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17 May, 2008 07:54

Russia to invest petrodollars abroad

Russia could soon invest its oil billions in direct overseas investments if its national welfare fund gets more freedom about how it's used. To this end, the Finance Ministry's debt department will prepare more liberal investment mechanisms by October.

Russia’s oil billions stashed away in the stabilisation fund were split into two in February, creating a reserve fund and a national welfare fund.

The investment strategy for both funds is highly conservative and aims for returns of just 10% profits annually.
The government, though, wants more for its $US23 billion. To boost profitability the Finance Ministry plans to invest up to 10 % of the fund in corporate bonds and foreign companies shares.

Analysts predict Russia will make waves abroad when it starts making big investment decisions overseas, as sovereign funds are often regarded as another geopolitical tool, like energy supplies.

Sovereign wealth funds amount to $US 2 trillion around the world, and are forecast to grow six fold by 2015, with Asia and Middle East among the most aggressive investors.

Market watchers expect Russia to stay on the conservative side in terms of investment policy, and make general investments at the index level or even buy land.