(Adds background, Erdogan comments)
MOSCOW, May 26 (Reuters) - Russian state gas giant Gazprom said on Saturday it had signed a protocol with the Turkish government on a planned gas pipeline and agreed with Turkish firm Botas to end an arbitration dispute over the terms of gas supplies.
The protocol concerned the land-based part of the transit leg of the TurkStream gas pipeline, which Gazprom said meant that work to implement it could now begin.
Turkey had delayed issuing a permit for the Russian company to start building the land-based parts of the pipeline which, if completed, would allow Moscow to reduce its reliance on Ukraine as a transit route for its gas supplies to Europe.
A source said in February the permit problem might be related to talks between Gazprom and Botas about a possible discount for Russian gas.
Turkish President Tayyip Erdogan said earlier on Saturday Turkey and Russia had reached a retroactive agreement for a 10.25 percent discount on the natural gas Ankara buys from Moscow.
Gazprom said in the Saturday statement, without elaborating, that the dispute with Botas would be settled out of court. (Reporting by Vladimir Soldatkin and Oksana Kobzeva; writing by Maria Kiselyova)