The deal was concluded on the sidelines of President Vladimir Putin's official visit to Austria just days after a protocol of intent received his verbal support.
"We know your company," Putin said as the sides signed the protocol. "It operates in many countries, and now also in Russia. This project has good prospects. I hope it will be carried out. The Russian government will, without question, support these projects."
A $1.6-1.7-billion plant expected to be built in the Volga city of Togliatti, where AvtoVAZ is based, as a result of the deal will assemble between 450,000 and 480,000 cars annually.
Sergei Ivanov, a first deputy prime minister, pledged to do even more to provide an attractive investment environment for foreign carmakers, which have flocked to Russia in recent years as the Russian market for automobiles has skyrocketed.
Magna, founded by Austrian immigrant to Canada Frank Stronach in the 1950s, designs and manufactures auto parts, and engineers and assembles complete vehicles, primarily for sale to major U.S. and European car manufacturers.
As of March 2007, the company reported that it owned 235 production and 62 engineering and research and development centers in 23 countries on five continents.
On May 10, Magna announced the sale of 20 million of its voting shares to Russian Machines, a wholly owned unit of Basic Element, the business empire controlled by one of Russia's wealthiest businessmen, Oleg Deripaska.
Under the proposed deal, both investors will have a right to appoint an equal number of directors to the board. Stronach will retain control of his company through his Stronach Trust.
Basic Element includes GAZ Group, Russia's second-largest carmaker, whose most successful post-Soviet products were trucks and light commercial vehicles.
