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EU OKs Renault's Avtovaz Stake

European Commission approved a $1 billion deal which gives Renault SA a 25 percent stake in Russia's largest automaker.

BRUSSELS, Belgium (AP) -- The European Union on Wednesday approved a US$1 billion (euro640 million) deal which gives Renault SA a 25 percent stake in the producer of Russia's Lada cars.

The European Commission says the agreement with Russia's OAO Avtovaz company, will not threaten open competition in the European car market. The EU clearance on Wednesday gives the French care manufacturer breakthrough access to one of the world's fastest growing markets through a well-established brand.

The Commission said in a statement the deal ''would not give rise to competition concerns'' in the EU and would hardly influence Renault's share outside Russia.

Renault beat out General Motors and Italy's Fiat for the stake of Avtovaz.

Under the deal, Renault gets three of the 12 seats on the Avtovaz board and will share engines and technologies with the Russian company as it develops a new generation of Ladas. The Lada trademark will be preserved.

Despite a 6 percent increase in domestic sales for Avtovaz last year, there is a growing concern that the company won't be able to keep pace with Russian demand for automobiles, as foreign competition tries carves out market share in a booming economy. Renault has emphasized that Lada would remain a distinctly Russian brand.

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