As China, Singapore, South Korea and the United Arab Emirates gobble up Western assets through their sovereign wealth funds, Russia has decided to join the party.

On June 30, United States Treasury Secretary Henry Paulson met in Moscow with Russian Prime Minister Vladimir Putin to discuss trade and investment. During the meeting, Paulson expressed appreciation for the $8 billion the Russian government had invested in the U.S. economy and said that both sides were working together to outline the best practices for sovereign wealth funds. “Since we do not have a sovereign wealth fund yet, you are confusing us with someone else,” Putin relayed to Paulson. Putin then added that Russia had indeed created various other funds, but that all of Russia’s current investments in America were of a private nature.

Whether or not these “various funds” are really private or not is up to debate—they are likely under a substantial amount of government influence. Regardless of this, Russia is soon to have an official state investment fund. Later in the meeting, Putin told Paulson that Russia is preparing to set up both an official sovereign wealth fund and a government agency to manage it.

This new and improved sovereign wealth fund would resemble the Abu Dhabi Investment Authority—which agreed last November to buy a $7.5 billion chunk of U.S. integrated bank Citigroup Inc.—and would allow the Russian government to directly purchase foreign companies. The Kremlin has already encouraged Russian corporations to take advantage of the strong ruble to make acquisitions in countries with currencies that have fallen in value.

Paulson welcomed this news from Putin. “Sovereign wealth fund money should be welcomed,” Paulson said once he returned home. “The only way not to welcome that money is when it’s politically driven. But as far as we can see the vast majority is being driven by interest in getting a higher risk-adjusted rate of return.”

While Paulson may think that everything is fine as long as foreign investments are not politically driven, the truth is that just about everything Putin does is politically driven.

Sovereign wealth funds are essentially the financial teeth of foreign governments, and America is being eaten alive. For more information on America’s loss of its strategic assets to foreign powers and the economic implications, read “Selling America for Designer Boots, Top Hats and Thimbles.” To see how the same trend is playing out in Britain, read “Selling Britain’s Corporate Crown Jewels.” •