China's $40b Silk Road Fund signs MoU with Russian firms

Chinese $40 billion Silk Road Fund (SRF), focusing on infrastructure investment under the "Belt and Road" initiative, will cooperate with Russian financial institutions in electricity and energy development projects.

The fund signed a Memorandum of Understanding (MoU) with the Vnesheconombank, the Russian state development bank, and the Russian Direct Investment Fund on Thursday in Beijing, witnessed by Chinese President Xi Jinping and Russian President Vladimir Putin after they attended the V-Day military parade as part of China's commemoration of the 70th anniversary of the end of World War II.

The two countries' financial institutions plan to jointly invest in infrastructure construction and industrial cooperation projects, especially in the electricity and energy sectors.

"The cooperation will promote the Silk Road Economic Belt and connect to the construction of the Eurasian Economic Union proposed by Russia," said a SRF statement. "It will also tighten the Sino-Russia ties in bilateral trade and investment."

The fund was established in Beijing in December 2014, and its first overseas investment project was in Pakistan, debuted in April.

Russian Direct Investment Fund focuses on equity investment completely owned by the Vnesheconombank.

The SRF also signed an agreement with the Novatek Inc, Russia's second-largest natural gas producer on Thursday, to purchase 9.9 percent stake of the Yamal LNG - a liquefied natural gas project at Sabetta, north-east of the Yamal Peninsula of Russia.

China National Petroleum Co has 20 percent of the projects ownership, and the French company TOTAL owns another 20 percent.

It was the fund's first investment project in Russia, and also the first investment in natural gas industry. It will further discuss with the Novatek about stake purchase details.