"The contract has two components, one for the construction of a launch site and another for the building of an adapted version of the Soyouz spacecraft known as the Soyuz 2-lb," Director General of Arianespace Jean-Yves Le Gall said during a press conference following the contract signing.

Le Gall also indicated that as much as 121 million euros (157 million dollars) in contracts would go to Russian space industry firms, the project's main builder and supplier.

"This is a step forward in our cooperation with Europe in the area of space technologies," said Anatoly Perminov, director of the Russian space agency.

The total project cost is 344 million euros (446 million dollars), of which 223 million (289 million) is being financed by the European Space Agency.

The European Investment Bank is providing the remaining 121 million euros (157 million dollars) in the form of a loan.

Le Gall said the funds had been approved and were ready for disbursement.

Arianespace has already signed the first Soyuz launch contracts with commercial and industrial clients, starting in about three years.

"We have signed the first contract with the French space agency to launch two Plaeiade satellites and with an Australian telecommunications operator to launch the Optus-D2 satellite," Le Gall said.

The Soyuz's first test flight is set to take place in early 2008.

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