Saudi Arabia and Russia announced a deal that entails a $10 billion investment from the Public Investment Fund of Saudi Arabia (PIF) to be invested with the Russian Direct Investment Fund (RDIF) and various projects within Russia’s borders. CEO of the Russian Direct Investment Fund, Kirill Dmitriev, said that they were on track for 10 deals with the PIF by the end of this year alone. Seven of the 10 deals are already in their final stages. Russia says they also expect to attract additional investment deals from countries such as China, South Korea, United Arab Emirates, etc. Despite the sanctions and intense military build up in the Baltic region, Russia is attracting large amounts of foreign investment.
The PIF is most interested in agriculture, health care, and real estate exposure with its Russian investment
After Russia and Saudi Arabia signed a deal in mid-June 2015 agreeing to a nuclear energy deal, the two oil producer powerhouses have slowly begun to increase relations this year with the goal of supporting each other’s interests through investment. As with regards to the $10 billion investment, the Saudis have “expressed interest in investing in agriculture, medicine, retail, logistics and real estate, according to [Kirill] Dmitriev,” (RT.com). The full $10 billion is expected to be fully implemented within the next 4-5 years. With the Saudis and the Russians growing relations, a new set of headaches could arise for the US, as Saudi Arabia is a key ally in the Middle East.
Saudi Arabia deal is the latest deal in the past few years that saw big foreign investment in Russia
Aside from Russia’s latest deal with Saudi Arabia, Russia has been busy over the past few years with attracting mass amounts of foreign investment into the country. In September 2013, the United Arab Emirates invested $5 billion with the RDIF for the purposes of gaining an interest in Russian infrastructure. A separate wealth fund in the United Arab Emirates also invested $1 billion with the RDIF earlier in 2013. Aside from UAE, Russia has received $1 billion from Japan to invest in Russia’ Far East and Siberia infrastructure projects. Around early 2012, China set up a $4 billion fund to invest in Russian agriculture, manufacturing and logistics. Kuwait gave Russia $500 million in early 2012 as well for investment purposes.
The point here is that Russia has been very successful in raising foreign investment funds, despite having a black mark against its reputation with the Ukraine crisis. Hiring Kirill Dmitriev appears to have been a smart move on the part of the Russian fund representation. Dmitriev is a former Goldman Sachs banker and certainly has devoted his skills to boosting the RDIF’s reach and capitalization. Focusing on the strengthening of Saudi Arabia-Russian relations, this certainly is a bit of a potential disaster for the US. While their partnership is mostly economic for now, nuclear deals and the evolution of the economic partnership into a military partnership would be disastrous for the US and the West. So far, economic sanctions have not been enough to deter Russian aggression, but with big investment deals coming in, Russia’s sanctions bite seems to not hurt as much as a capital infusion helps balance the volatility.