MOSCOW Russian state-owned lender VTB may pull out of the running to acquire a stake in internet giant Yandex, the bank's CEO, Andrei Kostin, told Reuters, as discussions are now centered around higher prices than the bank's initial offer.

Often dubbed "Russia's Google", Yandex is making progress on a corporate restructuring plan that should see it divest ownership and control of core, Russia-based businesses, in what could be one of Russia's most significant corporate deals this year.

Kostin said he was not sure VTB would continue with its bid. The bank already holds a 1.5% portfolio investment in Yandex.

"I am not sure that we will go into Yandex," Kostin told Reuters when asked about plans. "We have never had the desire to steer Yandex, and for a portfolio investment it is important to correctly determine the entry price."

"There are many factors in the deal now, one of them is the price increase compared to the original one. We offered on a different level. Therefore, now we are in the so-called stand by: we are not actively negotiating."

"It was announced at $7 billion recently, we submitted our application at a different price level, lower," Kostin said.

"Yandex, we believe, has good prospects – on the one hand, on the other – the company has its own peculiarities," Kostin said, pointing to the departure of founder Arkady Volozh.

"In general, there is the uncertainty factor, there is always the risk of sanctions and so on."

VTB was hit hard with Western sanctions over Russia's actions in Ukraine, something that limits its ability to front a consortium bid, Kostin said. VTB's initial offer had envisaged acquiring a stake of around 15%, which then dropped to 10%. Kostin expects more changes.

"I do not know how many contenders will eventually remain. Maybe their number will narrow in the new conditions, because, as far as I know, we were not the only ones who found these conditions not very comfortable," he said.

"I know that several names that were originally in the applicants there have already dropped out of the list. Therefore, the situation has not been resolved there yet."

Russian billionaires including Vladimir Potanin, CEO and the largest shareholder of metals giant Nornickel, and Vagit Alekperov, co-founder and a major shareholder in oil major Lukoil, are among the bidders for assets ultimately valued around $14 billion, three people familiar with the matter told Reuters last month.

Given Kremlin measures that oblige foreign companies leaving Russia to sell their assets at a 50% discount, shareholders in Yandex's Dutch-registered holding company Yandex NV, most of whom are Western investment funds, could ultimately make about $7 billion from a full divestment.

(Reporting by Guy Faulconbridge and Elena Fabrichnaya; Writing by Alexander Marrow)