Russia Creates Sovereign Wealth Investment Manager
In the wake of his interesting announcement at the 2008 St. Petersburg Economic Forum that Gazprom is seeking a stake in a proposed Alaska/Canadian natural gas pipeline to the lower 48 U.S. states, CEO Alexei Miller made headlines again this week in France. In a briefing to European energy executives in the French coastal city of Deauville, Mr. Miller predicted that world oil prices could reach $250 per barrel by 2010.
While many energy analysts were quick to dismiss these comments from a CEO representing an energy company with larger oil reserves than many OPEC countries, Mr. Miller's statement, combined with a comment from the Vice President of OAO Lukoil in April 2008 that Russian oil production might have peaked last year, could send world energy prices higher in the coming months. In the first quarter of 2008, Russia surpassed Saudi Arabia as the world's largest oil producer.
Click on the extended post to read excerpts from the articles by Bloomberg and Reuters.
What Sovereign Wealth Funds have bought - non-controlling shares in banks, brokerages, and other large Western firms. Russia's investments have yet to make front page headlines like the Abu Dhabi Investment Authority, Temasek holdings, and the Kuwaiti Investment Authority have done since the U.S. subprime crisis began - but this could be changing very soon, and Russia has not been unaffected by the problems of the American economy. According to The New York Sun, Bloomberg reported on May 19, 2008 that 21% of Russia's monetary reserves have been used to purchase Fannie Mae, Freddie Mac, and Home Loan Banks
Gazprom Aims for $1 Trillion Club on $250 Oil: Chart of the Day
Last Updated: June 15, 2008 20:41 EDT
By Lee J. Miller
June 16 (Bloomberg) -- OAO Gazprom Chief Executive Officer Alexei Miller made two forecasts last week that, if they come true, indicate more pain for consumers and a boon for Russia's government.
Oil will reach $250 a barrel ``in the foreseeable future,'' about 85 percent more than the current price, he said at a strategy briefing in Deauville, France, adding that the market value of state-run Gazprom will triple to $1 trillion as early as 2015.
Gazprom wouldn't be the first to reach the latter milestone. PetroChina Co. became the world's first trillion-dollar company on Nov. 5, when Class-A shares tripled on their Shanghai trading debut. PetroChina has since plunged 62 percent.
The chart of the day shows the market capitalization of the top three energy companies by value, Exxon Mobil Corp., PetroChina and Gazprom, since Jan. 23, 2006, when the Russian company began trading on the Micex Stock Exchange. Exxon's day-end peak was $527.2 billion on Oct. 18. The chart also shows the price of crude oil.
Click here to read the rest of the story from Bloomberg.
Russia plans agency to run sovereign wealth fund
Wed Jun 18, 2008 7:02pm IST
By Gleb Bryanski
MOSCOW, June 18 (Reuters) - Russia plans to set up a government agency which will manage its sovereign wealth fund and make investment decisions, a government source told Reuters on Wednesday.
The proposal was discussed by President Dmitry Medvedev amd officials at a meeting in the Kremlin on Tuesday, when Medvedev gave his blessing to a riskier investment strategy for Russia's first sovereign wealth fund.
"The proposal to create an agency has been supported at the meeting," the source said. The Russian agency will resemble Abu Dhabi Investment Authority, which agreed last November to buy $7.5 billion of stock in Citigroup.
Russia split its oil stabilisation fund this year into a $129 billion Reserve Fund, which will cushion the budget from a fall in oil prices, and a $33 billion National Wealth Fund (NWF) earmarked for riskier investments.
Click here to read the rest of the story from Reuters.
Vladimir F. Kuznetsov is currently providing corporate development and fund raising services for a number of Asian mineral development companies. Previously, he served as director of equity finance at the FINAM Investment Company in Moscow and published his own blog on Russian capital markets, Equity Finance in Russia. Mr. Kuznetsov is a fellow of Discovery Institute's Real Russia Project.
