Russia’s RDIF chief reveals investment plans with Saudi Arabia

Russian Direct Investment Fund (RDIF), Russia's sovereign wealth fund, along with its Saudi partners is looking at 25 new projects with plans to invest over $2 billion this year, RDIF CEO Kirill Dmitriev told Argaam in an exclusive interview.

A Saudi delegation, led by Saudi Minister of Energy, Industry and Mineral Resources Khalid Al-Falih, is set to take part in St. Petersburg International Economic Forum (SPIEF) from June 6 to 8.

Dmitriev revealed that RDIF and Saudi Aramco, the world's largest oil producing company, are expecting to conclude the deal to acquire a stake in Novomet, Russian oil production equipment manufacturer, in the near future.

Additionally, the Russian sovereign wealth fund is also currently working with the Public Investment Fund, Saudi sovereign wealth fund, on nine projects in the oilfield servicing and refining sector, freight transportation, railroad logistics and IT.

According to Dmitriev, the RDIF has offered about 30 investment projects in the Russian petrochemical sector to Saudi Stock Exchange-listed Saudi Basic Industries Corp (SABIC).

“Three projects have been selected for detailed review by SABIC, and one of them will be reviewed by their investment committee in the coming weeks,” he stated.

Excerpts from the interview:

Q: A large delegation from Saudi Arabia is coming to St. Petersburg International Economic Forum (SPIEF), which starts on June 6. What do you expect from the forum this year?

A: RDIF is pleased to welcome the Saudi delegation, headed by Saudi Minister of Energy, Industry and Mineral Resources Khalid Al-Falih, to the St. Petersburg International Economic Forum, where they will have a very prominent role. This will mark the first time in SPIEF’s history that Saudi Aramco and SABIC will have their own stands alongside their Russian and international peers. This Saudi presence at SPIEF shows the growing ties between our countries.

The key event of the forum is the meeting between leading global investors and Russian President Vladimir Putin, organized by RDIF. This year investors attending the meeting will have a total of over $15 billion, or 20 percent of all global assets under management, a record amount at these annual meetings.

On the first day of the forum RDIF and The State Hermitage, one of the world’s leading museums, will open an exhibition “Artificial Intelligence and Intercultural Dialogue”, dedicated to the creative capabilities of Artificial Intelligence (AI).

Two female artists from Saudi Arabia - Lulwah Al Homoud and Daniah Alsaleh - are taking part in this exhibition, which displays the scale of transformation in the country.   

Q: Which new sectors and projects are you looking to invest with the Saudi partners?

A: We are inviting Saudi, and other international investors, to join us in investing in Russia’s national projects, as part of an initiative launched by President Vladimir Putin aimed at transforming and modernizing the Russian economy, as well as raising the quality of life for ordinary Russian people. An initiative that is very similar to the Crown Prince Mohammed bin Salman’s Vision 2030 program.

The plan sees an investment of $400 billion into areas that are vital for developing the economy or improving the quality of life, including healthcare, education, and the environment. As well as fostering cultural development, future investments will target key infrastructural improvement, including high-quality roads and housing, and also supporting small enterprises and non-commodity exports, raising productivity, and growing the digital economy. Under the plan, there are clear targets set for each of these areas and allocated budget funds.   

At the RDIF we studied over 400 individual projects which can potentially become part of national projects and concluded that at least 30 percent of the total funding for national projects can be replaced with funds from private investors.

We believe that through the effective participation of private investors, these projects will become much more efficient.

Some of the previous projects we had jointly invested in with our Saudi and other international partners fits the description of these national projects. For example, as part of the development of high-quality roads, we are building a toll bypass for one of Moscow’s busiest avenues. This is being achieved at no expense to our budget, as it is being built with money entirely from private investors, including from Saudi Arabia.

Together with Russian company Rostec and partners from Saudi Arabia and Turkey, we are working towards building waste processing infrastructure that should reduce the amount of unprocessed waste in the Moscow region by 30 percent. This project aligns with the aims of the national project due to its ecological benefits.

Alternatively, as we target healthcare benefits under the national project, we are also building a network of oncology treatment centers.   

We are currently working with PIF on nine projects in the oilfield servicing and refining sector, freight transportation, railroad logistics and IT.  

We have brought several successful business missions to Saudi Arabia and will continue to work to open up Saudi markets for Russian companies.

The business mission at the start of this year included over 20 majority shareholders and senior managers of leading Russian companies, including petrochemicals holding SIBUR, submersible pump manufacturer Novomet, and fertilizer producer Phosagro.

Overall, RDIF and Saudi partners are looking at 25 new projects and are planning to invest over $2 billion this year. RDIF and Saudi Aramco are expecting in the near future to conclude the deal to acquire a stake in Novomet.

RDIF has also helped the company to become the first Russian supplier of Saudi Aramco and will continue to assist it to expand in the Middle Eastern markets.

With our Saudi partners, we are looking into a project with SIBUR to build a rubber plant in Saudi Arabia. The Russian company will have up to 49 percent stake in this project, and France’s Total will also be a shareholder. We also expect to bring an Asian investment partner into this project as well.     

Through the energy investment platform  RDIF, Saudi Aramco and PIF are looking at a number of projects in the oilfield services sector. RDIF and its Saudi partners are also considering potential projects in the technology sector.

Other projects under review include the localization of technologies developed by Russian oil infrastructure firm Transneft in Saudi Arabia, the production of insulin and modern vaccines by Russian companies in Saudi Arabia, and also the construction of healthcare centers, railroad infrastructure and water treatment projects in Riyadh and Jeddah. Additionally, we are also looking at joint projects in space exploration.

Q: RDIF has a $10 billion investment partnership with the Public Investment Fund (PIF), more than $2.5 billion already invested in projects. Can you describe the projects where you have invested along with the PIF?

A: Over the last four years the Kingdom of Saudi Arabia has become one of the most important partners for RDIF since the first meeting between Russian President Vladimir Putin and Crown Prince Mohammed bin Salman during the St. Petersburg International Economic Forum (SPIEF) in 2015. This was followed by the historic visit of the Custodian of the Two Holy Mosques, King Salman in 2017.

Since its inception in 2011, RDIF has formed over 20 partnerships with funds and companies from 15 countries, investing over $25 billion in more than 70 projects and becoming one of the world’s most leading sovereign wealth funds.  

Saudi Arabia had never invested in Russia before. Today, our partners from Saudi Arabia have invested in such landmark projects as Zapsibneftekhim, Russia’s largest modern petrochemical plant being built by Russian company SIBUR, Pulkovo international airport in St. Petersburg, the largest airport in Northwestern Russia, Northern bypass toll road for Kutuzovsky avenue in Moscow, development from scratch of the largest technology park in Russia.

Other investments include the construction of small hydropower plants in Northern Russia, the Detsky Mir children retail chain, trucking company GlobalTruck, leading global developer of holographic images and navigation systems WayRay.

The joint investment portfolio of RDIF and Public Investment Fund have shown positive returns, beating key international indexes.

Q: Are you still considering investment in Arctic LNG project together with Saudi Aramco?

A: We have a broader view on this issue. From the strategic point of view, we think that the Russian petrochemical industry has huge potential for investment and development in terms of import substitution, the creation of jobs and the development of exports. Russia’s natural gas reserves are four times bigger than Saudi Arabia’s, while at the same time the market capitalization of the Russian petrochemical industry is five times smaller. The potential is huge, and we estimate the creation of at least $100 billion in value.

Our Saudi partners have a unique expertise in this sector and a portfolio of successfully completed international projects. We would like to bring this expertise to Russia. RDIF can bring into this sector financial resources from its partners. At the same time, we understand the economics of this sector as investors in Zapsibneftekhim project.

We have studied in detail about 30 investment projects in the Russian petrochemical sector and offered them to Saudi Basic Industries Corp (SABIC). Three projects have been selected for detailed review by SABIC, and one of them will be reviewed by their investment committee in the coming weeks.

Q: Do you see the potential for joint investment in technology?

A: We see artificial intelligence (AI) as a very attractive sector for investment. RDIF is currently the key player in the sector after attracting $2 billion from our foreign partners for investment in AI development in Russia. With this in place, Russia has the potential to become one of the global leaders in AI development. We believe that through the use of AI, we can raise productivity in some sectors by 30-40 percent.

RDIF has presented an eight-step strategy of AI development in Russia at a meeting chaired by President Putin on May 30. Part of the strategy involves teaming up with our partners from the Middle East and Asia in order to open new markets for Russian AI developers.  We have scanned 100 leading Russian companies specializing in AI development, selected 20 of the most promising ones and have already made six investments.

One of the major deals which we are going to sign is the deal with Chinese e-commerce giant Alibaba. The deal will create the biggest e-commerce company in Russia, together with our Russian partners Mail.ru Group and Megafon.

This will be the biggest technology investment in the history of our country. As a result, small and medium-sized enterprises in Russia will gain access to Alibaba’s infrastructure, becoming able to sell their products to millions of customers all over the world.

RDIF and PIF have created a $1 billion technology investment platform and we are looking for more joint investments in this sector.  

To contact the writer, email Parag Deulgaonkar at parag.d@argaamplus.com