Ministers from the 15-nation consortium unanimously approved the scheme and backed a sweeping overhaul of marketing and manufacturing strategy that, for the first time, will see Russian rockets launched from Europe's space base, ESA Director-General Antonio Rodota said.

The funding decision will help the standard Ariane-5 rocket overcome a disastrous slump in the world market for satellite launches.

It will also fix a design flaw in the heavy version of this launcher that was blamed for a catastrophic failure last December.

ESA will spend 72.5 million euros (86.3 million dollars) to order a new batch of both versions of the rocket from 2005, according to ESA documents.

Another 42.5 million euros will be spent on redesigning the Vulcain-2 engine, blamed for the disastrous maiden launch of the 10-tonne Ariane-5 ECA last December.

A further 60 million euros will be spent on ECA testing and improvements.

Finally, 228 million euros are being earmarked to pay for two test launches of the ECA -- one in March 2004, carrying a dummy payload, and the other in September 2004, taking aloft a new ESA supply pod for the International Space Station (ISS).

In another historic proposal, ESA also agreed to open up its space base in French Guiana to Russia, a traditional competitor to Ariane.

Arianespace, which operates ESA's launchers, will tie up with Russia's Starsem company to use the Soyuz for launching medium-sized payloads to help meet a gap in its own marketing range.

ESA countries, led by France, have already pledged more than half of the 314 million euros needed to build a new launchpad at Kourou to accommodate the Soviet-era launcher, Rodota said.

He described it as a "political signal" and a "firm undertaking" towards Russia.

In another decision, ministers agreed to unfreeze 124 million euros in contributions to the International Space Station (ISS).

The money was frozen in November 2001 because of a row with the United States. Washington, worried by cost overruns on the ISS, was at the time mulling a big reduction in crew, which in turn would have severely restricted Europe's science programmes on the orbital outpost.

On Monday, ESA cleared an important obstacle for launching a competitor to the US Global Positioning System (GPS) for the world's burgeoning market in satellite navigation services.

Its members agreed terms on a legal structure for sharing funding and supervision for the project with the European Union (EU).

The scheme, named Galileo, is scheduled to be operational by 2008. The first will be launched in September 2005, senior ESA official Claudio Mastracchi told AFP.

Galileo is designed to girdle the globe with 30 satellites in medium Earth orbit, comprising 27 operational satellites and three reserves, plus two control centres on the ground.

In 2001, the Pentagon voiced concern, suggesting Galileo could be a security threat because of its open access.

Galileo's development and launch costs are put at around 3.2 billion euros (3.77 billion dollars), with running costs from 2008 onwards of around 220 million euros annually, the agency said.

ESA, which is institutionally separate from the EU, comprises Austria, Belgium, Britain, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden and Switzerland.

Funds in existing programmes will be used to pay for the technical modifications to the Ariane-5 ECA and for the rocket manufacture; the 228 million euros needed for the test flights is a new funding request, according to an ESA document.

SPACE.WIRE