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As government funds from China, Singapore and the Gulf buy stakes in everything from French oil companies to American banks, it is worth asking whether Russia is poised to embark on an overseas spending spree of its own.

Just a decade after its financial crisis, Russia is the world’s third largest holder of foreign exchange reserves. The most recent estimate of $500bn puts these behind only China with $1,650bn and Japan with $980bn. The dollar value of Russia’s forex reserves has shot up by more than 5 per cent since the beginning of the year and is expected to continue growing. Capital Economics estimates that about three-quarters of this year’s increase comes from currency fluctuation: Russia holds 45 per cent of its reserves in euros, which have appreciated sharply against the dollar. But high oil prices and a resurgent economy have also played a role, as the government has sought to contain upward pressure on the rouble.

What is Russia going to do with all that money? In February, the government split its gigantic Stabilisation Fund into two separate entities. While the larger $125bn Reserve Fund is being invested in overseas government and government-backed agency bonds, the $32bn National Wealth Fund is expected to make riskier overseas investments in the hope of generating higher returns. The NWF will probably be in the top 10 largest sovereign wealth funds and could reach $80bn by 2011. Strategic overseas investments cannot be ruled out. But it is important not to overstate Russia’s potential impact.

The NWF’s strategy is bogged down in political infighting and there are calls to use it to tackle Russia’s state pension deficit and infrastructure backlog.

Though the thought of Moscow investing directly in the US agitates some American politicians, the truth is the fund is tiny compared with the $800bn that private equity has on hand.

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