Saudi Arabia To Invest $10bn In Russia


The diplomatic relationship between Russia and Saudi Arabia seems to have turned a corner in recent weeks. Fresh off the heels of their deal to produce nuclear power, the two countries have announced a new cooperation. Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, and the Russian Direct Investment Fund have announced a profound financial commitment. Saudi Arabia pledges to invest $10bn into Russian projects over the next four to five years, with the help of the Russian Direct Investment Fund. To further increase the country’s investment in international markets, Saudi Arabia will use Russian projects.

The deal between Saudi Arabia and Russia was finally carved out at last month’s St Petersburg International Economic Forum. The annual event brought together leading businesses such as Goldman Sachs and GE, and senior diplomats, from all over the world. After striving for a year, Saudi Arabia and Russia are eager to begin the new projects.

The new deal is already moving extremely fast. Seven projects have already been given the go-ahead, and they are now in the final stages. It is expected that ten will be completed by the end of this year.

The investment projects are in variety of sectors, spanning infrastructure, logistics, and agriculture. However, it is not one-sided. In addition to this deal, Saudi Arabia and Russia have developed plans for increased Russian investment in Arab countries. In conjunction with he Saudi Arabian General Investment Authority, the Russian Direct Investment Fund will invest into projects in Saudi Arabia, and elsewhere in the Middle East. The thaw in Saudi-Russian relations is not happening in isolation. Although both countries differ in their positions on Syria, Iran, and the Crimea, other factors may made these seem relatively minor – at least in the face of economic success.

The continued advance of the emerging countries, and the financial difficulties in the west (particularly in Europe) have convinced these countries of the need to cooperate. With these changing economic tides, laying down differences for the common good is the right option – and the smart one.

An initial $10bn investment from Saudi Arabia may open the door to significant financial cooperation in future.

A degree of economic cooperation between the two countries could help to transform the economic balance in the world. Both countries are regional powers, so their increasing cooperation could well encourage their neighbours to seek opportunities. Russia and Saudi Arabia are both leading oil producers, and this is an area in which the emerging countries have long depended on each other. Cooperation and collaboration are key to international trade, especially in the emerging economies. Recently Russia overtook Saudi Arabia to become the largest oil exporter to China. Perhaps now Saudi and Russia’s competition in the international arena can move away from funding proxy wars, and more towards trade deals. The BRIC countries have already overcome barriers to create a development bank for the benefit of emerging countries. With Saudi Arabia and Russia’s economic détente, wider cooperation in the emerging markets is inevitable – and all will be better for it.

If you like this article you may be interested in “An Unlikely Partnership? Saudi Arabia and Russia’s Nuclear Deal”.


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