Russia’s Infrastructure Opportunity

China used the 2008 Summer Olympics as a catalyst for infrastructure development that would benefit the country in the long term. Now Russia is giving itself a makeover before it plays host to the 2014 Winter Olympic Games.

The host city of Sochi and its surrounding areas are busy building what’s needed to accommodate the thousands of visitors expected for the Games. A new $200 million airport opened for business in the fall of 2010, and officials say more than 200 sports and support facilities will eventually be constructed. This doesn’t include the road, railway, port, electrical and telecom infrastructure projects in the works.

And Sochi is just a part of the broader infrastructure effort under way in Russia as it strives to modernize itself out of the Soviet era. Along with the transportation, communication and power investments, Russia is also building schools, hospitals, housing and other social infrastructure.

Given Russia’s geographic size, its infrastructure ambitions are huge both in scale and in price. A new railway across Siberia, for example, is estimated at $13 billion and new airports can run close to $1 billion each.

The Russian Far East city of Vladivostok is preparing to host the 2012 Asia-Pacific Economic Cooperation summit – the infrastructure cost is estimated at close to $5 billion. And Russian President Dmitri Medvedev plans to spend as much as $7 billion in 2010 and 2011 on housing for the nation’s senior military officials.

On top of that, the improving relations between Russia and China stand to spread into the infrastructure realm. The Beijing government is expected to invest heavily in Russia – estimates are $12 billion over the next five to 10 years for a dozen construction projects. These projects include about $250 million to rebuild a rail link between the countries.

Infrastructure creation on this scale requires vast quantities of natural resources – energy, steel, copper, cement and more. As we have seen in China, Brazil and elsewhere, such investment typically pays off in terms of economic growth.

About Frank Holmes 263 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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  1. Official Russia | Today in Russian Business - Dec 31, 2010

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