The agreement was signed by German Gref and Christian Streiff, president of the French carmaker, who attended an economic forum in Russia's second city, St. Petersburg, Russian authorities used to court foreign investors.
Gref said the plant would initially produce 75,000 cars. But Streiff said no final decision had yet been taken either on the site of the plant or on the model range.
The Russian economics ministry said earlier the French concern was considering the Saratov and Nizhny Novgorod regions in central Russia and the Alabuga industrial zone in the Russian Volga republic of Tatarstan as potential sites.
Streiff said he expected that the Russian auto market would be expanding and the project would be successful. The French businessman said Peugeot sales in Russia increased 60% year-on-year in 2006.
Peugeot Citroen will become France's second carmaker after Renault to start production in Russia.
The deal with Peugeot Citroen also became the third contract on industrial assembly signed at the 11th St. Petersburg Economic Forum. On the second day of the forum Saturday the Kaluga Region signed similar agreements with Samsung and Volvo Trucks.
Volvo Trucks will set up a truck plant in a free economic zone outside Kaluga, a city about 188 km southwest of Moscow. Under the deal, investment should amount to some 3.5 billion rubles ($134.72 million), and about a thousand new jobs could be created.
A contract with Samsung deals with the production of household appliances, will require the same amount of investment and create 1,200 new jobs.
