UPDATE 1-Ford sees return to Russian market growth in 2017

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PARIS, Jan 27 (Reuters) - Ford expects the embattled Russian car market to return to growth this year as improved stability in exchange rates and prices brings customers back into showrooms.

Russian price inflation for new cars has eased in the past six months, Ford of Europe chief Jim Farley said on Friday, spurring demand for cars and especially SUVs.

“We’re just starting to see those green shoots and it’s really related to the strength of the currency and its knock-on effect on inflation,” he told Reuters.

The Russian market has shrunk by more than half from its 2012 peak of 2.9 million vehicles, sapped by the rouble’s decline in response to weaker oil prices and international sanctions.

While rival General Motors halted production in 2015, Ford has dug in, launching new models and defying last year’s further 11 percent market drop with a 10 percent sales gain.

The Moscow-based AEB industry association now predicts 4 percent growth in car sales this year, ending the four-year slump.

An upturn in Russia would mark a bright spot for Ford of Europe, which also warned on Friday that the impact of Britain’s vote to leave the EU would put a $600 million dent in its 2017 earnings as its sterling currency hedges expire.

Ford expects the Russian market to turn positive “towards the end of the year”, Farley said. “Within the next 24 months we see the Russian market recovering.”

Its Ford Sollers venture and France’s Renault - which recently invested fresh capital in Lada-maker Avtovaz and has gained market share - are poised to benefit.

German luxury carmaker Daimler is also weighing up a Russian plant investment as the market outlook improves.

“We are in dialogue with the Russian government in order to check whether the economic requirements for local passenger car production are fulfilled,” spokeswoman Sofia Stauber said. (Reporting by Laurence Frost in Paris and Jack Stubbs in Moscow; Editing by Alexander Smith, Greg Mahlich)