PRISTINA, Jan 19 (Reuters) - Kosovo backtracked on Monday from a pledge to take control of a huge mining complex claimed by Serbia, a step Belgrade had warned would put at risk European Union-sponsored negotiations between the Balkan neighbours.

The Trepca complex of lead, zinc and silver mines once employed 20,000 people and accounted for the majority of the former Yugoslavia's mineral wealth.

Since Kosovo's 1999 breakaway from Serbia in war, Trepca and other "socially-owned enterprises" - a hybrid ownership structure under socialist Yugoslavia - have been held in trust and readied for sale by an agency created by the United Nations.

But myriad creditor claims and the fact the complex straddles Kosovo's Serb-Albanian ethnic divide has stymied progress on Trepca, which currently operates at a minimum level of output just to keep the mines alive.

Losing patience and fearing bankruptcy, Kosovo's new government last week said it would take control of Trepca under a law due to be adopted on Monday, spurring Serbia to lobby the EU to prevent such a step.

As lawmakers convened, Prime Minister Isa Mustafa told them the law had been removed from the agenda and that parliament would instead consider a proposal to give the Kosovo Privatisation Agency another three years to restructure Trepca.

"We want to create conditions for Trepca to function without legal problems in the future," Mustafa said. "Right now we want to stop Trepca from going bankrupt."

Political sources told Reuters the government had faced pressure from Western ambassadors to backtrack, given concern over the impact on a fragile dialogue between Serbia and its former southern province aimed at improving relations seven years after Kosovo declared independence over Serbian objections.

Even before Mustafa spoke, Serbian Prime Minister Aleksandar Vucic told reporters in Belgrade that Kosovo had backed down, saying he had held intensive talks with foreign ambassadors.

Serbia claims to hold around 75 percent of Trepca, but Kosovo says it lost all rights to state-controlled enterprises on Kosovar territory when forces under late Serbian strongman Slobodan Milosevic massacred and expelled ethnic Albanians in 1998-99 in a counter-insurgency campaign.

Both Serbia and Kosovo have long extolled Trepca's potential, though experts warn it would need huge investment to restore the complex to anywhere near its Yugoslav-era heyday. Complicating matters, the complex straddles Albanian and Serb areas of Kosovo, making any move to sell it even more sensitive given still tense relations between the communities.

It may also take years to sort through all the creditor claims, mainly from Serbia but also from a number of Greek investors. Mustafa said that, based on some assessments, around 1.4 billion euros ($1.6 billion) was claimed by creditors. ($1 = 0.8645 euros) (Editing by Matt Robinson and Susan Thomas)