Russian government-owned military export company Rosoboronexport has tightened its grip over the country's largest carmaker AvtoVAZ, announcing its intention to revise the company's current auto component supply contracts, Russian business daily Kommersant reported on Friday, according to Prime-Tass.

Earlier this year Rosoboronexport gained indirect control of 61.8% in AvtoVAZ.

Rosoboronexport is expected to revise the agreements before AvtoVAZ' upcoming extraordinary meeting of shareholders (EGM), which is slated for 22 December, Kommersant reported without citing specific sources.

The daily reported, however, that Rosoboronexport "warned" AvtoVAZ' suppliers of the coming revision.

After the revision, AvtoVAZ' auto part supply agreements will be motivated by "economic feasibility," Rosoboronexport said in its warning, Kommersant reported.

Rosoboronexport's move is expected to reduce the influence of Russia's SOK Group, which exclusively sells AvtoVAZ' spare parts and also runs about 30% of auto component supplies to AvtoVAZ, Kommersant said, adding that SOK earlier sought a controlling stake in the company.

A contract between AvtoVAZ and SOK stipulates that if AvtoVAZ cancels SOK's exclusive spare part sales right unilaterally, it has to pay 14 billion rubles, Kommersant said.

In order to reduce SOK's influence, Rosoboronexport may try taking over SOK-managed transport company AvtoVAZtrans, as well as auto component producers Dimitrovograd Auto Component Plant and Motor-Super, which are also managed by SOK and supply their products to AvtoVAZ, Kommersant said. SOK owns a controlling stake in Motor-Super, while AvtoVAZtrans and Motor-Super are owned by AvtoVAZ and SOK only has management rights in the companies.

Meanwhile, the General Prosecutor's Office, the Interior Ministry and the Federal Security Service have been auditing AvtoVAZ' activities since early December, Kommersant said, according to the Prime-Tass report.

The Interior Ministry's department for the Samara Region has filed a 230 million ruble back tax claim against AvtoVAZ for the past two years, Kommersant said.

AvtoVAZ counted all auto components bought and requested a value added tax (VAT) refund on these components, however, since some of these components were embezzled afterwards, not all of the components were assembled, a police source said, Kommersant reported. The source said that AvtoVAZ is not authorised to get VAT refunds on components that are not assembled and sold.

The department has also filed a lawsuit claiming that AvtoVAZ' dealer Avtomet sold to AvtoVAZ three tonnes of molybdenum for a price three times as high as the market price. The police argue that one of AvtoVAZ' managers was simultaneously a shareholder of Avtomet and received a kickback.

Most AvtoVAZ executives in charge of purchases control stakes in the company's suppliers, said a police official in Tolyatti, a city in the Samara Region, Kommersant reported.

Earlier this year Rosoboronexport bought two AvtoVAZ subsidiaries that held a total of 61.8% in their parent company, Kommersant said earlier, adding that the US$700 million deal was financed by Russian state-controlled bank Vneshtorgbank, or VTB.

After the purchase, Rosoboronexport and VTB representatives were nominated for AvtoVAZ' board of directors on 1 December.

AvtoVAZ currently controls around 70% of Russia's domestic passenger car production and accounts for 40%-42% of total passenger car sales in terms of volume, Prime-Tass noted.

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