Sovereign Brothers of Wealth wait patiently as Qatar’s investment authority loses a lot on Rosneft Holding

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Posted 03/05/2022

The Russian oil and gas giants on the London Stock Exchange saw their share prices plummet following the Russian invasion of Ukraine. In the last consequential period in Eastern Europe, the US Treasury has increased the number of sanctions against Russia, including by blocking the Russian central bank.

Prior to the annexation of Crimea to Russia in 2014, the Russian Direct Investment Fund (RDIF), the country’s sovereign wealth fund for strategic development (SDSWF), paved the way for institutional investors to access Russian developments and investments. RDIF has formed a number of bilateral funds with nations such as the United Arab Emirates, Saudi Arabia, Kuwait, Bahrain, Italy, France, India, China and Japan. China Investment Corporation (CIC) and RDIF created the $ 2 billion Russia-China Investment Fund. Other bilateral investment funds have supported themselves such as the Russia-Japan Investment Fund (with the Japan Bank for International Cooperation). RDIF has also built forays with Italy and France. RDIF and Fondo Strategico Italiano (FSI) have previously formed a 1 billion euro Italian-Russian investment platform. Similarly, RDIF and Caisse des Depots International (CDC International) formed the Russia-France Investment Platform.

Sovereign funds
Sovereign wealth funds are long-term institutional investors, usually able to await scandals, economic events and even global pandemics. According to transaction data from the Sovereign Wealth Fund Institute (SWFI), Gulf-based sovereign wealth funds are the largest group of cohort sovereign investors in Russia, followed by Asian sovereign wealth funds. Gulf sovereign wealth funds have been hit accounting for their holdings in Russia. Since the Russian invasion of Ukraine began, Russian stocks have declined due to increased sanctions by the US and Europe. Shares of Rosneft, Gazprom, Lukoil and Surgutneftegas collapsed on the London market, losing up to $ 190 billion of their combined market capitalization, or 95%. Rosneft is Russia’s largest oil producer. The Qatar Investment Authority (QIA) is an institutional investor in Russia, which chooses strategic deals. At the time, QIA had a 4.5% stake in Rosneft. In 2018, QHG Oil Ventures sold a 14.2% stake in Rosneft for € 7.4 billion (US $ 8.4 billion) to QIA. This brought QIA ownership in Rosneft to around 19%. Previously, Qatar also felt isolated. Qatar was locked in an economic boycott imposed by Saudi Arabia, the United Arab Emirates, Bahrain and Egypt, which cut off diplomatic and transport ties with Doha in 2017, accusing it of supporting terrorism.

Abu Dhabi-based Mubadala Investment Company traded around $ 6 billion in investments in Russia and has over 45 investments in the country from 2013 to 2022. Prior to the invasion, Mubadala made an investment in PJSC SIBUR Holding and En + Group International PJSC. En + Group holds control of Rusal, one of the largest aluminum producers in the world and the largest outside of China. Mubadala has a satellite office in Russia in addition to having a $ 2 billion co-investment vehicle with RDIF. In addition, Mubadala manages a $ 5 billion commitment from the Abu Dhabi Department of Finance to invest in Russian infrastructure projects. The Saudi Arabian Public Investment Fund (PIF) has exposure to some Russian investments, as well as the Kuwait Investment Authority, the Abu Dhabi Investment Authority and Mumtalakat Holdings. The PIF has invested $ 10 billion in a partnership managed by the RDIF to invest in projects in Russia, in areas including infrastructure and agriculture.

Middle Eastern sovereign wealth funds are familiar with wars, economic crises and other similar events. They also understand the influence of a Russky Mir, a Russian world, in their hemisphere and the importance of trade. The Middle East needs secure access to wheat and other forms of agriculture to feed a growing population.

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