Question

FROM YOUR OWN WORD ANSWER THE FOLLOWING QUESTION:

Q.1 Russia is largely dependent on oil exports to drive its economy forward. Given the sharp fall in global oil prices that occurred in 2014 and 2015, what impact do you think this will have on FDI into Russia?

Answer 1

we know that when it comes to exporting oil in the world, Russia is on second position which makes Russia's economy heavily dependent on oil and gas market.the sharp fall in oil prices in global market caused heavy losses to the Russian economy.when we compare two countries like America and Russia, The people of America celebrated the decline in oil price but in Russia the situation was completely different.in Russia they suffer greatly whenever the oil prices gets down.30% of Russia"s GDP depends on oil export.Between 2014 and 2015 Russia's economy was collapsed and that happend very rapidly and was completely devastating.in the start of 2015 Russia and his neighbouring country Ukraine had the lowest purchasing power parity as compared to the other countries in the world.this decline also affected the imports in Russia in 2014.During this crisis some foreign companies stopped their businesses in Russia.some examples are Volvo, Apple, Steam ,IKEA ,etc.they suspended their activities in Russia.

in between 2014 and 2016 the Foreign Direct Investment in Russia saw serious inconsistancy.for FDI Russia's oil industry is the main target and Russia's dependency on this industry make it more vulnerable,so whenever there is changes in oil and gas prices that's make direct effect on FDI.oil prices affected the Russian currency and this caused the unstability in the macroeconomics environment.the energy sector like oil and gases plays the important role in Russian economy, it is the source of half of Russia's export and the reserves of Foreign currency.and it is the main reason of FDI inflow in the country.and when in 2014 the oil prices fall it made huge impact on the decline of FDI.and since 2016 the FDI flows is slowly recovering in the country.