Alibaba ties with Russian firms on e-commerce platform that will use Moscow's own payment system

Key Points
  • Chinese firm Alibaba has signed a joint venture with Russian partners to launch an e-commerce arm.
  • The partnership is aimed at integrating Russia's key consumer internet and e-commerce platforms.
Russian sovereign fund chief: Alibaba is a great partner for us

Chinese e-commerce giant Alibaba signed a new strategic partnership with a number of Russian firms Tuesday, which will form a new e-commerce platform and utilize Russia's own payments system.

The deal — signed at the Eastern Economic Forum (EEF) in Vladivostok, Russia — includes the sovereign wealth fund of Russia, the Russian Direct Investment Fund (RDIF), alongside mobile operator MegaFon and internet group The partnership is aimed at integrating Russia's key consumer internet and e-commerce platforms, and also launching a leading social commerce joint venture in Russia.

Alibaba added Tuesday that the idea is to create a one-stop destination for consumers to communicate, socialize, shop and play games, all within the same online ecosystem. A Financial Times article last week also likened the venture to a digital version of China's silk road initiative.

"Collectively, the parties will inject new capital, strategic assets, leadership, resources and expertise to create an unmatched value proposition for merchants, consumers and internet users across Russia and the CIS (Russian Commonwealth), as well as accelerate the development of Russia's rapidly growing digital economy," a press release stated Tuesday.

According to the statement, Alibaba will contribute AliExpress Russia, its local e-commerce arm, to the partnership which could enable the Chinese firm to reach out to a larger audience in Russia. It also said it would look at injecting money into the venture.

Alibaba's Jack Ma speaks to Kirill Dmitriev, the head of the RDIF, at the Eastern Economic Forum (EEF) in Vladivostok, Russia.

"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," the official statement said.

Alibaba will also cede control of its Russian business to form the partnership. The Chinese firm will own 48 percent of AliExpress Russia with the Russian entities taking 52 percent. The idea being that it will give Alibaba increased access to the Russian market.

The agreement, expected to be formalized in the first quarter of 2019, will use Russia's payments system known as Mir, according to Kirill Dmitriev, the head of the RDIF. Mir was developed in late 2014 after Western sanctions were imposed on Russia for its annexation of Crimea and its alleged role in the destabilization of eastern Ukraine. Mir is used in Russia alongside international payment systems such as Visa and MasterCard.

—Reuters contributed to this article.