DaimlerChrysler has suspended plans to establish its own assembly facility in Russia, Yelena Divakova, chief of the corporate communications department of DaimlerChrysler Automobiles RUS told Russian business daily Kommersant.

"The headquarters of DC has decided to suspend negotiations with Russia on setting up its own production in the country, because Russia has not provided reasonable conditions for the project. We will resume negotiations if the reasonable conditions are provided," she said, according to the paper. She did not elaborate on the conditions DC seeks, Kommersant added.

A source with the Economic Development and Trade Ministry reportedly dismissed DaimlerCHrysler's suspension statement as "speculation".

"Suspending a project is not giving it up," the source said. "But we won't give additional breaks for DC, because we have a universal approach to all investors."

The Prime-Tass news agency noted that, last year, DaimlerChrysler said that it wanted to build its own assembly facility in Russia to assemble Mercedes-Benz cars.

In May 2005 DC chose a location for the facility in the Leningrad Region. Also in May, DaimlerChrysler's CEO Juergen Schremp said he was optimistic about the project during his meeting with Russian president Vladimir Putin. In September the new CEO of DaimlerChrysler, Dieter Zetsche, promised to make a final decision on the project by December.

Earlier this year the government ruled to eliminate or substantially reduce import duties on auto components for "industrial assembly" facilities that have an annual output of at least 25,000 vehicles. Investors that establish their car assembly facilities in Russia also have to commit to 'localising' [sourcing] components used in production.

DC reportedly wants additional benefits, including tax remissions for its assembly facility, Kommersant said.

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