Iran will sign a contract with Renault this week to produce the Logan, reported Reuters, quoting the Iranian industry ministry.

Renault and the Iranian government have reached an agreement with Renault investing around US$2bn in the project.

The Logan, code-named L90, will be assembled by a joint venture company in Iran, Renault-Pas. That company has reportedly signed contracts with local component suppliers worth around €600m.

A major sticking point in the negotiations was that Iran required that Renault produce around 20% of worldwide Logan exports in Iran. Last month the Iranian government suspended the deal until Renault accepted its terms. The Iranian minister said that Renault has agreed to Iran's conditions, although Renault has not confirmed this. Renault had complained that exports would be difficult because Iran does not have trade pacts with neighbouring countries and that exports would be hit by hefty tariffs.

The potential for the Logan in the Iranian market is good as it should offer an alternative to the Paykan that dominates the million unit market at present. Renault has said that it plans to produce 250,000 Logan units a year in Iran as of 2008, nearly a third of its worldwide sales target of 800,000 cars by 2009.