Chinese, Mideast Funds to Invest in Russian Agricultural Venture

The Wall Street Journal Online, Dow Jones, 27.03.2014

Russia Seeks to Show It Can Draw Foreign Investment Despite Western Sanctions

Russia's state-sponsored private equity group said Thursday it has persuaded Chinese and Middle Eastern sovereign-wealth funds to invest in a Russian agricultural venture, as the country seeks to show it can still draw foreign investment while under the shadow of Western sanctions.

The Russian Direct Investment Fund, which was set up by President Vladimir Putin three years ago to attract foreign private equity investment into Russia, said it was leading a consortium buying a $200 million stake in Sodrugestvo, a Luxembourg-based soybean and rapeseed producer and trader.

Among the investors is the China Investment Corp., with which the RDIF set up a $2 billion co-investment fund in 2012, and an unnamed Middle Eastern sovereign-wealth fund. Sodrugestvo had $2 billion in revenue last year and has operations in Russia, several former Soviet states, Brazil and Northern Europe.
"The fact that RDIF established the consortium is a clear signal that international capital remains available for high-quality Russian companies," said RDIF Chief Executive Kirill Dmitriev.

Russia has increasingly turned to the East for investment dollars in recent years, with the RDIF securing a series of deals with Asian and Middle Eastern funds. Since the U.S. and the European Union imposed sanctions on Russian government officials and people close to Mr. Putin following the annexation of Crimea, Russian officials have pushed for a further strengthening of ties outside of the West.

Still, the fund counts several high-profile Western private-equity figures on its international advisory board, including Blackstone Group Chief Executive Stephen Schwarzman, Apollo Global Management APO +2.56% Chief Executive Leon Black and TPG Capital co-founder David Bonderman. One of the members of its supervisory board—Mr. Putin's chief of staff Sergei Ivanov —is included on the U.S. sanctions list.

The RDIF was created in 2011 and is a fully owned subsidiary of Russia's state development bank, Vnesheconombank. The fund is capitalized with $2 billion a year in state cash for five years for a total of $10 billion and under its mandate is required to secure co-investment that at a minimum matches its own commitment.

Last year, it launched a $2 billion fund with Abu Dhabi's Mubadala Development Company and a $1 billion deal with the Japan Bank for International Cooperation. In 2012, it secured a commitment of $500 million from the Kuwait Investment Authority to co-invest in all RDIF deals.