UAE firms to invest Dh3bn Russia

The UAE is in the midst of two deals set to deepen commercial ties with Russia, marking the Gulf state's first foray into direct investment in the country.

The Russian prime minister Vladimir Putin keeps an eye on proceedings as Mikhail Shelkov , the chief executive of Prominvest, left, and Badr Jafar, the executive director of Crescent Petroleum Group and vice chairman of Gulftainer, right, sign contracts.

Two UAE firms are investing US$800 million (Dh2.93 billion) on projects in Russia, marking deepening commercial ties between the two countries. Prominvest, the investment arm of the state-owned Russian Technologies, will form partnerships with Damac Group, the Dubai-based property developer, and Gulftainer, the Sharjah-based port operator, to create direct investment funds.

The deals were signed at a meeting of business leaders yesterday in the Russian resort town of Sochi, which was attended by the Russian prime minister Vladimir Putin. "I am pleased to see that investments have become a two-way street," Mr Putin told the state-owned news agency ITAR-TASS . Gulftainer, owned by Crescent Petroleum Group, will invest $500m to help acquire logistics and ports assets in Russia, the latest in a string of deals between Russian companies and the Jafar family, which owns Crescent.

"This is another major demonstration by the Crescent Group of its commitment to building strong economic ties with our Russian brothers, pulling together the synergies and strengths in our respective areas of expertise," said Badr Jafar, the vice chairman of Gulftainer who is also the executive director of Crescent. In June, Crescent signed a deal with Rosneft, the Russian state-owned gas company, to begin gas exploration in Sharjah.

Crescent and Rosneft previously discussed collaborations in Iraq, where Crescent is in a consortium with Sharjah-based Dana Gas. In addition to Crescent's deal, Damac will invest $300m in property projects in Sochi, which will host the Winter Olympics in 2014. "We have always been interested in investing in the Commonwealth of Independent States countries and this joint venture presented us an opportunity to enter into a market with great potential and a strong regulatory and transparency framework," said Hussain Sajwani, the chairman of Damac.

Damac said the investment would help it diversify its property holdings, which include portfolios in North Africa, Jordan, Lebanon, Qatar and Saudi Arabia. Russia's previously vibrant property market withered during the global downturn, with GDP growth in the sector falling 6.3 per cent in the fourth quarter of last year, according to Bloomberg. However, the sector turned a corner in the second quarter of this year, returning to growth of 2.4 per cent.

Russian Technologies is a state-owned holding company with interests in a variety of industries including aviation, car manufacturing, rare minerals and defence. Russia is among the world's fastest expanding economies, with growth of 5.2 per cent this year, according to Bloomberg. @Email:[e-mail]