That report noted that U.S. officials should keep sensitive military technology and the production of defense-related goods under the control of American companies.

Ener1 and Mr. Lugar's office dismissed concerns about the company's Russian investors, and observers also noted that many of the firms against which Ener1 is competing have their own foreign ties.

For instance, A123 Systems Inc. builds its batteries in China and wants U.S. government loans to build new U.S. plants in Massachusetts and Michigan; Valence Technology, Inc. also has plants in China but is seeking funding to build a facility in Texas; and LG Chem Ltd., the largest chemical company in South Korea, has proposed building a multimillion-dollar lithium-ion battery plant in Michigan.

Johnson Controls Inc. and Saft Advanced Power Solutions LLC, a French battery maker, have formed a partnership to invest $220 million in a new advanced-battery manufacturing facility in Michigan.

A123 Systems and Valence acknowledged in separate SEC reports that doing business in communist China posed a risk, adding that they can be affected adversely by China's diplomatic and political relationship with the United States. China has said it hopes to lead the world in the production of hybrid and electric vehicles.

Neither firm responded to telephone calls and e-mails for comment.

Prabhakar Patil, chief executive officer at Compact Power, Inc., the U.S. subsidiary of LG Chem, said that except for some critical but limited funding, his Troy, Mich., operation has "pretty much been left alone" by its South Korean parent in its pursuit of the government cash. He said CPI would be financially independent by 2012.

"In the end, any business that wants to be successful has to have a level of independence and, ultimately, the ability to sustain itself," said Mr. Patil, who retired at Ford Motor Co. in 2005 after 27 years, including five as chief engineer for the hybrid electric vehicle division. "And you have to be prepared to do it without government intervention."

Mr. Patil said LG Chem recognized early that the United States would be a "strategic priority" in the production of lithium-ion batteries and has given him the "level of independence to make that happen."

Currently, the U.S. has almost no lithium-ion manufacturing capability, although EnerDel began the first commercial-scale production line in Indianapolis in May. The battery cells produced at the Indianapolis facility would be assembled at a second EnerDel plant, in Noblesville, Ind.

Lithium-ion batteries are highly prized by both public and military users because they have more power and are smaller and lighter to help extend the range and mileage of hybrid vehicles. The auto industry is looking to build more fuel-efficient cars, and the U.S. military has focused on the battery's long life cycle and cost savings over conventional batteries for such important weapons as unmanned aerial vehicles (UAVs).

Ener1's political backers

Mr. Lugar and Mr. Bayh have used their political clout to help secure for Ener1 $6.5 million in earmarks -- money set aside for special pet projects in the government's annual spending bills. One called for $1.6 million last year to develop hybrid tanks and UAVs for future U.S. Army combat systems.

The two lawmakers have supported the company because if it wins the government money, it would create as many as 3,000 jobs in Indiana.

Mr. Lugar, top Republican on the Senate Foreign Relations Committee, has known about Ener1's foreign investors "for a long time" but isn't concerned about government money going to a Russian-connected company, his Senate office said.

"The manufacture of lithium-ion batteries is an expanding international business, and a lot of foreign companies are involved," spokesman Andy Fisher said. "As the business grows, I would expect that the number of international companies involved will expand."

Mr. Bayh's office declined comment on what it knew about the Russian investors: "Not going to have anything for you on Ener1," spokesman Brian Weiss said in an e-mail.

Ener1 has applied for the government cash under the Energy Department's $2.4 billion Advanced Technology Vehicle Manufacturing program and a $480 million Advanced Battery Manufacturing Initiative loan program.

Ener1's ties to Russia

The company insists its foreign investors don't have control over its day-to-day operations, but the firm acknowledged in a prospectus to the SEC on Feb. 17, 2009, that the Ener1 Group -- in which Mr.