Moscow, Jan 25 - Russia and India agreed on Thursday to build a plant producing 40,000 tonnes a year of titanium dioxide in the Indian state of Orissa, which New Delhi will finance through part-repayment of its debt to Russia.
Russia will take 30,000 tonnes of the plant's output, enough to meet about half its requirements, when production starts in 2009, an official involved in the project told Reuters.
"The agreement has already been signed," said Yuri Parkhomenko, general director of Giredmet, the Russian state body responsible for equipment supply and construction.
"The plant will start production in another two years," he added.
Titanium dioxide is a pigment that provides brightness in a range of product from paints to chocolate wrappers.
The deal was signed during a visit to India by Russian President Vladimir Putin. India is the second-biggest buyer of Russian weapons after China and the two countries on Thursday signed a deal to construct nuclear power plants in India.
Russian Defence Minister Sergei Ivanov told Russian news agencies this week the titanium dioxide venture would be financed by India's debt repayments to Russia.
Russian media have estimated India's total debt to Moscow, which dates from the Soviet period, at $1 billion or more. The two countries have said they plan to boost bilateral trade to $10 billion annually by 2010 from turnover of $2 billion now.
"They're trying to come up with some solutions where they can barter with each other to keep the amount of actual cash transferred to a minimum while eating into the debt," said Chris Weafer, chief strategist at Russia's Alfa Bank.
INVESTMENT
Parkhomenko did not say how much investment would be required to build the titanium dioxide plant. He said the companies involved in the joint venture were St Petersburg-based Tekhnokhimholding and India's Kerala Minerals & Metals Ltd.
The Russian company would process the titanium dioxide and supply it to end-users in Russia, he said.
"The project has been under discussion for several years already," said Andrei Alexandrov, general director of the international association Titan, which groups titanium firms in the former Soviet Union.
Russia does not produce its own titanium dioxide, analysts said. The product is made from ilmenite ore, which is also used in production of titanium sponge -- the raw material for titanium metal used in aircraft and golf clubs.
Russia's VSMPO-Avisma is the world's largest producer of titanium products for the aerospace sector. It purchases ilmenite from Ukraine and last year said it was also looking to import raw materials from Sri Lanka, India and Vietnam.
Russian state arms trader Rosoboronexport last year acquired a majority stake in VSMPO-Avisma.