (bcm) of gas a year. Plans for another underwater pipeline to Turkey, with a potential annual capacity of 63 bcm, have also been considered but talks between Moscow and Ankara have hit an obstacle as they have not been able to agree on the level of gas price discount Russia would offer.

Turkish state-owned energy company Botas could consider taking Gazprom to international arbitration if an agreement between the two countries on natural gas prices is not signed by Monday, energy sector officials said on Friday.

Moscow halted gas supplies to Ukraine in June 2014 over unpaid bills but Russian gas transit to the European Union was unaffected. Gas flows to Ukraine resumed at the end of last year after a so-called “winter package” was agreed.

The current interim deal expires at the end of this month, and EU-brokered talks between Russia and Ukraine about third-quarter supplies are due to start in Vienna on Tuesday.

Miller said one of the key issues that needs to be resolved in future talks was over a gas transit fee, which Moscow pays for using Ukrainian infrastructure to ship its gas to Europe. He said that Ukraine wants to hike the charge from $2.70 to $5 per 1,000 cubic metres of gas transported 100 km.

“We will never sign a transit contract on unacceptable terms for Gazprom,” he said. (Additional reporting by Orhan Coskun in Ankara; Writing by Vladimir Soldatkin; Editing by Jack Stubbs and Pravin Char)

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