Russia on a Western Buying Spree

It seems like only yesterday Russia was complaining of exploitation by the industrialized Western nations. The West is "plundering our natural resources," "buying up all of our best companies," and turning Russia "into a source of raw materials," said the Russians.

But all that has changed in the five years since Russian president Vladimir Putin took over in the Kremlin. Today, the story is more of Russian companies expanding abroad, buying up companies, and grabbing control over raw materials in the West.

For instance, Russian steel giant Severstal bought out the bankrupt Rouge steel works in the U.S. earlier this year. Dairy and juice conglomerate Wimm-Bill-Dann Foods (NYSE: WBD  ) is buying up milk factories the length and breadth of Ukraine. And oil major Lukoil is acquiring more and more gas stations in the U.S.

Monday produced more news in this vein, when Russia's biggest mining concern, Norilsk Nickel, announced that it has paid nearly $1.2 billion to purchase a 20% stake in South Africa's Gold Fields (NYSE: GFI  ) . Norilsk's wholly owned subsidiary, Norimet, will consummate the deal, buying the stake from its current owner, Anglo American PLC (Nasdaq: AAUK  ) .

This deal will make Norilsk the largest shareholder in Gold Fields, which is one of the world's largest gold producers and also owns the 12 million-ounce Arctic Platinum Project, an advanced-stage platinum group metals project in Finland.

The Gold Fields stake is a good fit for Norilsk, which produces gold and platinum in its own right, as well as copper, cobalt, and silver. Additionally, Norilsk is the world's largest producer of both nickel and palladium. According to the companies' joint press release, Norilsk and Gold Fields may now begin closer cooperation in exploiting their respective gold assets.

For U.S. investors, though, there is another benefit to this kind of deal. With each Western purchase, Russian companies tie themselves closer to the West. They make it riskier to engage in hijinks like the one that brought Tyumen Oil Company to the brink of litigation with BP PLC (NYSE: BP  ) a few years back.

Put bluntly, the more U.S. and other Western assets Russian companies buy, the more assets they have that can be seized if they do something illegal, get sued, and lose a case in U.S. court -- hence, an incentive to play fair.

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Foolish contributor and international lawyerRich Smith has a day job advising Western companies on doing business in Russia. He owns shares in Wimm-Bill-Dann, but has no interest in any other company mentioned in this article.


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