Oaktree’s Moldova play gets sucked into geopolitics

Moldova stands out among Ukraine’s neighbors as facing perhaps the clearest danger of spillover from Russia’s February invasion.

After all, Russian troops have occupied Transnistria since 1992, which is a sliver of land within the country to its eastern border with Ukraine, and disruption of regional trade has significantly challenged Moldova’s economy.

EU policymakers have responded by including the country along with Ukraine in a membership plan described as responding to Moscow’s aggression. Such a fast track to EU membership for Moldova will be a boon to business in a country whose population ranks among the poorest in Europe, and it would have been hard to imagine even just a few years ago.

Oaktree’s 2019 investment into Moldovan grain and sunflower agribusiness Trans-Oil – which we profile here – stands to benefit from any moves toward EU membership and is significant for several reasons.

It demonstrates the role private capital can play in an industry with incumbents already well-entrenched in key markets around the world. The investment is being led by Tommy Jensen, an Oaktree executive whose experience includes time leading Bunge’s operations in Europe and the Middle East. With the Los Angeles-headquartered firm’s backing, Trans-Oil has already expanded into Serbia with the acquisition of a silo complex and port terminal infrastructure from MK Group. The latter shed those assets in preparation for a sale to Archer Daniels Midland.

Oaktree declined to comment so it is not possible to say for sure, but Jensen’s perspective on how multinational agribusinesses view the region and its role in global trade likely shaped the firm’s view on Moldova and Trans-Oil’s potential. That perspective was likely also valuable in understanding the scope and timing of ADM’s entry into Serbia and any opportunities that could materialize for Trans-Oil as a result.

Oaktree’s Trans-Oil investment also reflects the functioning of the well-stablished ecosystem that sees developmental finance institutions help prepare important sectors and companies in underdeveloped economies for private investment. The EBRD’s Wojtek Boniaszczuk told Agri Investor that the opportunity for Oaktree to invest was created when the International Finance Corporation elected not to redeem shares it was due in relation to a loan it had extended to Trans-Oil and described the company as having “graduated” from involvement with DFIs.

That a generalist firm with as savvy a reputation as Oaktree pursued an opportunity in a country that even specialists had elected to steer clear of is significant, regardless of the conflict in Ukraine. The question of timing in that broader regional context does help make Oaktree’s Black Sea agriculture play particularly noteworthy.

Though few expected an invasion on the scale Russia mounted in February, by the time Oaktree made its Trans-Oil investment in 2019, an escalation of conflict in Ukraine was a distinct possibility. Entry into Moldovan agribusiness has placed the firm at the forefront of Western investors’ push towards Eastern Europe at a time when the geostrategic dimensions of finance have rarely been in sharper relief.

For Russian policymakers who see conflict in Ukraine as just one theater of a broader clash stretching across multiple regions and domains, the Western-backed development system from which Trans-Oil “graduated” is by no means a neutral one. In assuming an ownership position in Trans-Oil left behind by DFIs, Oaktree has – intentionally or otherwise – entered the ideological battle underlying Russia’s invasion of Ukraine.

The Western response to Russia’s invasion has thus far included a significant focus on financial sanctions designed to constrain Moscow’s ability to sustain its operations. Ukraine’s recent advances on the battlefield have introduced a note of optimism to a campaign bound to eventually focus on challenges and opportunities related to post-war rebuilding.

To the extent neighboring Moldova and the positive example provided by development in Serbia is relevant to that broader struggle, Oaktree’s role in Black Sea ag will be an important factor to watch.