UPDATE 1-Dow put-off litigation in Kuwaiti dispute-source

(Adds details on Kuwait joint venture, background, byline)

By Euan Rocha

NEW YORK, Feb 20 (Reuters) - Dow Chemical Co (DOW.N) said on Friday it had entered into arbitration proceedings to settle a dispute with a Kuwaiti firm that bailed out of a $17.4 billion joint-venture deal, and a person familiar with the matter said the U.S. company had put off a lawsuit for now.

Dow CEO Andrew Liveris said last month that Dow was simultaneously pursuing both litigation and arbitration against Kuwait's Petrochemical Industries Co, which backed out of a deal to buy 50 percent of Dow's plastics business.

Dow has so far not launched any litigation proceedings, the source said.

Dow, the biggest U.S. chemical maker, was widely expected to stop short of taking aggressive action against its Kuwaiti partners for fear of reprisal from Kuwaiti authorities.

Dow has other joint ventures with PIC in Kuwait, and it is also expecting a $1 billion investment from the Kuwait Investment Authority (KIA) that could be jeopardized.

The joint venture agreement fell apart after some Kuwaiti parliamentarians objected to it. Kuwait's parliament launched an investigation in January into whether there was wrongdoing by officials involved in setting up the joint venture.

Dow has denied any wrongdoing.