Russian Prime Minister Vladimir Putin said on Tuesday Israel may be excluded from the Blue Stream-2 gas pipeline project as it has uncovered its own gas deposits.
Russia and Turkey agreed last March to build the second leg of the Blue Stream pipeline, linking the two countries via the Black Sea, to pump Russian gas to Israel, Lebanon, Syria and Cyprus.
Putin said that there was information that Israel has found gas shelves on its territory and therefore "it is unlikely to need this [Russian] gas".
"The Blue Stream gas pipeline is unlikely to be laid through Israel," Putin said, adding there was no connection with the recent Israeli attack on a Gaza-bound humanitarian aid convoy.
The premier rejected the possibility of sanctions against Israel.
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Last week, Turkish media said Turkey could exclude Israel from the Blue Stream-2 gas pipeline project if relations between the countries continue to deteriorate.
Turkey, whose nationals were killed during last week's raid by Israeli commandos on pro-Palestinian activists in the Mediterranean Sea, has harshly condemned the attack.
Blue Stream-2 "live" project
Meanwhile, after talks with his Turkish counterpart, Recep Tayyip Erdogan, Putin said that since the construction of Blue Stream-2 project has been provided with sufficient resources, it is a "live" project.
He said that during the talks with Erdogan, they had discussed the possible construction of an additional Black Sea leg of the pipeline from Russia to Turkey with the supplies to third countries.
Turkish-Azerbaijani Shah Deniz-2 gas deal does not affect Blue Stream-2
Following the bilateral talks in Istanbul, Erdogan said a Turkish-Azerbaijani agreement on gas supplies from the Shah Deniz-2 gas field in Azerbaijan will not affect Russia's Blue Stream-2 project.
"This will no hinder Russian natural gas supplies - it will not affect Blue Stream," Erdogan said.
Currently, Azerbaijan annually supplies Turkey with 6 billion cubic meters of gas from Shakh Deniz-1, which produces 9-10 billion cu m a year. Turkey wants to buy another 6-7 billion cu m from Shakh Deniz-2. The field is due to go on stream by 2014-2017 and is expected to produce up to 16 billion cu m a year.
Putin said he was glad Turkey had expanded its sources for supplies. He said Turkey had signed contracts on gas supplies to cover its growing needs for energy resources.
Putin arrived in Turkey on Tuesday to attend the third summit of the Conference on Interaction and Confidence-Building Measures in Asia (CICA) and hold bilateral talks with top officials from Turkey and other countries.