BUSINESS

Doubling the value of a Lada by filling it with petrol may be a popular Russian joke. Doing it by teaming up with Renault in the prestigious Formula One racing circuit is not.

While the Russian car is unlikely to be whizzing round Silverstone or Monaco in the near future, its brand name will be after Prime Minister Vladimir Putin agreed a key sponsorship deal with the French team.

"We will take the first steps in sponsoring the project, and it's possible that we will increase our sponsorship role in the future," the premier said at a meeting with Renault CEO Carlos Ghosn on March 3.

The move comes as Russia races to revamp its struggling domestic auto industry, which has been overtaken by foreign producers in recent years.

Russia's three main international auto alliances - Renault-Avtovaz, Kamaz-Daimler and Fiat-Sollers - are set to get 180 billion roubles ($6 billion) in state stimulus packages, while they will have to invest a further 584 billion roubles ($19.6 billion) themselves, RIA Novosti reported Industry and Trade Minister Viktor Khristenko as saying.

The Lada manoeuvre has generated more speculation that the Kremlin is looking for Renault to play a greater role in the struggling Russian brand.

"Renault might not only use the AvtoVAZ premises to manufacture its models, but might also play a bigger role in the Russian manufacturer itself," said Renaissance Capital industry analyst Alexander Kazbegi.

"For instance, there was a discussion lately that Renault managers will look after procurement of components and spare parts at AvtoVAZ," he said.

Formula 1 is also thought to be hunting for fresh funds and new sponsorship, in particular following the withdrawal of BMW and Toyota due to lack of financing.

Others see Formula 1 as an opportunity to improve Lada's image - which is some way from the top of the podium - through associating it with the elite of motorsports.

"The participation in Formula 1 advertising programme is a strong and very effective promotional tool, as it attracts a large TV audience," said Vladimir Evstafiev, vice president of the Russian Association of Communication Agencies.

It appears the Kremlin is hoping to ride on the back of the country's first F1 driver Vitaly Petrov, who will be appearing for Renault and sporting the Lada logo on his car and uniform next season.

"The fact that the prime minister paid attention to the racing driver is quite positive, we hope it will attract attention to motorsports in Russia," said Konstantin Kopylev, spokesman for Lukoil's racing teams. "I think after Canada failure, the government needs to demonstrate that it wants to support high-tech sports."

Russia's first venture into the world of F1 was met with positive tributes from Renault team chairman Gerard Lopez who described it as an "honour [to] spearhead Russia's entry into the sport."

Hopes of a Russian Grand Prix, however, still appear stuck on the grid as Yevtsafiyev says it will set the country back "hundreds of thousands" of Euros.

Moscow's Grand Prix dreams

Hopes for a Moscow Formula-1 Grand Prix revved up in 2008 when construction started on the Moscow Raceway, but the project has since skidded off track due to the crisis.

The construction site in Volokolams, 70 kilometres from the capital, was opened by Moscow Region Governor Boris Gromov and racer David Coulthard in 2008 but now lies abandoned, reportedly due to financial problems.

Despite this, 2009's Bavaria Moscow City Racing brought three top teams - McClaren, Williams and Red Bull - to speed around the Kremlin.

It is thought Formula-1's top brass would like to cash in on the sport's popularity in Russia and Eastern Europe, with Bulgaria holding its first race in 2011. Until Russia has a track, however, it will be unable to join the list of around 30 countries which hold full Formula-1 races.

The Vyborg Rocket

Vitaly Petrov will become the first Russian driver to compete in F1, supporting Renault's Polish team leader Robert Kubika beginning with the Gulf Air Bahrain Grand Prix on March 14.
The 25-year-old Vyborg-born racer forged a successful career in Grand Prix 2, F1's feeder series, achieving several wins for the Campos GP-2 team.

In Russia Petrov is known among racing fanatics as the "Vyborg Rocket" after making his name as the winner of several national championships, including "Formula 1600" and the "Lada
Revolution" series.

Despite heading to the heat of Bahrain later this week, Petrov keeps his Russian roots with a preference for ice racing.