Davos 2019: Saudi investment in Russia ‘hits $2.5bn’

Kirill Dmitriev, CEO of the Russian Direct Investment Fund, revealed further details of a Saudi investment deal at the Davos forum. (WEF)
Updated 23 January 2019
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Davos 2019: Saudi investment in Russia ‘hits $2.5bn’

  • Public Investment Fund in 2015 signed agreement to invest $10bn in Russia
  • Russian fund chief says talks underway for gas, petrochemicals deals

DAVOS: A quarter of Saudi Arabia’s pledged $10 billion investment in Russia has been deployed, the boss of Moscow’s sovereign wealth fund said on Wednesday.

The Saudi Public Investment Fund (PIF) in 2015 signed an agreement to invest up to $10 billion in Russia through a partnership with the Russian Direct Investment Fund (RDIF).

Kirill Dmitriev, chief executive of RDIF, told the Davos forum on Wednesday that $2.5 billion of that money had been invested. 

“We’re at $2.5 billion, and there are some mega-deals discussed by Saudi Arabia to invest in our (liquefied natural gas) sector, and in our petrochemicals sector. So it’s a really very good cooperation,” Dmitriev said. 

The $2.5 billion investment marks a rapid increase in the pace of Saudi investments in Russia. In December, Dmitriev said that, as of late 2016, Saudi Arabia’s investment in Russia “stood practically at zero,” according to the Russian News Agency.

The fund chief said that there was a wider warming of relations between Saudi Arabia and Russia, aside from the investment deals.

“Many people blame Saudi Arabia for pressure on the Soviet Union, because they brought oil prices very low when the Soviet Union collapsed, and obviously the war in Afghanistan. But in three years, under the leadership of President Putin, and (Saudi Crown Prince) Mohammed bin Salman, we were able to really make it a strategic, positive relationship,” Dmitriev said.

He pointed to a cooperation between Russia and Saudi Arabia, as well as other OPEC members, to agree to cut oil output to help stabilize energy prices, along with “major investment inflows.”  

“It’s an example of how, in a fractured world, we can have a positive impact in two or three years, of rebuilding relationships between countries.”

 

Dmitriev said Russia was looking to bring in more foreign investment under the country’s plan for national projects. 

“We need to destroy this myth that Russia is not producing positive returns. It is producing positive returns,” he said. 

“As part of this National Projects Plan, we believe it is very important to bring in foreign investors, because … lots of co-investment in addition to government money brings additional transparency and clarity into projects.”

The Middle East is key to this, he added.

“With the United Arab Emirates we have done 45 investments already, and we have major investment flows coming from the Middle East, including Saudi Arabia,” Dmitriev said.


Gulf defense spending ‘to top $110bn by 2023’

Updated 15 February 2019
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Gulf defense spending ‘to top $110bn by 2023’

  • Saudi Arabia and UAE initiatives ‘driving forward industrial defense capabilities’
  • Budgets are increasing as countries pursue modernization of equipment and expansion of their current capabilities

LONDON: Defense spending by Gulf Arab states is expected to rise to more than $110 billion by 2023, driven partly by localized military initiatives by Saudi Arabia and the UAE, a report has found.

Budgets are increasing as countries pursue the modernization of equipment and expansion of their current capabilities, according to a report by analytics firm Jane’s by IHS Markit.

Military expenditure in the Gulf will increase from $82.33 billion in 2013 to an estimated $103.01 billion in 2019, and is forecast to continue trending upward to $110.86 billion in 2023.

“Falling energy revenues between 2014 and 2016 led to some major procurement projects being delayed as governments reigned in budget deficits,” said Charles Forrester, senior defense industry analyst at Jane’s.

“However, defense was generally protected from the worst of the spending cuts due to regional security concerns and budgets are now growing again.”

Major deals in the region have included Eurofighter Typhoon purchases by countries including Saudi Arabia and Kuwait.

Saudi Arabia is also looking to “localize” 50 percent of total government military spending in the Kingdom by 2030, and in 2017 announced the launch of the state-owned military industrial company Saudi Arabia Military Industries.

Forrester said such moves will boost the ability for Gulf countries to start exporting, rather than purely importing defense equipment.

“Within the defense sector, the establishment of Saudi Arabia Military Industries (SAMI) in 2017 and consolidation of the UAE’s defense industrial base through the creation of Emirates Defense Industries Company (EDIC) in 2014 have helped consolidate and drive forward industrial defense capabilities,” he said.

“This has happened as the countries focus on improving the quality of the defense technological work packages they undertake through offset, as well as increasing their ability to begin exporting defense equipment.”

Regional countries are also considering the use of “disruptive technologies” such as artificial intelligence in defense, Forrester said.

Meanwhile, it emerged on Friday that worldwide outlays on weapons and defense rose 1.8 percent to more than $1.67 trillion in 2018.

The US was responsible for almost half that increase, according to “The Military Balance” report released at the Munich Security Conference and quoted by Reuters.

Western powers were concerned about Russia’s upgrades of air bases and air defense systems in Crimea, the report said, but added that “China perhaps represents even more of a challenge, as it introduces yet more advanced military systems and is engaged in a strategy to improve its forces’ ability to operate at distance from the homeland.”