TurkStream will deliver Russian gas to Turkey and is eventually intended to serve the European Union.
"Go!" Putin said, pressing a button on the Pioneering Spirit pipelaying ship, the world's largest construction vessel, to formally launch the work, accompanied by Gazprom energy giant's chief Alexei Miller.
The Kremlin strongman also phoned Erdogan from the ship in an effusively friendly exchange covered at length by Russia's state Rossiya 24 channel.
"The work has already started. I want to thank you once more and congratulate you on this," Putin said.
"Where in our country it takes years, I'm not exaggerating, on various administrative agreements, with Turkey we do this in a few months," Putin said.
"Undoubtedly this happens directly with your personal support."
Russia first floated the project in 2014 after the European Union blocked plans for a pipeline under the Black Sea to Bulgaria, at the height of the Ukraine crisis.
Then a diplomatic crisis in November 2015 over Turkey's shooting down of a Russian bomber on the Turkish-Syrian border delayed the project, which was revived when bilateral relations were mended last year.
The two leaders spoke for around 15 minutes and then agreed to speak again later, while Erdogan said "Spasibo," or thank you, twice, Russian television reported.
The Turkstream project will see the construction of two lines, each capable of carrying 15.75 billion cubic metres of gas per year. The first is due to be completed in 2018 and the second in 2019.
The idea is not just to supply gas to Turkey but also to turn it into a transit country for Russian gas heading to the European Union, replacing Ukraine.
Russia also plans Nord Stream 2, a twin pipeline under the Baltic Sea to Germany, but the project has been delayed due to opposition from countries including Poland.
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