UPDATE 1-Russia VTB to sell EADS stake at market price-CEO

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YEREVAN, Dec 8 (Reuters) - Russia's second-largest bank, VTB VTBR.MM, will sell its 5 percent stake in European aerospace company EADS EAD.PA to the country's new United Aviation Corporation at the market price, VTB's CEO said on Saturday.

“The final buyer is the United Aviation Corporation, the Bank of Development can be an intermediate buyer,” Andrei Kostin told reporters at a briefing in Armenia’s capital Yerevan. “We will sell at no less than a market price.”

Kostin said there was a 50 percent chance the deal would be completed this year.

Last year, state-controlled bank VTB alarmed France and Germany when it unexpectedly built up a 5 percent stake in EADS.

Russia sought a joint production deal with EADS and hoped to win a strategic say at EADS through the stake held by VTB, but core shareholders made it clear Russia should not try to bolster its stake in the Airbus parent.

President Vladimir Putin has ordered Russian aviation firms to merge into United Aviation Corporation (UAC) and pledged a total of 18 billion roubles ($719.1 million) of government investment in 2008-2010.

The Bank of Development, which received 200 billion roubles from the state budget last month, is one of several institutions created by the government to help diversify the economy from the oil and gas sectors.

Last month, UAC said it planned to spend about $1 billion to buy the VTB stake in EADS. EADS has a stake of about 10 percent in Irkut IRKT.MM, which helps make Russia's flagship Sukhoi fighter jets and is part of UAC.

EADS shares closed at 21.7 euros on Friday and EADS total market capitalisation is 17.66 billion euros or $25.89 billion, according to Reuters data. (Reporting by Dmitry Sergeyev, writing by Gleb Bryanski)