Outcomes from SPIEF: continuing conversations and the wisdom of Jack Ma
In an earlier post I provided some background to this year’s St Petersburg Economic Forum (SPIEF) and focused on the event’s growing Asian connections. As expected, the 19th Forum did indeed produce a number of new deals in Asia, as well as globally. In this post I will discuss a number of key developments and reflect on the overall sentiment of participants at SPIEF, including that of Alibaba Chairman Jack Ma who shared some valuable insights on the state of Russian investment.
The agreements reached at SPIEF 2015 which received the most attention were, as expected, in the energy industry. These deals have highlighted both Russia’s westward and eastward connections. In the west, it was announced that the newly planned ‘Turkish Stream’ pipeline will be extended to Greece (Reuters), and somewhat unexpectedly that there will be a capacity expansion to the Russia-Germany Nord Stream pipeline. From the East, many were also pleasantly surprised to see Saudi Defence Minister, Prince Mohammed bin Salman in attendance, and all the more so after a nuclear energy agreement was signed between Saudi and Russia. And finally with a combination of both East and West, a further deal saw Shell and Gazprom agree to construct a third pipeline for the Sakhalin-2 project in Russia’s Far East.
All of this is of course good news. However, both Russian and overseas participants were realistic about the fact that, whilst better than 2014 in terms of participation, this year’s SPIEF was not ‘business as usual’, where the volume of actual deals was concerned. A number of agreements were very impressive, but the total value of the 205 contracts announced was $5.4 billion, less than in previous years (Russia Beyond the Headlines). Although the overall value of deals declined this year, participant numbers reached an unprecedented 10,000 people (Lenta), including the return of many western businesses which were absent last year (Financial Times). Although this is promising for Russian investment as it shows significant interest in the Russian market, the Moscow Times reported that there were mixed views among a number of prominent SPIEF participants, some of whom are positive about the state of the Russian economy, whereas others are proceeding with caution. Although Russia’s difficulties may still be hindering some partnerships, tomorrow’s deals may well grow out of connections forged at this year’s Forum.
These sentiments echo those put across by Jack Ma, Chairman of Chinese e-commerce giant Alibaba who addressed the Forum on its second day. Although some focused on the lack of a major world leader at this year’s Forum, as head of a company valued at $231 billion, when it went public last year, Ma represents a formidable force in the business world. Ma not only commented on the importance of connections but also highlighted the Forum’s Asia focus, drawing particular attention to the importance of China’s Silk Road Economic Belt strategy (Xinhua), a key element of Russia’s future Eurasian connectivity.
In a thorough and intriguing interview with RBK Daily following the Forum, Ma stressed that he is as enthusiastic about Russia as ever, noting that the current downturn is a perfect opportunity to lay the groundwork for the future. Long-term planning is a hallmark of Chinese strategic thinking (indeed, Sun Tzu’s Art of War is already an established classic in some western business circles!) and Ma reinforced this idea, declaring that he thinks in terms of five- or ten-year plans, as opposed to looking just a few months ahead. Perhaps greater contact with China and its top business leaders will help investors to look at the long-term strategy, and bring greater investment to Russia in the coming years.
Furthermore, a positive sign for the PE industry is that the deals originating from the Forum were not uniquely limited to direct investments and JVs with state owned corporation, but also included a significant breakthrough for the Russian PE industry development agency ‘RDIF’. The head of RDIF Mr Dmitriev noted that the Saudi Public Investment Fund (PIF) agreed to invest $10bn in Russia, predominantly focusing on infrastructure, agriculture, healthcare, logistic and retail sectors. This announcement comes as a long-awaited fresh breeze amidst the recently rather stale Russian PE fundraising environment.