The french brand, which is a powerhouse in the European market, has become a strategic partner of Avtovaz, which controls 70 per cent of car production in Russia and owns the Lada brand.

The partners aim to step up output for the domestic market and abroad and to renew the Lada range through raising production to more than 1 million units a year.

Renault is reported to have beaten off competition from Fiat and General Motors to secure the deal with Avtovaz.

New car sales in Russia are expected to hit 2.5 million in 2007 and it is expected to become Europe's biggest market within four years with annual sales of 3.3 million cars.

Sales of non-Russian brands surged by more than 60 per cent to 1.3 million in the first 10 months of the year and Renault claims the alliance will transform Russia into its largest market.