Saudi Arabia to invest $10bn in Russia via fund

By bne IntelliNews July 7, 2015

bne IntelliNews -

 

Saudi Arabia’s Public Investment Fund, a sovereign wealth fund, will invest $10bn in Russia via the government-run Russian Direct Invest Fund (RDIF), in what will be Saudi Arabia's biggest ever investment in Russia.

"This is a landmark transaction, one of the largest transactions in the realm of sovereign funds," the head of RDIF, Kirill Dmitriyev, told journalists, adding that it signified the "reloading" of economic ties between Russia and Saudi Arabia. "The potential of relations between the two countries is huge," newswires quoted him as saying.

The RDIF is a co-investment fund established in 2011 that matches investors' committments with funds from its own resources. The Saudi deal was reportedly initiated by the signing of a memorandum of understanding during the St Petersburg Economic Forum in June.

The announcement comes on the eve of Russia's hosting of a joint summit in the Urals city of Ufa of the BRICS organisation of largest emerging markets and the Shanghai Cooperation Organisation of Central Asian countries. The event will represent a landmark in the Kremlin's pivot away from the West towards Asian investors.

The Saudi investment signals that besides BRICS and Asia, another source of funds for Russia to tap is in the Middle East, where many oil-rich states have set up sovereign wealth funds akin to the Saudi' Public Investment Fund. Prior to the Saudi deal, the largest investment in the RDIF was a $7bn commitment from a wealth fund run by United Arab Emirates.Russia may be able to leverage its foreign policy influence in the Middle East against investment commitments, analysts noted.

Dmitriyev said Mohammed bin Salman Al Saud, Saudi deputy crown prince and defence minister, had made an “immense” contribution to the signing of the deal, as quoted by the Financial Times. Meanwhile, analysts speculated that the deal may be a Saudi sweetener to induce Russia to compromise on its Syria policy. The Saudis are backing "moderate" Islamist rebels in a four-year-old civil war, while Russia supports the increasingly embattled Syrian President Bashar al-Assad.

RDIF said it would invest the Saudi money in projects for infrastructure, retail, logistics and agriculture over a five-year period together with other funds committed by sovereign wealth funds, including the $2bn Russia-China Investment Fund.

According to Dmitriyev, seven projects have already been selected, including the Moscow ringroad. "The first seven projects have received preliminary approval, and we expect to close 10 deals before the end of the year," the RDIF chief said.

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