INTERVIEW: Fund chief Kirill Dmitriev on why Russia-Saudi relations are about more than just oil

Illustration by Luis Grañena
Updated 10 June 2019
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INTERVIEW: Fund chief Kirill Dmitriev on why Russia-Saudi relations are about more than just oil

  • CEO of Russian Direct Investment Fund explains why relations between the two countries are “the best ever”

Kirill Dmitriev was one of the bigger attractions on the “corridor of power” at the St. Petersburg International Economic Forum last week.

The chief executive of the Russian Direct Investment Fund found it difficult to walk the long central avenue of the ExpoForum center on the city’s outskirts without being stopped by journalists and quizzed about the many deals RDIF announced at the three-day event, sometimes dubbed the “Russian Davos”.

An investment banker and private equity merchant by trade, since he was appointed to the top job at RDIF in 2011 Dmitriev has emerged as one of the leading advocates of the “new” Russian economy that President Vladimir Putin is trying to forge, and a staunch defender of the country’s sometimes controversial foreign policy.

He is also a big friend of Saudi Arabia. “I think Russia now has the best relationship ever with Saudi Arabia, thanks to the efforts of President Putin, King Salman and Crown Prince Mohammed bin Salman,” he told Arab News during a break in his whistle-stop tour of the forum exhibits. Though he does not say so, his own efforts have also contributed significantly to the development of that relationship. For the past couple of years — since the first Future Investment Initiative conference in Riyadh in 2017 — RDIF has been in partnership with the Kingdom’s Public Investment Fund (PIF) on a range of joint investments in Russia and Saudi Arabia. Last year, that was extended to include a three-way investment fund between Russia, China and Saudi Arabia. It is big strategic stuff.

The relationship goes back further than just two years, Dmitriev revealed. “It started four or five years ago with the visit of the Crown Prince to the forum, where he met our president and our investors. It all came from that,” he said.

 

BIO

BORN

• Kiev, 1975

EDUCATION

• BA Economics Stanford University, California, US

• MBA Harvard Business School, US

CAREER

• Investment banker, Goldman Sachs

• Consultant, McKinsey & Co

• Private equity executive

• CEO Russian Direct Investment Fund

 

Business and personal relationships struck then have proved enduring. The news headlines in St. Petersburg were all about the Saudi-Russia entente in the energy industry, where the Opec+ deal to limit production has helped stabilize oil prices at a time of great volatility.

“There is no doubt that an Opec+ agreement that allows Russia, Saudi Arabia and others to stabilize oil markets can be positive, will stay in place and will be going forward regardless of any short-term decisions,” he said.

“Maybe there will be a slight increase in production, maybe it stays the same, but regardless of that short-term decision in June, Opec+ will definitely do positive things for the world economy and our countries,” he added, as energy policymakers from the Saudi and Russian sides met in St. Petersburg to hammer out production details ahead of the next meeting of oil producers later this month.

But the Saudi-Russia relationship is about more than just oil, as Dmitriev explained.

“Basically it is all encompassing. It’s not only in the area of investments, it’s not only in the area of oil, but also in terms of culture. There is an exhibit where two great Saudi artists presented their work on artificial intelligence. Who could have imagined just four years ago that two Saudi artists, both of them female, would be in a Russian exhibition on artificial intelligence?

“It shows how the world is quickly changing and it shows that Russia and Saudi Arabia are great partners,” he said, referring to a cultural exhibition that opened in the famed Hermitage museum on the first day of the forum.

Dmitriev spelled out some of the areas where Saudi and Russian interests coincide. “There is a huge opportunity for Saudi Arabia to invest in Russian infrastructure, in technology and in the petrochemicals sector. We are discussing a number of deals with Saudi Aramco through Sabic in petrochemicals.

“For Russian companies, the interest is in oil services, and we have a petrochemicals project in Saudi Arabia. In infrastructure, a Russian company has offered to build a major bridge in Saudi Arabia, and our Russian railroads want to build railways there,” he said.

There is also likely be ongoing joint interest in the field of artificial intelligence, which is a big priority area for both the Kingdom and for Russia, and could tap in to Saudi Arabia’s growing international financial network.

“We have a joint fund with PIF in technology. So that will be the vehicle to do some AI stuff as well. And by the way PIF has a great partnership with SoftBank, so that relationship is also very important,” he said.

Tourism and leisure is another area where he sees potential mutual benefit. “We believe that lots of Russian tourists would benefit from and would enjoy going to Saudi Arabia. We have a major tourism program that is very interesting for Russian tourists, including Muslim Russian tourists,” he said.

At home, RDIF’s mandate, with $10 billion of reserved capital under its management, is to invest in the country’s infrastructure — roads, bridges, airports, transport and logistics systems — in pursuit of the Russian national program to modernize and transform its economy.

Much like Saudi Arabia’s Vision 2030, Russia — the world’s biggest energy producer — realizes it must diversify its economy away from oil dependency, and has also to overcome the effect of US-led sanctions on some sections of Russian business, imposed after the annexation of Crimea in 2014.

RDIF is one of the main instruments for achieving both goals. Hitherto dependent largely on government funding, there were some suggestions at the St. Petersburg event that it could seek to widen its appeal to private sector investors — Russian and global — for the next stage of its development.

Apart from President Putin, who regularly attends the forum, the big foreign guest was President Xi Jinping of China. His presence on the same podium as Putin underlined that, as trade tensions with the West increase for both Russia and China, the two big powers are increasingly likely to seek mutual support, especially in relation to Donald Trump’s US.

Dmitriev’s position on that prospect is nuanced. “China is an important and very strategic relationship for Russia, but it’s not a tactical decision, that we think about China now when there are trade wars with the US.

“Russia has had a good relationship with China in the past — it is definitely a very strategic partner the last ten years and we have signed a number of deals with them, including with Alibaba this week. We think Russia and China can do lots of great things together, but its not a relationship of Russia and China against somebody else. Russia is open to China, to the US, to Europe and the Middle East,” he said.

There was no official American presence in St. Petersburg after the US ambassador to Moscow said he would boycott the event in protest at the detention of Michael Calvey, a big US investor in Russia, in a dispute over ownership of private equity firm Baring Vostok.

Dmitriev’s view on Calvey and the US absence was carefully worded: “Well, we see lots of investors who did come, and it’s important to have constructive dialogue. And by the way in the forum we announced a joint investment with Baring Vostok. Calvey is a very credible person.” 

There were a raft of deals announced by RDIF during the forum, some involving Middle East investors, such as an infrastructure finance agreement to help build a new ring road around congested Moscow.

Perhaps the most eye-catching one involving Arab partners was an early stage project involving RDIF and other Russian corporations with DP World of the UAE to develop sea routes in the Arctic region.

Dmitriev explained the rationale. “Because of global warming, there are some things happening that open some opportunities. Russia has this frozen coast all of the seasons. Now it’s opening up and it’s possible to navigate for nine months. When you have special ships you can actually have 12 months navigation. That could cut the length of travel for many ships by half.

“So that’s a huge opportunity to reduce time of delivery, reduce costs of delivery. DP World is one of the largest infrastructure players in the world, one of the largest shipment companies that controls a huge portion of trade. Their commitment is to build with us different port facilities in the northern sea route, and it’s an example of how interesting economically this infrastructure is,” he said.

Earlier in the week, Dmitriev had stood alongside Khalid Al-Falih, the Saudi energy minister, at the Hermitage to applaud the new-found Russian-Saudi cooperation in art and technology. What began as a relationship in the energy business had obviously blossomed into something broader.

“Through oil deals and investment deals we really build friendship and great camaraderie,” he said, before weaving his way again through the media ambushes in the forum halls.


China to issue $2bn bonds in Saudi Arabia amid deepening bilateral ties

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China to issue $2bn bonds in Saudi Arabia amid deepening bilateral ties

RIYADH: China has announced plans to issue dollar-denominated bonds in Saudi Arabia starting the week of Nov. 11, marking its first debt issuance in US currency since 2021. 

The Asian country’s Ministry of Finance disclosed on Nov. 5 that it will sell up to $2 billion in bonds in Riyadh.

This issuance comes as China and the Kingdom are strengthening a multifaceted alliance that extends across multiple spheres.

In recent years, both nations have sought to broaden their economic cooperation, aligning strategic initiatives such as China’s Belt and Road Initiative with Saudi Arabia’s Vision 2030 plan.

“With the approval of the State Council, the Ministry of Finance will issue US dollar sovereign bonds of no more than $2 billion in Saudi Arabia in the week of November 11, 2024. The specific issuance arrangements will be announced separately before the release,” the ministry’s statement read.

Strengthening Saudi-Chinese relations

In September, the Kingdom’s Crown Prince Mohammed bin Salman and Chinese Premier Li Qiang co-chaired a pivotal meeting of the High-Level Saudi-Chinese Committee, where they reviewed aspects of joint cooperation and addressed regional and international developments. 

The session in Riyadh emphasized opportunities in energy, trade, and investment, as well as well as technology and security, while laying the groundwork for enhanced coordination across these sectors. 

Expanding tourism and education links

Tourism has emerged as a significant focus in Saudi-Chinese relations. In October, Saudi officials, including the Minister of Tourism Ahmed Al-Khateeb, engaged with Chinese counterparts to expand travel and investment ties.

The Kingdom received the designation of “Approved Destination Status” from Beijing earlier this year, following participation in key events in China. 

To attract 5 million visitors from the Asian country by 2030, Saudi Arabia has introduced Chinese payment processing options, launched tailored tourism campaigns, and increased direct flights between the two countries.

Growing trade and investment

China has been Saudi Arabia’s largest trade partner since 2014, with bilateral trade reaching $97 billion in 2023. This figure includes $54 billion in Saudi exports and $43 billion in imports from China. 

Investments between the two nations have also surged, with Chinese investments in the Kingdom rising from $1.5 billion in 2022 to $16.8 billion in 2023. Saudi investments in China are also substantial, totaling $75 billion.

Saudi Arabia and China are exploring new avenues for collaboration, including joint investments in renewable energy, infrastructure, and technology, with a focus on sustainable development. 

The crown prince’s 2019 visit to Beijing set a foundation for this strategic partnership, resulting in 12 agreements and memoranda of understanding that continue to shape bilateral cooperation.


Saudi Arabia awards 11 mining exploration permits under accelerated program

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Saudi Arabia awards 11 mining exploration permits under accelerated program

JEDDAH: Saudi Arabia has granted 11 mining exploration permits to local and international companies for six sites under its Accelerated Exploration Program, which aims to unlock the Kingdom’s underutilized mineral resources.

On Nov. 5, the Ministry of Industry and Mineral Resources announced that the permits, covering a total area of 850 sq. kim across Riyadh, Makkah, and Asir, were awarded as part of a competitive licensing round designed to boost the country’s mineral sector. This initiative is aligned with Saudi Arabia’s Vision 2030 and the National Industry Development and Logistics Program.

The recent competition concluded with one national company and five alliances consisting of 10 local and international firms being awarded the exploration rights. The competition was designed to maximize the value of the country’s mineral resources and expand the mining industry as a key pillar of the economy.

Transforming the mining sector

Saudi Arabia is aiming to transform mining into the third pillar of its industrial base, alongside oil and petrochemicals. The Kingdom is home to more than 5,300 mineral sites, estimated to be worth around SR5 trillion ($1.33 trillion), and the ministry is actively seeking to harness these resources to fuel economic growth.

Among the winners, the alliance of ANS Exploration and Odyssey Metal Ltd. was granted an exploration license for the Umm Qasr site in Riyadh, known for its deposits of gold, silver, lead, and zinc. Gold and Minerals Co. secured a license for the Wadi Doush site in Asir, an area rich in gold, silver, and copper ore deposits, covering 157 square kilometers.

The alliance of AuKing Mining Ltd. and Barg Al-Saman Mining Co. received a license for the Shuaib Marqan site in Riyadh, spanning 92 square kilometers and noted for its copper, silver, and gold resources. Meanwhile, Metal Bank Ltd. and the Mining Holding Co. were awarded the Wadi Al-Jouna site in Asir, which covers 425 square kilometers and contains copper, zinc, silver, and gold.

Other awarded licenses include the Hazm Shubat site in Asir, granted to the Rawkad and Masharef alliance, which is known for its gold deposits. The Midad Al-Muna for Mining and Tinka Resources alliance was given the license for the Huwaimdhan exploration site in Makkah, which also holds significant gold resources.

Commitment to local development

A total of 44 bids were received from 22 companies — many of them new to the Saudi market—during the competition. Bids were evaluated based on technical expertise, proposed work programs, and social and environmental considerations. As part of their commitment, the winning companies have pledged to invest SR75 million ($20 million) in exploration activities and SR5 million toward community development, aiming to create jobs and opportunities for citizens in underserved areas.

This licensing round marks a significant milestone for Saudi Arabia’s mining sector, with four companies receiving exploration licenses for the first time, further cementing the Kingdom’s appeal as a leading investment destination for mining.

Aligning with Vision 2030

The ministry highlighted that this initiative reflects investors' confidence in Saudi Arabia’s mining investment framework, which adheres to the highest standards of transparency and environmental responsibility. It also underscores the country’s commitment to diversifying its economy in line with Vision 2030, which aims to develop the mining sector as a key economic driver.

In a related development, the ministry recently announced another competition for seven mining exploration licenses, covering regions in Makkah and Riyadh and targeting a range of precious and base metals, including gold, copper, zinc, lead, and silver. The deadline for submitting technical proposals for this new licensing round is at the end of November.


Private sector drives 6.1% rise in Saudi capital investment for Q2

Updated 32 min 9 sec ago
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Private sector drives 6.1% rise in Saudi capital investment for Q2

RIYADH: Saudi Arabia’s gross fixed capital formation reached SR296 billion ($79 billion) in the second quarter of 2024, marking a 6.1 percent year-on-year increase, according to recent data. 

The Ministry of Investment attributed this growth primarily to the non-government sector, which holds an 86.45 percent share of total GFCF.  

This sector saw an 8.2 percent increase, reaching SR255.9 billion, reflecting robust private-sector activity aligned with Vision 2030’s targets to boost private investment. Conversely, GFCF in the government sector declined by 5.2 percent to SR40.1 billion.   

GFCF, which measures net investments in assets like infrastructure, machinery, and construction, is a key indicator of long-term economic potential, as it reflects capacity-building investments that drive productivity and growth. 

Saudi Arabia’s appeal as a top investment destination continues to grow, with the Ministry of Investment issuing 3,810 licenses in the third quarter — a 73.7 percent annual rise, excluding permits from the Tasattur anti-concealment initiative.  

This strong performance highlights the Kingdom’s successful positioning as a competitive market, driven by an increasingly stable and business-friendly environment, according to the report. 

The ministry’s October report, which aligns its data with the latest IMF guidelines, showed that Saudi Arabia’s foreign direct investment stock reached SR897 billion in 2023, a 13.4 percent increase from 2022.  

Excluding the one-time SR55 billion Aramco pipeline deal, the data showed that net inflows — representing the total new foreign capital coming into the country after accounting for outflows — also surged by 91 percent during this period, reaching SR86 billion. 

As Saudi Arabia pushes toward its goal of making FDI 5.7 percent of its gross domestic product by 2030, this upswing in foreign capital not only strengthens the Kingdom’s position as a global investment hub but also reinforces the ongoing expansion in GFCF, contributing to sustainable economic growth.  

Saudi Arabia has been advancing a range of initiatives to attract and deepen foreign investment, positioning itself as a hub for international business in the Middle East. 

One such measure, announced in 2021, requires foreign companies bidding for government contracts to establish regional headquarters within the Kingdom by 2024. 

This mandate has already encouraged major firms to set up shops in Riyadh, underscoring the Saudi government’s commitment to drawing long-term investment. 

The Public Investment Fund has also played a critical role in bolstering the investment landscape. 

Recently, PIF signed a memorandum of understanding with Brookfield Asset Management to become an anchor investor in Brookfield Middle East Partners. 

This private equity platform plans to raise $2 billion to invest in various high-growth sectors, such as technology, healthcare, and industrials. Additionally, at least half of BMEP’s capital will be allocated to Saudi-based companies, facilitating FDI inflows directly into the Kingdom. 

Another major win came with BlackRock, the world’s largest asset manager, which recently secured approval to establish a regional headquarters in Riyadh. 

This move is set to expand BlackRock’s Middle East operations significantly, reinforcing Saudi Arabia’ appeal as an investment destination for global financial firms. 


Energy sector drives GCC IPO gains in Q3, positive year-end outlook: PwC 

Updated 54 min 37 sec ago
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Energy sector drives GCC IPO gains in Q3, positive year-end outlook: PwC 

RIYADH: Initial public offerings across the Gulf Cooperation Council region registered a year-on-year increase in proceeds in the third quarter of 2024, despite a decline in the number of listings, according to a new report. 

The energy sector spearheaded this quarter’s growth, led by NMDC Energy’s listing, which raised $877 million — the largest IPO in the UAE this year, stated PwC Middle East. 

Saudi Arabia’s parallel market, Nomu, also contributed to the quarter’s performance, with three listings. 

PwC forecasts strong aftermarket performance for companies completing IPOs in 2024, predicting that most of the top 10 IPOs by deal size will trade above their initial offering prices. 

This outlook suggests a favorable market reception for large IPOs in the coming year, with strong investor demand potentially driving post-IPO stock prices higher. 

“As has been the case in recent years, Q3 has seen relatively few companies come to market. Since the end of the quarter, we have seen a number of IPOs either completed or announced across the GCC, including OQ Exploration and Production, Oman’s largest ever IPO, supporting the positive outlook for the remainder of 2024,” said Muhammad Hassan, capital markets leader at PwC Middle East. 

In the third quarter, bond issuances in the GCC raised $4.4 billion, marking an almost 30 percent increase over the previous year. 

Additionally, $5.2 billion was raised through sukuk issuances, with 88 percent of these bonds listed on the Qatar Stock Exchange or Nasdaq Dubai. 

Governments in the region accounted for nearly 65 percent of total bond and sukuk issuances. 

“Looking forward, the outlook for the GCC IPO market remains positive with a healthy IPO pipeline of companies from a diverse range of sectors busy preparing for their upcoming IPOs across the region,” the report stated. 


Saudi-Portuguese Business Council launches investment regulation initiative to boost trade

Updated 38 min 17 sec ago
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Saudi-Portuguese Business Council launches investment regulation initiative to boost trade

RIYADH: Saudi Arabia and Portugal are aiming to increase awareness of investment regulations in both countries to boost trade thanks to a first-of-its-kind initiative.

Announced by the Federation of Saudi Chambers, the Saudi-Portuguese Business Council signed a memorandum of understanding with Ibrahim Al Howishel Law Firm to facilitate the entry of Portuguese companies into the Kingdom.

The MoU will also encourage regional companies to invest in Portugal by acting as a legal advisor. It will be the first of its kind among Saudi foreign business councils within the federation.

Its objective is to increase the number of international investors in the Kingdom by informing them about the positive developments, regulatory environment, and investment landscape.

Walid Al-Balhan, chairman of the Saudi-Portuguese Business Council, emphasized that the recently signed MoU aligns with Saudi Arabia’s Vision 2030, which aims to attract foreign investment and strengthen international business ties.

He also said the advisor would address investor queries and provide guidance on regulations, building confidence among Portuguese companies looking to enter the Kingdom.

He extended his gratitude to the Federation of Saudi Chambers and relevant government bodies for their support of the council’s initiatives.

Under the agreement, both parties will collaborate with the Kingdom’s authorities to host workshops for Portuguese firms interested in the Saudi market.

These sessions are expected to cover key topics, including the Premium Residency system, foreign investment regulations, and company setup processes, as well as strategic investment opportunities and incentives for firms considering relocating their headquarters to Saudi Arabia.

The agreement also includes cooperative efforts to refine investment procedures for Saudi companies in Portugal, propose incentives for entities from the European country to attract investors within the Kingdom, and provide advisory support for companies in both nations.