German automaker Daimler will open a plant near Moscow to make Mercedes-Benz cars, it announced on February 21. The Reuters news agency says it was the first new investment by a major Western automaker since sanctions were imposed on Russia three years ago.

The plant will be Daimler's first to produce passenger vehicles in Russia. Daimler says it plans to invest more than $260 million on the facility. The first cars are due to leave the assembly line in 2019.

Russia's Trade and Industry Ministry reportedly said in a statement that the Daimler plant will produce more than 20,000 Mercedes-Benz passenger cars and SUVs per year under an agreement that will run for nine years.

Reuters says that sanctions did not forbid investments in the auto sector, but caused a chill in investor sentiment. Sanctions also added practical complications because financial transactions had to be restructured to avoid banks subject to sanctions.

General Motors pulled out of Russia two years ago. Auto sales overall have more than halved from a 2012 peak of almost 3 million a year. Mercedes in 2016 sold 36,888 passenger vehicles, a drop of 11% year on year, according to the Association of European Business, a lobby group which tracks sales.

The decision to build the new factory shows a global automaker has "faith in the Russian market, regardless of short-term circumstances", Alexander Morozov, Russia's deputy minister for trade and industry, was quoted as saying in a statement.