ARAB CAPITAL HITS RUSSIA

Political risks and doubts about American economic stability have forced wealthy Arab countries to look for new possibilities for investment. Russia is proving to be a very attractive partner.

Dmitri Zhantiev, Sergei Belichenko

Investors from Arab countries are demonstrating more and more interest in Russia. The official visit of Saudi Crown Prince Abdalla to Moscow in September played a key role in the promotion of Russo-Arab economic cooperation. For many years, relations between Russia and Saudi Arabia, the source of more than 60% of Arab foreign investment, were strained, in part due to mutual distrust over the Afghan War and Chechnya. However, in the last six months, the situation has rapidly begun to change. The Saudis have come to understand that Russia is one of the world’s most attractive countries for investment. At the Russo-Saudi business forum which took place in August, the president of the Saudi Arabian Chamber of Commerce and Industry Al-Juresi stated that though “Saudi investment abroad is approaching one trillion dollars, the investment potential of Saudi business is far from exhausted and businessmen in Saudi Arabia are prepared to invest tens of billions of dollars in interesting projects in Russia.”

Though no major announcements or concrete agreements came as a result of Abdalla’s Moscow visit, it did give the green light to large-scale joint projects. On December 15^th, a Russian delegation headed by Evgeni Primakov, President of the Chamber of Commerce and Industry of the Russian Federation, will arrive in Saudi Arabia and meet with Crown Prince Abdalla, the Royal Ministers, and the representatives of various business circles in order to discuss a range of business projects. But this is about more than just Saudi money. In April 2004, a traveling investment forum will be held in Lebanon, and its main aim will be to attract Arab investment to Russia’s Central Federal District.

The need to diversify

Perhaps the main reason that Arab capital has gotten interested in Russia is that investors want to diversify their foreign investments. The problem is that 50% of Arab investment goes to the US, where Arab capital is feeling less and less comfortable. After September 11^th, Arab investments ended up in a dangerous spot, when a group of over 600 family members of 9-11 victims sued fo