Russia and Saudi Arabia have deepened ties stemming from a 2016 agreement on oil, to include partnerships by their respective sovereign wealth funds. 

Kirill Dmitriev

Relations between Russia and Saudi Arabia have not always been warm. For decades during Soviet times, any relationship between the two countries was difficult, given the geopolitical differences.

Since 2015 however, when Saudi Arabia’s then-crown prince visited the St Petersburg International Economic Forum and met with president Vladimir Putin and a number of investors, the situation has started to change. It was then that Russian and Saudi Arabian sovereign wealth funds, the Russian Direct Investment Fund (RDIF) and the Saudi Arabia's Public Investment Fund (PIF), established a $10bn partnership to invest in attractive projects in Russia to promote trade and investment co-operation between the two countries.

The growing understanding between our two countries became increasingly evident in 2016 when, at a time of severe oil price volatility, the need to cut oil production became the most viable solution to bring stability to the global market. This joint effort to stabilise the price of oil (and therefore the global energy market) demonstrated Russia’s ability to successfully co-operate with Organisation of the Petroleum Exporting Countries (OPEC) – and particularly Saudi Arabia – for mutual benefits stretching far beyond energy markets.

The OPEC-plus (a group comprising OPEC and its allies) deal helped, and will continue to help, foster the growth of the Russian economy as well as global economic growth. The first OPEC-plus agreement generated an additional $130bn for the Russian budget, freeing up funds to finance major infrastructure projects and other key growth initiatives.

The OPEC-plus deal has also contributed to the stability of the global oil markets and enabled producers to adjust production depending on market conditions, providing predictability to the market. The deal also had a positive broader macroeconomic effect, as it helped stabilise the Russian ruble exchange rate, inflation and other macroeconomic indicators. Such stability is a crucial factor for foreign investors in Russia.

Joint investments

As Russia’s sovereign wealth fund, RDIF acts as the catalyst for attracting foreign direct investment, talent and technologies into the country, maximising returns on invested capital and contributing to the modernisation of the Russian economy. Our focus from day one has been on identifying profitable joint investment opportunities and bringing in high-quality investors, and Saudi Arabia’s PIF is one such partner. Saudi companies have never invested in Russia before, and we are proud that the PIF made the first investment in Russia with RDIF.

Together we have already invested more than $3bn in strategic infrastructure and technology projects in Russia, such as Pulkovo International Airport in St Petersburg; ZapSibNeftekhim, Russia’s largest modern petrochemical facility; the development of Russia’s largest technological park at the former airfield of Tushino in Moscow; and the construction of a toll road bypassing Kutuzovsky Prospekt – one of Moscow’s busiest avenues.

During King Salman’s official visit to Moscow in 2017, RDIF, Saudi Aramco and the PIF established a $1bn joint platform for investment in the energy sector, and a $1bn platform for investment in technology. Together with Saudi Basic Industries Corporation, we are working on strategic petrochemical projects in Russia and Saudi Arabia, including major greenfield plants on Russia’s biggest gas production sites.

Beyond oil

These initiatives demonstrate that our cross-border collaboration goes far beyond the oil sector, which still dominates both economies; together with Saudi partners we are now looking into several dozen projects in a number of areas such as aviation, water management, technology and infrastructure. Russian energy majors are ready to invest in the Saudi petrochemical sector, and Moscow-based technology companies are exploring co-operation in commercial space launches, artificial intelligence (AI), facial recognition and augmented reality.

As Russia is the world’s biggest exporter of wheat, we are starting cooperation with the Saudi Agricultural and Livestock Investment Company to improve food security in Saudi Arabia. Diversification away from over-reliance on any single sector is crucial to ensure long-term economic growth for both countries.

Saudi Arabia’s unique geographical location between three continents has supported its trade for centuries. As the country continues to develop its infrastructure, transport and ports, it has significant potential to further maximise the benefits of its geography and become an exceptional regional logistical hub and a major centre of global trade.

Russia has made significant steps to diversify its economy and exports. RDIF and its partners are focused on investing in projects that promote the development of Russia’s technologies as well as investment into infrastructure, regional development, improving living standards, boosting export potential and operational efficiency. International partnerships are expected to help promising Saudi companies develop into new regional and global leaders and localise global expertise.

Sustainable growth

Over the next few years, we expect our co-investments to be key drivers to help deliver sustainable growth, and our Saudi Arabian partners will have a major role to play in this process.

As Saudi Arabia also proceeds with its own multi-sectoral reforms as part of its Vision 2030 transformation programme, aimed at developing itself as a country with a sustainable and diversified economy, we see further potential in our partnership and expect investment levels to multiply this year and further in 2020. Vision 2030 resonates strongly with the Russian Priority National Projects that will see more than $400bn of investments over six years, and we hope to learn from each other when fulfilling such programmes.

Leading innovative companies from Russia are involved in Vision 2030 in key areas such as renewable energy, healthcare and education, AI and high-speed transportation as well as port infrastructure for the transshipment of agricultural products. There is also ongoing joint interest in AI, which is a priority area for both Saudi Arabia and for Russia, and could tap into the countries’ growing international financial networks. They now have an opportunity to expand their technologies in the promising markets of Saudi Arabia and the wider Middle East, and help Saudi Arabia turn its vision into reality.

Cross-border projects

With Saudi Arabia and Russia’s rich cultural heritage, tourism and leisure is another prospective opportunity for cross-border investments. More than 10 million Russian tourists visit the Middle East each year, and many of them will be interested in Saudi Arabia’s Red Sea Project – the world’s most ambitious luxury tourism development.

In 2018, Saudi Arabia was ranked 39th in the Global Competitiveness Index, and by 2030 it is committed to being in the top 10. To achieve this target and advance the multi-sector structural reforms under the Vision 2030 programme, further public-private partnerships are required to facilitate the flow of private investments, improve the business environment, support export diversity and enhance the competitiveness of the country's companies internationally.

The total investment potential of Saudi Arabia’s economic transformation is estimated at an impressive $4000bn, enabling the country to identify and unlock new opportunities. However, the success of the transformation is not only defined and shaped by financial investments. It is also about the cross-border transfer of technology, knowledge and expertise, as well as training and empowering leaders. This helps create a diverse and vibrant environment with equal opportunities, promoting excellence, respect and inclusion, and driving economic growth.

Cultural initiatives

Recently, I stood alongside 50 high-profile investors who manage a total of $15,000bn of assets at the Hermitage museum in St Petersburg to open an innovative exhibition of art based on AI, to which RDIF invited our partners from the Saudi Arabian ministry of culture and PIF as well as the Russia-China Investment Fund. The exhibition featured works of 16 artists from around the world including works by two talented female Saudi artists.

The Hermitage exhibition ‘Artificial Intelligence and Intercultural Dialogue’ was the latest cross-cultural initiative from RDIF and a further example of effective partnership in art and technology between Russia and Saudi Arabia. It built on earlier cultural endeavours by the fund, such as concerts by the Mariinsky orchestra and a Russian avant-garde art exhibition in Saudi Arabia in 2018, organised in partnership with Saudi Aramco and the PIF.

Art and culture have always helped countries to promote and build closer ties, and it is something RDIF feels passionately about. These growing cultural ties are testament to the deepening relationship between Russia and Saudi Arabia, forged by our strong common interests and with the potential to unlock collaborative and mutually beneficial opportunities.

One of the works at the Hermitage exhibition used the Arabic alphabet as a basis to create the abstract graphical form of a new language that aspires to become a universal means of communication. For RDIF, this universal connection is a foundation for partnerships that transform economies and facilitate mutually beneficial growth.

Kirill Dmitriev is CEO of the Russian Direct Investment Fund.


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