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OTTAWA — Backed as national champions by the Kremlin, an armada of Russian companies is spreading out around the world in search of acquisitions, and Canada is increasingly in their sights.
Whether the companies are state-controlled or privately owned, Russian firms – many flush with cash from the recent commodities boom – are embracing globalization and seeking to mount a challenge both to entrenched Western firms and competitors from countries such as China, India and Brazil.
And it is all being done with the blessing of President Vladimir Putin, who told the country's leading business organization recently that “the time has come to expand the participation of our enterprises in international co-operation and the realization of serious commercial initiatives abroad.”
Russia analyst Denis Maslov said the trend is both geopolitical – as the Kremlin seeks to assert itself internationally – and standard business practice for multinational companies.
“Russian business is just extremely expansionist internationally, and the Kremlin likes that,” Mr. Maslov said.
“The Kremlin wants Russia to be an important economic player. So once you are a well-established, very rich, very savvy businessman, if you want to do something internationally, they are not going to be opposed to it unless you are selling a large stake in your strategic enterprise to a foreigner.”
To date, there have been few major investments by Russian companies in Canada, but interest is growing.
Magna International Inc. announced yesterday that Russian billionaire Oleg Deripaska would invest $1.54-billion (U.S.) to purchase 20-million Magna subordinate voting shares in the Aurora, Ont.-based auto parts maker.
Earlier this month, MMS Norilsk, a Russian nickel giant, launched a $5.3-billion bid for Toronto-listed LionOre Mining International Ltd., in one of Russian's largest bids for a publicly traded foreign company. Norilsk is thought to be a target of the state-owned diamond monopoly, Alrosa.
As well, OAO Gazprom, the country's natural gas monolith, has signalled it wants an equity stake in a liquefied natural gas plant that PetroCanada and TransCanada Corp. are planning in Gros Cacoun, Que. Petrocan is vying to become a partner with Gazprom in the plant that will liquefy the gas in Russia, but will have to yield a stake in the Canadian project in return.
The largest Russian acquisition to date is OAO Lukoil's $2-billion purchase in 2005 of Nelson Resources Ltd., a Toronto company that had assets in Kazakhstan.
Fyodor Lukyanov, editor of the journal Russia in Global Affairs, said yesterday the Kremlin prefers state-owned companies as national champions, but is willing to work with so-called oligarchs who run private companies and steer clear of politics.
The new Russian multinationals include Gazprom, OAO Rosneft and OAO Lukoil in the energy sector; Norilsk, Alrosa and Mr. Deripaska's Rusal aluminum company in mining, and OAO Severstal steel and its competitor Evraz Group, which failed in a bid for Ipsco Inc. and recently concluded the acquisition of Oregon Steel, based in Portland.
Mr. Lukyanov said there is no question the Kremlin would block the acquisition of one of those major Russian firms by foreigners.
“The idea behind this national champion concept is not only to strengthen the state control but also to have Russian companies play on the global stage. And to do that, they must compete with the biggest international companies.”
