UPDATE 1-Russia postpones bill making U.S. sanctions compliance a crime

(Adds detail, background, quote from Russian lawmaker)

MOSCOW, May 17 (Reuters) - Russian lawmakers on Thursday voted to postpone the second reading of a bill being discussed in the lower house of parliament that would make it a crime to comply with Western sanctions on Russia.

The lower house said it would hold consultations next week with businesses before proceeding further with discussion of the draft law, a day after business lobby groups on Wednesday publicly voiced opposition to it.

"I think we can find a construction under which these fears can be removed. And then the law will pass without any fears and, generally speaking, we need it," lawmaker Valery Gartung said on Thursday. He is a member of the Just Russia party which often allies itself with the Kremlin.

The bill is one of two items of legislation drawn up by lawmakers in response to the United States' s decision to impose sanctions on Russia last month.

Washington blacklisted some of Russia's biggest companies and businessmen, striking at allies of President Vladimir Putin to punish Moscow for alleged meddling in the 2016 U.S. presidential election and other "malign activities".

In retaliation, Russian lawmakers in a first reading on Tuesday approved a bill making it a crime punishable by up to four years in jail to refuse to supply services or do business with a Russian citizen, citing U.S. or other sanctions.

Business and banking sector representatives a day later expressed concerns and appealed to parliament for further consultations.

The Russian Union of Industrialists and Entrepreneurs said in a statement on Wednesday that the bill creates risks of unreasonable criminal prosecution of Russian and foreign citizens, and could harm the investment climate.

The draft law has also raised concerns among some other Russian executives and groups, including the Association of European Businesses.

"We are afraid that the European businesses may be caught between the conflicting requirements of U.S. and Russian authorities in relation to sanctions," the association said. (Reporting by Polina Nikolskaya Writing by Tom Balmforth Editing by Christian Lowe)