Tesco is believed to be eyeing a move into Russia's swiftly expanding retail market amid reports that it has held informal talks with Russia's biggest supermarket chain, X5 Retail Group. The Independent reports this today. X5 was formed from the merger last year of two chains, Pyaterochka and ZAO Perekriostok, which were respectively based in St Petersburg and Moscow. It is controlled by Mikhail Fridman's Alfa Group.

X5 operates more than 1,200 owned and franchised food stores across Russia and the former USSR. In a statement issued yesterday X5 said it does not rule out some form of commercial partnership with Tesco while insisting it was not preparing to sell its business.

According to the daily Kommersant newspaper, X5, a Moscow-based supermarket chain, has held or is preparing to hold talks with two other foreign retailers apart from Tesco. The newspaper named Wal-Mart and Carrefour as other potential partners. More specifically, it said the meetings centred on the possibility of buying a controlling stake in the firm in 2008 after X5 exercises an option to buy a chain of Russian hypermarkets.

Russia’s retail food market is expected to expand by an annual rate of 16 per cent between now and 2010. A deal with X5 would give a foreign retailer a real head start on its competitors, sparing it the difficult task of starting from scratch and growing organically in a market notorious for corruption and red tape, The Independent comments. X5 insisted it was not planning to turn over its business to a foreign retailer altogether but appeared to leave the door open to some kind of cooperation.

Tesco said it did not respond to what it called "rumour and speculation", but said "never say never" when asked whether it had any plans to expand into Russia. Tesco has stores in 12 countries outside the UK and is known to be keen to expand into promising emerging markets.