Geopolitics and challenges of Russian economic development

научный руководитель, доцент кафедра «Иностранные языки-4»

Финансовый университет при Правительстве РФ

Россия, г. Москва

GEOPOLITICS AND CHALLENGES OF RUSSIAN ECONOMIC DEVELOPMENT

Nowadays Russia is experiencing a slowdown in economic development mainly due to international sanctions imposed on the country from the USA and the EU in response to the Crimean crisis. Firstly, both the EU and the USA drew up a list of Russian government officials and businessmen preventing them from having foreign assets, bank accounts and getting visas to Western and European countries. Sanctions were also applied against large Russian companies who were prohibited to trade their bonds, borrow money from foreign companies and restricted in their right to provide long term loans and make investments. Secondly, the import of high tech equipment needed to extract oil and gas from deep Arctic mines in Russia was banned. Thirdly, military cooperation between Russia and many western countries was stopped.

In response to the sanctions from the USA and the EU, Russia also began imposing many restrictions on foreign entities and their actions. Firstly, Russia published sanctions applied against foreign government officials. Secondly, Russia put embargo on import of certain types of agricultural products, raw materials and foodstuffs which are produced in countries who applied sanctions against Russia.

The sanctions damage Russian economy greatly due to embargo policy, the increase in tax burden inside the country and problems of oil companies connected with maintaining profitability. On the other hand, sanctions can help Russian economy to get out of crisis in the following way. They can become a stimulus for development of backward agricultural sector. Also Russia can redirect its market on Asia and Latin America where losses from sanctions will be offset by mutual trade with China and Brazil.

Sanctions will force Russia to trade more with BRICS and emerging markets, and even borrow more from those markets. It will stimulate Russian industry and technology, as Russia reorients its defense sector out of the Ukraine. Undoubtedly, the BRICS bank that has just been developed will assist Russian economic diversification. Russia's bilateral trade with its trading partners will be settled in yuan, ruble and other currencies instead of dollar. So, these are examples of how Russia will accelerate its economic and strategic reorientation towards the rest of the world and will reduce its dependency on Europe and the USA. The US policy in the long-term is economically very short-sighted. The US, obviously, exacerbated the situation in the Ukraine for political reasons. We think, there is going to be longer term economic costs to the Europeans, and some to the US, as a result of that short-sighted political strategy.

In conclusion, Russia will diversify more, and develop more common markets, and more trade relations with other areas, more banking relationships and more currency relationships. In the long-term it is probably good for Russia to diversify its economy.