Amid ongoing tensions with the Ukraine and subsequently, the United States and European Union, Russia has been forging deeper business ties with Qatar, whose sovereign wealth fund has recently agreed to invest $2 billion there.
The Qatar Investment Authority (QIA), one of the world’s biggest wealth funds, has been increasingly focusing on emerging markets like Russia, China and India.
In this latest deal, the QIA is forging a joint development with state-backed private equity fund Russian Direct Investment Fund (RDIF). The news was confirmed by RDIF CEO Kirill Dmitriev at a meeting between Russian President Vladimir Putin and foreign investors, the Gulf Times reports.
The $10 billion fund works with international partners to invest in projects in Russia, with the aim of lowering some of the risk involved by the foreign companies as they are partnering with the state.
Among the major infrastructure projects planned for Russia are a new Moscow ring-road and a fast-speed train line.
Qatar-Russia relations
The new partnership bolsters an already developing relationship between Qatar and Russia. In July last year, the Financial Times reported that the fund confirmed QIA’s recently-appointed Chief Executive Ahmad Mohamed Al-Sayed had joined the RDIF’s advisory board.
Also sitting on the board are the heads of the Abu Dhabi state fund Mubadala Development Company, and China Investment Corporation.
In May last year, the QIA also bought a stake in Russian bank VTB.
The RDIF has for some time been wooing investors, particularly from the Gulf states and Asia, which comprise 90 percent of its funding sources.
Last year, it announced a partnership with Mubadala to invest $1 billion each. This followed a $2 billion fund with China Investment Corp in 2012 and a $500 million fund with the Kuwait Investment Authority.
Also last year, the head of Credit Suisse Qatar told Reuters that he expected the QIA to invest more in developing markets. Speaking at the Reuters Middle East Investment Summit in October 2013, Aladdin Hangari said:
“I think going forward, we’ll see them (QIA) doing more in emerging markets as long as they find the right opportunities.”
Russia sanctions
The move comes as some private equity firms have voiced concerns about investing in Russia.
Over the last two months, the EU and US have published lists of companies and individuals hit by travel bans and asset freezes. Some of them have close connections to Putin.
As Ukrainians go to the polls today to vote for a new President, the EU prepares itself to impose tough sanctions.
EU leaders say that if the elections are “not free and fair,” they will meet later this week to start detailed discussions on what sanctions they could impose on Russia –Â ranging from luxury goods imports to an oil and gas ban, Reuters reports.
Thoughts?
It makes sense to hedge your bets. Russia needs friends and it’s economy needs investment. (Russia’s economy is the size of Belgium). Qatar wants to diversify its investments and see the potential for a strong return from Russia. Qatar is also not concerned about the political climate and if Russia keeps invading and annexing parts of other countries as well, they will also not be bothered as long as they make a good return.
From a purely financial, if not moral, point of view it is a good move.
The investors in the same funds used for the Winter Olympics lost millions…..not so sure on this being a safe or good investment.
Making money is good but it also buys influence even if the investment goes south. Qatar would like help with Iran and Syria where Russia has influence, so by investing lots of money in Russia it buys you a seat at the table.
Buying influence, with Russia? This has also shown to be a poor investment. The point is you need to trust your investment partner. The world powers have a history of seeking investments from the Middle East but not honoring any influence or diplomatic overtures. Kuwait, Saudi Arabia, and Egypt all come to mind. Getting a seat at the table in terms of Syria and Iran will take quite a bit more than help in building a highway. As Qatar competes directly with Russia on their #1 export and is seen as a means of hedging against Moscow’s influence in the Ukraine, this may actually just be a means of smoothing that potential trouble spot over, which goes back to your point, but not in terms of influence with other Gulf or Levant entities, but rather just keeping the big bear at bay. It should be interesting to see the turn of events from this.
India and China are THE places to invest and to get your moneys worth but certainly not Russia or Egypt for that matter. One never knows when Russia is going to go they way of the USSR
Qatar already invested billions in China and India.
Expanding on what @loveitorleave:disqus said, Qatar has also invested billions in the US, UK, France, and the list goes on and on. Point is, Qatar wants, as MIMH pointed out, to diversify its investments.
Those Indian labourers has been invested in and Chinese ladies who used to be at the Sheraton…..
Putin must laughing out loud (as his foreign minister). Anyway, I would recommend to invest in some decent roads in qatar.
Invest in some traffic police training.
So after the Russians spent (extorted, spun, washed, stole, washed again, “invested”) billions in infrastructure projects that were not completed, the lesson taken away is to add more foreign investment to the coffers. There are economic investment questions that could be learned in this case, such as trusting the investment to yield a return. Given the last round of this for the Winter Olympics as a baseline learning curve, one would expect perhaps a wiser choice for $2Bn of sovereign debt. http://www.businessweek.com/articles/2014-01-02/the-2014-winter-olympics-in-sochi-cost-51-billion