Russia to Build an Agrobridge
The project to attract Arab investments in the domestic agro-industrial complex has the potential to bring up to $10 billion into the sector.
Ad part of the XX April International Academic Conference on Economic and Social Development, organized by the HSE, Deputy Head of Russia’s Federal Antimonopoly Service Andrei Tsyganov and Director of the HSE-Skolkovo Institute for Law and Development Alexey Ivanov discussed AgroFinMost (Agro Financial Bridge), a project to attract Arab investments into the Russian agricultural sector, with Sheikh Mohammed Taki Usmani, Chairman of the Abu Dhabi Islamic Bank’s Sharia Board. In return for investments, which are expected to go as high as 10 billion US dollars, Middle East countries will receive guaranteed volumes of grain to ensure food security of the region.
“The project will set up an organizational and legal platform to attract Islamic investment in the Russian agri-food sector in accordance with Islamic law (fiqh) structures. The key feature of such a financing model, which distinguishes it from the usual speculative models, is its focus on building long-term partnership in implementing socially beneficial projects, rather than seeking short-term interest gains,” says Alexey Ivanov. “Not only did we devise mechanisms for long-term partnership in the supply of Russian agricultural produce to Middle East countries, which are based on principles that make sense even to the most conservative of Islamic investors, but also took into account the growing needs of these countries in ensuring food security of the region. The next stage is creating a pool of Russian partners who would be willing to take part in the practical implementation of the project.”
It is expected that the project will attract long-term money into the Russian agricultural sector and will establish sustainable channels for food supply to Muslim countries. In addition, the project envisages the development of transport and logistics infrastructure for food exports via the Black Sea and the North-South international transport corridor.
No systemic efforts are undertaken today to attract investments from countries of the Islamic world into the Russian agricultural sector. At the same time, significant infrastructural and organizational barriers to the supply of Russian food to global markets exist, which require outside-the-box solutions. The AgroFinMost project will create a new large-scale Eastern market for Russian food, which will be less dependent on global food price fluctuations.
Russia has the potential for both an intensive (higher yields) and extensive (higher acreage) growth in crops production. According to the Ministry of Agriculture, adding as little as 6 million hectares of land may result in crop increases in the range of 15.2 to 17.5 million tons per year.
“Ensuring Russia’s active presence as an important player in world industrial markets is a multidimensional task. It is not just about larger financing of the Russian agricultural sector, but also about solving major infrastructural issues, establishing value chains and networks in the agri-food markets, and most importantly, devising a set of rules by which this complex system will work, explained Andrei Tsyganov. “For us as a regulator, it is especially important to ensure fair non-discriminatory conditions for the participation of Russian agricultural producers and other market players in large projects, transparency of financing and decision-making procedures.”
“Food security is a major theme in the Persian Gulf countries. We have to import significant amounts of food consumed, including through programmes that provide food resources to the poorer countries of the Islamic world,” explains Sheikh Muhammad Taki Usmani. “Building up substantial food reserves and ensuring stable food supply channels from Russia is a strategic need for the Gulf countries.”
AgroFinMost project is implemented by the HSE-Skolkovo Institute for Law and Development as part of a set of measures to develop competition in the agricultural sector provided for by the National Plan for the Development of Competition, approved by the President of Russia on 21 December 2017.