Russian police have opened a criminal investigation into the alleged misuse of 565 million rubles ($17 million) of state funds set aside for the country's satellite navigation system.

The Interior Ministry's anti-corruption department has "unearthed facts of the unreasonable spending of 565 million rubles, earmarked by the state for the development of the space system Glonass," the body said in a press release on Tuesday.

Senior officials at the company Russian Space Systems, a contractor to the Glonass project, are suspected of the signing fake contracts with commercial firms.

Russian Space Systems has dismissed the accusations.

Its offices are currently being searched by police.

The firm was at the center of a public spat earlier this year after accusing the head of the state space agency Roscosmos, Vladimir Popovkin, of "illegal audits" and setting up "uncontrolled structures." Roscosmos then hit back, saying the allegations were part of a "media campaign" against Popovkin.