Under the terms of the deal, which was signed during the Eastern Economic Forum and later announced in a press release, Alibaba will be required to sell 52% of its Russian business to its new partners in the country and inject an undisclosed sum of cash in the JV. In exchange, the Chinese online retailer will be given increased access to a region of the world where it has been keen to expand in for some time.
In the press release, the involved parties said the partnership has been set up to integrate Russia's key consumer internet and e-commerce platforms and is likely to be formalized in the first quarter of 2019. Kirill Dmitriev, the head of the RDIF, a sovereign wealth fund established by the Russian government to make equity investments, added that the JV will use Russia's MIR payments system, according to CNBC.
"By partnering with Russia’s leading consumer internet platform, AliExpress Russia will leverage Mail.Ru Group’s 100 million internet users across its social media, messaging, e-mail and online games properties. With access to this unique platform and user base, the JV will fill a highly complementary role in the Russian consumer lifestyle value chain, creating a one-stop platform for social, communications, gaming and shopping," the press release stated. The deal will also grant Russian small and medium-sized enterprises access to Alibaba's customers.
Alibaba has been targeting Russia for some time now. The company’s executive chairman Jack Ma visited the country several times over the past few years and last autumn said on a stage shared with Russian President Vladimir Putin that he thinks “Alibaba should join forces in developing Russia.” (See also: Alibaba's Jack Ma to Step Down in a Year.)
The Chinese e-commerce giant views Russia, one of the world’s most populated countries, as a key growth market, particularly as rival western online retailers have little to no presence there. The Financial Times reported that Russia’s preference for cash transactions has held back the country’s e-commerce progress, but also noted that over half of the 140 million population use the internet on a daily basis.
Alibaba’s partnership with Russian firms marks another important step in China’s bid to roll out a "digital silk road." Beijing’s Belt and Road Initiative has been encouraging Chinese companies to develop e-commerce, mobile phone and mobile payments businesses overseas. Alibaba has so far been leading the way in those efforts, having also partnered with Indonesia, Pakistan and Malaysia to digitize local partners, help small businesses grow and boost online trade. (See also: Alibaba Q1 Revenue Rises 61%, Beats Estimates.)
Executive chairman Jack Ma once said, “For human beings the first globalization was the Silk Road... today in the Internet [age], I think we should transfer the Silk Road to an e-road. The e-road is to connect every country. The e-road is to give inclusive opportunity for everybody.
Other Chinese online retailers, including Didi Chuxing Technology Co., JD.com (JD) and Tencent Holdings Ltd., have similarly been expanding their presence in south and south-east Asia.