Energomash says the engine will be 30 percent more efficient than current designs and will avoid the need to produce hydrogen for fuel, RIA Novosti reported Saturday.
The rocket will operate on a mixture of acetylene and ammonia dubbed atsetam, company officials said.
"A mixture of acetylene and ammonia is 20 times cheaper than hydrogen as a kilogram of hydrogen costs about 2 thousand rubles [$67] and a kilo of atsetam is maximum of 100 rubles [$3.35]," Energomash Innovative Technology Director Anatoly Likhvantsev said.
The new engine will be based on the existing RD-161 oxygen/kerosene engine and will not require major structural changes, he said, since the physical properties of atsetam are similar to kerosene.
"Using 5 to 7 tons of this mixture, we can save a considerable amount of money," Likhvantsev said.
"In addition, the components that are included in atsetam can be easily stored and transported, whereas hydrogen requires special storage and transportation conditions."
Energomash officials said rockets could be launched with the new engine in 2017-2018.