The Wall Street Journal-20080125-Russia Government Fund Will Tread Carefully
Return to: The_Wall_Street_Journal-20080125
Russia Government Fund Will Tread Carefully
DAVOS, Switzerland -- Russia's government hopes to avoid a Western political backlash when it invests part of its soaring wealth abroad by buying only small stakes in U.S. or European companies, Russian Finance Minister Alexei Kudrin said.
Mr. Kudrin laid out how his government plans to invest surplus energy revenue in foreign corporate stocks and bonds beginning next year. Russian authorities will hire private-sector fund managers to manage the "national wealth fund" while capping stakes in foreign companies at 5%, he said in an interview. That would allay fears in Germany, the U.S. and elsewhere about Russian-government influence in important companies, he said.
"Fears would only exist in cases where such funds make direct investments in companies and acquire controlling stakes," Mr. Kudrin said.
Mr. Kudrin and other officials from energy-rich or developing countries are the stars of the gathering of business and political elite in Davos, thanks to the curiosity and trepidation that such countries' rising financial power arouses in the U.S. and Europe. Many Davos-goers from developed countries are playing down concerns that state investment funds could become levers of foreign political influence.
"It seems they don't like us, but they need our money," said Kristin Halvorsen, finance minister of Norway.
State funds from the Middle East and China have helped to bail out a string of U.S. banks that took hits when the subprime-mortgage market collapsed, but their clout also has prompted some governments, such as the U.S. and Germany, to beef up defenses against foreign corporate takeovers.
Russia plans to put an initial $31 billion of its nearly $160 billion of stockpiled energy revenue in a national wealth fund, which will be invested abroad beginning next month, initially only in government bonds.
Mr. Kudrin said the international and Russian fund managers appointed to invest the money would have to keep at least 60% of cash in foreign-government bonds, allowing them to invest about 20% to 40% of the portfolio in corporate stocks and bonds. "Portfolio investments don't raise any concerns at all," Mr. Kudrin claimed.
"Direct investments of 10% or 15% are when an investor gets involved in the management of a company. We want to diversify the investments, and therefore we want to limit our stake in any one company," he said.
Though Russia wants to model its fund on Norway's, it has some way to go to match Norwegian inoffensiveness. As Ms. Halvorsen explained, Norway's fund not only discloses every corporate stake it holds, but is also forbidden from contributing to "unethical acts."
"We can exclude companies that produce nuclear weapons, cluster bombs or land mines, or which violate human rights or harm the environment," Ms. Halvorsen said.
Mr. Kudrin and other officials from energy-rich countries rejected calls from the U.S. and Europe to sign a code of conduct that would make the activities of state investment funds transparent. At a panel discussion, Mr. Kudrin said diversification would make Russia's investments transparent enough.
