RDIF Funneling More Chinese, Middle Eastern Money Into Russia

Dow Jones, The Wall Street Journal, 19.11.2014

DOHA -The $10 billion Russian Direct Investment Fund is funneling more Chinese and Middle Eastern money into Russia's ailing economy, partly compensating for a decline in Western-led activity in the face of geopolitical tensions.

Since its formation four years ago, the Russian state investment fund has invested $7.3 billion in Russia's economy. It plans to continue at a similar pace with total annual investments of around $2 billion, of which up to a fifth will be marked for transactions abroad, Chief Executive Kirill Dmitriev said in an interview.

Russia's economy has been hit by falling oil prices and Western sanctions, devaluing its national currency and discouraging potential investors.

"Some of our co-investors from the U.S. delayed some of their investment decisions and are taking a pause. And yet some investors from China are accelerating their investment pace and some of the Middle Eastern investors also see this is as a very unique opportunity to invest into some assets with very reasonable valuations," said Mr. Dmitriev on the sidelines of a sovereign wealth conference in Qatar.

"The goal is not to substitute U.S. and Europeans with Asian and Middle East but to work with all our partners," he said. "I think obviously investing in Russia right now is not for every investor in the world but for people with long-term views and with some clear industrial expertise."

RDIF is currently working on four transactions outside Russia, including one in the agricultural sector in Europe Mr. Dmitriev said.

Mr. Dmitriev acknowledged that the twin burden of falling oil prices and sanctions had battered the Russian economy resulting in an economic slowdown and the devaluation of the ruble. That in turn has led to a partial shift of the fund's investment strategy toward sectors, such as agriculture and private health care, which Mr. Dmitriev expects will continue to boom even during tough economic times.

He also predicts sovereign-wealth funds from around the world will increasingly work alongside the Russian fund.

He dismissed any suggestion that the RDIF could be used as a political tool by the Russian government instead of a pure financial actor whose main priority is to seek higher returns on its investments.

"As soon as you start mixing politics and investments it becomes very difficult. Different countries go through ups and downs in politics and, for sovereign-wealth funds, it would be very dangerous to basically have all of future generations subject to political fluctuations," he said.