The project moderated by the HSE-Skolkovo Institute for Law and Development aims to boost Russian agricultural exports and secure food supply to Islamic countries by using Islamic finance mechanisms.
The project will set up institutional infrastructure for investments in the Russian agricultural sector using instruments offered by Islamic law. As a result, the Russian agribusiness will receive ‘long money,’ while participating Muslim countries will benefit from stable supply channels of predictable volumes of agricultural products, relying on a solid cross-border transport and logistic infrastructure for food exports both via the traditional routes through the Black Sea and the International North—South Transport Corridor.
The project is implemented by the National Research University Higher School of Economics as part of activities to enhance agricultural production exports, envisaged by Decree of the President ‘On National Development Goals and Strategic Development Objectives of the Russian Federation Until 2024’ of 7 May 2018 No. 204 and by the Comprehensive Plan for Modernization and Expansion of the Mainline Infrastructure Until 2024, approved by Resolution of the Government of the Russian Federation of 30 September 2018 No. 2101-p.
Project Mission: To set up sustainable, long-term trade and investment cooperation in the area of agriculture between Russia and countries of the Islamic world.
Project Goal: To establish long-term sustainable partnership mechanisms for the supply of Russian agricultural produce to Islamic countries by using partnership financial instruments based on the principles of Islamic law.
— To lay the groundwork for long-term sustainable financing of Russia’s agricultural production and exports
— To contribute to Islamic countries’ food security
— To build up food reserves jointly controlled by project participants, which can serve as a collateral for the securities to be issued as part of the project
— To implement partnership financial instruments on the world agricultural market
— To establish new pricing mechanisms in the global food trade
— To build long-term relations with the conservative part of Islamic investors
— To develop cross-border logistics infrastructure in Russia and in food importing countries, jointly owned and controlled by project participants.
The goal of doubling Russia’s agricultural exports to USD 45 billion in 2024, set in a 2018 Decree of the President of Russia, is complicated by a number of challenges related to both the operation of the global food markets (their oligopolistic structure and speculative nature) as well as the issues of Russia’s own agricultural sector (high cost of long-term capital and legal barriers to borrowing for small and mid-sized farmers, decreasing marginality, underdeveloped export infrastructure). These factors put a damper on the efforts to realize the full potential of Russia as a key supplier of agricultural produce on the world market.
The project aims to tackle these issues by building long-term partnership relations with Islamic countries, which, on the one hand, have high demand for food security, while on the other, have accumulated significant financial resources available for investment. The project will seek to meet Islamic countries’ demand for more stable and less speculative relations with food suppliers based on the principles and values of Islamic law while channeling Islamic investments into the Russian agricultural sector and logistics infrastructure so as to enable a quick expansion of grain production and the development of new logistic routes to Islamic countries.