Russia seeking its place on the Belt and Road map

Russia is looking for closer participation in China's Belt and Road Initiative through government-backed investment in projects that put the country on the map, according to a top sovereign wealth fund manager.

Kirill Dmitriev, chief executive of the Russia Direct Investment Fund and co-chief executive of the Russia-China Investment Fund, says his team is eyeing more opportunities related to the initiative after having already made several successful investments.

"The Belt and Road Initiative is very important for Russia, as it can provide sources of additional growth," he says. "Russia is strategically placed between China and Europe, and we can participate to provide more connectivity in the initiative."

The $2 billion Russia-China Investment Fund was launched in 2012 as a joint venture between China Investment Corp and the Russia Direct Investment Fund, with each side committing $1 billion.

The Russian fund and joint China-Russia fund have both invested in projects, many of which facilitate connectivity between China and Europe through Russia. Projects include an airport project in Vladivostok that helps Chinese tourists travel and do more business in Russia's Far East, a railroad bridge over the Heilongjiang River - also known as Amur River - that connects China with Russia and cuts transportation costs, and a telecommunications network that potentially could connect China and Europe through Russia.

Dmitriev's comments come after presidents Xi Jinping and Vladimir Putin signed a joint statement in May on integrating the Belt and Road Initiative with Russia's aspirations under the Eurasian Economic Union framework.

The Chinese initiative is aimed at further strengthening trade and investment integration between Asia and Europe through infrastructure development. The Eurasian Economic Union is targeted at integration of states located primarily in northern Eurasia, and was originally set up by Russia, Belarus and Kazakhstan.

The closer cooperation between China and Russia on regional integration has resulted in many government-backed business deals, one being oil company Sinopec's purchase of a 10 percent share in Russia's largest gas processing and petrochemicals company, Sibur, in December, a deal that aims to strengthen both countries' petrochemicals industry efficiency.

Dmitriev says the Russia-China Investment Fund is focused on committing to projects that would help the common interests of China and Russia, with a focus on sectors like technology, production of natural resources with added value, and agriculture.

He says the fund is keen to get involved in more projects that include Russia's contribution to the Belt and Road map, and its current investment pipeline is about $3 billion. He says support from the Chinese and Russian governments for the joint fund is key to its advantages, as it cuts out geopolitical risks that individual Chinese and Russian investors may face.

Dmitriev says the fund's strategy is to invest in projects that would provide a good financial return, rather than invest in sectors or companies for political reasons. From an investment decision-making perspective, it functions like any other private sector fund.

"We believe real returns are key to investment. In the process of creating good returns, you create jobs and economic growth."

In 2015, the Russia-China Investment Fund invested in Didi Kuaidi, a Chinese taxi-hailing app, and online education platform Tutor Group. The latter launched an English-learning platform for the Chinese mainland, Asia and other countries in 2004, but now offers more languages and has attracted funding from the likes of Alibaba and Qiming Venture Partners.

Dmitriev says companies like Didi, Kuaidi and Tutor Group are already leaders in China, but the same business models can be applied equally to Russia, and he hopes by investing in those countries the fund can help to develop synergies.

He says the fund has approved about 15 transactions and that, so far, the projects have been profitable.

Although China's growth has slowed, Dmitriev says he is not worried. "We believe it is good growth, although we do expect there will be fluctuations in the market, and we believe China will continue to be a key driver of the world economy."

He also has high expectations for China's leadership of the G20 this year, and he hopes the country will work toward tackling unnecessary global trade and investment barriers that hamper Chinese and Russian outward investment.

cecily.liu@mail.chinadailyuk.com