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. Last Updated: 07/27/2016

State Bank to Invest in International Firms

VLADIVOSTOK -- The country's new Development Bank, a government-owned investment vehicle, will buy stakes in companies abroad, Finance Minister Alexei Kudrin said.

"The bank has this right and we are already making such investments," Kudrin, also a member of the bank's supervisory board, told reporters on a weekend trip to the Far East.

The Development Bank is slated to receive up to $10 billion this year from the government's $122 billion stabilization fund to back infrastructure and industry investment.

State-run funds and banks from cash-rich countries such as China are becoming increasingly acquisitive, worrying governments in developed nations and prompting calls for protective measures against politically motivated acquisitions.

Last year, state-controlled bank VTB alarmed France and Germany when it unexpectedly built up a 5 percent stake in the European Aeronautics, Defense and Space Co.

Russia sought a joint production deal with EADS and hoped to win a strategic say at EADS through the $2 billion stake held by VTB, but its overtures were rebuffed by core shareholders.

President Vladimir Putin this year ordered the creation of a range of development institutions to promote an industrial and technological revival and fix the country's aging infrastructure.

Russia, the world's No. 2 oil exporter, has built up foreign reserves of over $400 billion -- the world's third largest after China and Japan. It has so far only invested its stabilization fund in triple-A rated sovereign debt.

The new institutions, including the Development Bank, created on the platform of the government's debt agent and pension fund manager, will receive $27 billion from the oil fund and from the sale of assets of bankrupt oil company Yukos.

The Development Bank does not have its own banking license and will not report to the Central Bank. The bank is regulated by a separate law, which exempts it from sales tax and capital adequacy requirements.

The details of the bank's future investment plans are still sketchy and the government is due to review a draft strategy document next month.

Kudrin said the bulk of the money assigned to development institutions would not be spent this year and added that temporarily available funds at the Development Bank might also be invested in domestic stocks.

The money from the Development Bank may support Russian shares amid global jitters. Kudrin urged caution in order not to overheat the domestic market, however.

"Taking into account a large additional state contribution, we will take this procedure to the supervisory council, which will allocate this money in domestic markets in a measured way," Kudrin said.

The bank's eight-strong supervisory board is packed with top officials and is chaired by Prime Minister Mikhail Fradkov, whose son Pyotr sits on the bank's management board.

Kudrin said the supervisory board discussed at a meeting last week a possible increase of the Development Bank's 53 percent stake in Belarus' sixth largest bank, Belvneshekonombank, its first substantial acquisition abroad.

In February the government plans to split the stabilization fund into a risk-averse Reserve Fund and a new $19 billion National Welfare Fund, up to 60 percent of which would be invested in foreign blue chip stocks.