Russian Prime Minister Dmitry Medvedev threatened on Tuesday to retaliate for the grounding of a subsidiary of NATIONAL airline Aeroflot because of EU sanctions, with one newspaper reporting that European flights to Asia over Siberia could be banned.Low-cost carrier Dobrolyot, operated by Aeroflot, suspended all flights last week after its airline LEASING agreement was cancelled under European Union sanctions because it flies to Crimea, a region Russia annexed from Ukraine in March."We should discuss possible retaliation," Medvedev said at a MEETING with the Russian transport minister and a deputy chief executive of Aeroflot.The business daily Vedomosti reported that Russia may restrict or ban European airlines from FLYING over Siberia on Asian routes, a move that would impose costs on European carriers by making flights take longer and require more fuel.Vedomosti quoted unnamed sources as saying the foreign and transport ministries were discussing the action, which would put European carriers at a disadvantage to Asian rivals but would also cost Russia money it COLLECTS in overflight fees.

Shares in Aeroflot - which according to Vedomosti gets around $300 million a year in fees paid by foreign airlines FLYING over Siberia - tumbled after the report, closing down 5.9 pct compared with a 1.4 percent drop on the broad index.

At the height of the Cold War, most Western airlines were barred from flying through Russian airspace to Asian cities, and instead had to operate via the Gulf or the U.S. airport of Anchorage, Alaska on the polar route.

European carriers now FLY over Siberia on their rapidly growing routes to countries such as China, Japan and South Korea, paying the fees which have been subject to a long dispute between Brussels and Moscow.

Vedomosti quoted one source as saying a ban could cost airlines like Lufthansa, British Airways and Air France 1 billion euros ($1.3 billion) over THREE months, but industry experts said that figure was probably too high.