By Irene Klotz

CAPE CANAVERAL, Fla. (Reuters) - A proposed ban on purchases of a Russian-made rocket engine to launch U.S. military satellites will speed up the development of an American-made replacement, the head of United Launch Alliance, a Lockheed Martin Corp and Boeing Co joint venture, said on Wednesday.

A compromise defense policy bill in Congress would bar the purchase of more Russian-made RD-180 rocket engines to send U.S. military satellites into space. ULA, the Lockheed Martin-Boeing joint venture, uses the RD-180 to power its Atlas 5 rocket and holds a virtually monopoly on the U.S. military’s launch business.

The congressional proposal, aimed at punishing Moscow for this year's invasion of the Crimean peninsula, is one of several new agreements included in a compromise version of the 2015 National Defense Authorization Act (NDAA) filed on Tuesday in the House of Representatives and expected to be debated as early as this week.

“We’re allowed to continue our current purchase of RD-180s that we already have on order. That’s going to carry us quite some distance,” said ULA Chief Executive Officer Tory Bruno, who was at Cape Canaveral for Thursday’s planned launch of a sister rocket, the Delta 4 Heavy, carrying a NASA Orion spaceship on a test flight.

ULA announced in September it would partner with Amazon.com founder Jeff Bezos’ rocket company, Blue Origin, to develop a replacement engine for the Atlas 5. Blue Origin’s BE-4 engine is expected to be available in 2019.

“We’re going to have to accelerate development of our replacement engine,” Bruno said.

ULA currently has 16 RD-180 engines in inventory and ordered 24 more prior to Moscow's annexation of Ukraine's Crimea region and perceived backing of the separatists in eastern Ukraine.

ULA expects it also will have to shift some satellites onto pricier Delta 4 rockets once it runs out of RD-180s and before the new engine is ready.

“We’re going to have to do some real planning … but we think we can make this work,” Bruno said.

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Privately held Space Exploration Technologies, or SpaceX, has sued to be allowed to compete for some of the military's launch business. The Air Force is nearing certification of the SpaceX Falcon 9 rocket for military missions.

The NDAA, which is approved annually, sets U.S. defense policy and authorizes spending levels but does not actually appropriate funds. It has to be approved by both chambers of Congress before going to President Obama for his signature.

Already controversial, the RD-180 supply deal came under new scrutiny in November, when Reuters reported that a tiny company half-owned by Russian engine maker Energomash stands to receive $93 million in cost mark-ups under an RD-180 contract. Those charges are being added to the program despite a 2011 Pentagon audit that contested a similar, earlier contract with the middleman company, Florida-based RD Amross.

(Reporting by Irene Klotz; additional reporting by David Alexander in Washington; Editing by Tom Brown)