UPDATE 1-Turkish court rules to keep U.S. consulate employee in custody

(Adds details on case, background on strains)

By Ezgi Erkoyun

ISTANBUL, June 28 (Reuters) - A Turkish court ruled on Friday to keep an employee of the U.S. consulate in custody as his trial on espionage charges continues, in a case that has damaged relations between Washington and Ankara.

Metin Topuz, a Turkish translator for the Drug Enforcement Administration at the consulate in Istanbul, has been in custody for 21 months. The next hearing in the case was set for Sept. 18.

Trials of U.S. citizens and local consulate workers in Turkey have been a source of discord between the NATO allies, whose ties have also worsened over Ankara's purchase of Russian missile defences and policy differences in Syria.

Presidents Tayyip Erdogan and Donald Trump are expected to meet at the G20 summit in Osaka on Saturday to discuss Turkey's purchase of the S-400 defences, which are expected to be delivered in July.

Topuz is charged with espionage and links to the network of cleric Fethullah Gulen, who is based in the United States and blamed by Turkey for plotting the failed 2016 coup. Washington says Topuz is innocent.

He is accused of being in frequent contact with officers who led a 2013 corruption probe in Turkey, which the government has described as a "judicial coup attempt" by Gulen's network. Topuz denies the charges, saying it was not his decision who he came into contact with through his work. (Writing by Daren Butler; Editing by Jonathan Spicer)

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