* Vimpelcom CEO says $7.8 bln fair price - media
* "This is just the starting point" - source
* Confusion causes Orascom share price surge
* Central bank demands compensation from Djezzy - source
(Adds background, detail, explanation of share movement)
By Alexander Dziadosz and Maria Kiselyova
CAIRO/MOSCOW, Oct 7 (Reuters) - Orascom Telecom's shares surged before falling back again on Thursday, reflecting uncertainty about the fate of a $6.6 billion deal to tie up the Egyptian firm's telecoms assets with Russia's Vimpelcom.
Orascom climbed as much as 7.3 percent after Vimpelcom Chief Executive Alexander Izosimov was quoted as saying that Orascom's lucrative Algerian unit Djezzy - which the Algerian government wants to buy - was worth around $8 billion.
That price would be way above the $2.5 billion some analysts estimate Algeria is willing to pay.
"Izosimov admits (that Vimpelcom may sell Djezzy to Algeria) but asks absolutely unrealistic price, saying Vimpelcom is ready to sell it for $7.8 billion, while the Algerian government has so far (been) saying it would buy it for $2.5 billion," Renaissance Capital analyst Alex Kazbegi said.
"There is a very big gap."
The fate of the unit, at the heart of a long-running row between Egyptian billionaire Naguib Sawiris and Algiers, is seen as a potential hurdle to closing a deal that could create the world's fifth-biggest mobile phone operator.
Also on the line is a bid by Vimpelcom -- 40-percent owned by Russian oligarch Mikhail Fridman's Alfa-Group -- to enter the developed market by buying control of Sawiris's Italian operator Wind.
Some traders interpreted the news as a final price agreed with Algerian authorities, rather than just a desired price. The stock later pared gains to end just 0.7 percent higher on speculation that a deal for the unit was not complete.
"This (the talk of an Algerian offer) appears to be wrong now. It was only a rumour," said Chamel Fahmy, senior regional sales trader at Pharos Securities.
Djezzy is Orascom's main revenue earner but has been prevented from transferring its profits out of the country since a bitter back-tax dispute with authorities broke out last year.
'A FAIR PRICE'
Orascom officials have repeatedly cited $7.8 billion as a fair value for Djezzy since Sawiris said South Africa's MTN offered that much. The Vimpelcom CEO's comments suggest the Russian operator is sticking to that line.
"If the Algerian side voices the readiness to buy Djezzy at a fair price, we'll be ready to sell it then," Izosimov was quoted as saying by Russia's ITAR TASS.
A person familiar with the matter said Vimpelcom's comment should be interpreted as an effort to set out its initial position for further talks with the Algerian government.
"This is a starting point, the two sides only met for the first time this week," the person said.
Algeria had already blocked a plan by Orascom to sell the unit to MTN and said it wants to buy Djezzy for itself.
"We have already said no to South Africa, i don't see why we should say yes to Russia. Algeria wants to buy Djezzy, and it has the right to do so," a source familiar with the issue told Reuters.
Tensions between Algeria and the Sawiris family, considered Egypt's richest, date back to 2008, when a firm run by Sawiris's brother sold its cement factories in the North African country to France's Lafarge.
Algiers has fraught relations with its old colonial ruler and felt it should have been consulted.
In addition, Algeria has been making operations difficult for Orascom by hitting the unit with demands for back taxes.
On Thursday Algeria's central bank demanded $193 million in compensation from Djezzy because it violated foreign exchange rules, an Algerian telecoms official source said.
Asked on Tuesday if Algeria could scupper the Vimpelcom deal, Sawiris said his "gut feeling" was no, but added that the deal depended on debt refinancing and other factors.
He gave the deal a 90 percent chance of going through.
For SCENARIOS on the deal click
(Additional reporting by Victoria Howley and Yasmine Sale; Editing by Erica Billingham)