The plant is to be built around 400 kilometres east of Algier, the report stated.

The contract dates back to a visit to Algeria by Chancellor Angela Merkel in 2008 and had already been largely approved by her previous administration, it added.

Details of the factory for armoured vehicles were first reported in June. Algeria was Germany’s biggest arms market in 2013 with exports worth more than €825 million.

Gabriel recently blocked a contract for Rheinmetall to provide a fully-equipped training camp to Russia because of the crisis in Ukraine.

Düsseldorf arms company Rheinmetall will shortly sign a contract to produce 980 Fuchs armoured vehicles in Algeria when the facility has been shipped abroad and reassembled, the Handesblatt newspaper reported on Wednesday, citing sources.

The €2.7-billion deal is part of a huge delivery of arms worth €10 billion to the north African country. According to Handeslblatt, Daimler will be exporting SUVS and trucks to Algeria while Thyssen-Krupp will be delivering warships.

According to an annual government report into German arms dealsreleased in June, Algeria was Germany’s biggest market for weapons in 2013. It bought equipment worth €825.7 million including tank parts, SUVs and trucks.

But this deal will be the first time German firms have gone beyond supplying tanks and weapons to authoritarian regimes and sold an entire factory to produce armoured vehicles. Transparency International ranks Algeria 94th out of 177 countries in its Corruption Perceptions Index.

The factory to build the Fuchs vehicles will be built in Ain Smara in north eastern Algeria, Handelsblatt reported. The country has pledged to not sell the vehicles on to other countries.