Alibaba, one of China's major players in the e-commerce industry, announced a joint venture with Russia's sovereign wealth fund, telecom company Megafon, and internet firm Mail.Ru Group. The parties announced the partnership in a joint statement during the Eastern Economic Forum in Vladivostok where both Chinese President Xi Jinping and Russian President Vladimir Putin attended.
Russia is currently under sanctions imposed upon by Europe in the wake of the Ukraine crisis when Moscow was accused of illegal annexation of Crimea. The country is also suffering sanctions from the United States under a chemical and biological warfare law following alleged poisoning of a former Russian agent and his daughter in the United Kingdom in 2017.
China, on the other hand, is fighting a separate trade war against the United States.
With a common antagonist, Russia and China have been actively building closer political and economic ties. In fact, Alibaba's joint venture with Russia's tech giants was announced after Bejing participated in the Vostok 2018 which is Moscow's largest and most powerful war games ever conducted since the Cold War era.
Involved in the recently announced joint venture are Russian Direct Investment Fund which is Moscow's sovereign wealth fund of the Russian Federation, Megafon which is a pan-Russian operator of digital technologies, and Mail.Ru Group which is the leading internet and IT company in the country.
Specifically, the joint venture will integrate Russia's major consumer internet and e-commerce platforms and eventually launch a social media channel that will service internet users in Russia and the Commonwealth of Independent States. The latter is a regional intergovernmental organization of 10 post-Soviet republics in Eurasia.
The yet to be named joint venture will open vast opportunities for Russia's small and medium-sized enterprises, the joint statement reads. Alibaba has more than 600 million consumers and through them, Russian SMEs will have access to consumers in China, Southeast Asia, Europe, Turkey, and India. As estimated, the future consumers of Russian SMEs will be more than four times larger than the actual population in the country.
The parties entering the joint venture will also pour new capital, strategic assets, knowledge, resources, and expertise in AliExpress Russia.
If transactions go according to plans, Alibaba will have a 48 percent stake of the AliExpress Russia while MegaFon, Mail.Ru Group, and RDIF will hold 24 percent, 15 percent, and 13 percent stakes correspondingly.
Alibaba, however, did not specify the amount of cash it poured into the joint venture and into AliExpress Russia.
Kirill Dmitrev, the head of Russia's sovereign wealth fund told CNBC, said his country is much closer to China now than the United States. He said Russia and Beijing meet eye-to-eye on important bilateral, economic, and political issues.
