Benefits To The Russian Government From Foreign †Free Samples

Questions: 1.What are the benefits to the Russian government from foreign direct investment in general and in the oil industry in particular? 2.What are the risks that foreign companies must bear when making investment in Russia? What are the sources of this risk? How substantial are they? 3.Is there any way foreign companies can reduce these risks? Answers: 1. FDI holds an important place in the macro as well as micro economy of Russia. It has led to important economic development as it has provided proper allocation of funds to the state budget where the distribution of funds were inadequate. FDI has helped in enhancing the scientific and technical potential of Russia (Berdysheva Romanova, 2017). It has also provided access to the Russian products in international market. Due to an opening in international market FDI has improved the production of various industries in Russia. Moreover FDI has helped in starting up new business ventures based on production in the country. The most important contribution of FDI to Russian economy is the development of their abundant natural resources especially in the field of oil. Russia has been largest oil exporter in the world and it maintained its status quo for a long time which has made it the global superpower for a better part of the century (Kapusuzoglu Ceylan, 2017). But after dissolution o f the Soviet Union, Russian oil companies started to fade due to lackluster condition and improper availability of funds. FDI has helped those oil companies to re-establish themselves by providing them with proper funds to enhance their technology and upgrade their infrastructure to compete in the international market. 2. After the dissolution of Soviet Union, Russia has suffered from economic breakdown as its government machinery has lacked the means and resources to uplift its economy(Berdysheva Romanova, 2017). In recent days Russian currency has taken a dip in the international market and has become one of the weakest currencies. Due to this reason Global players are reluctant in investing in Russian economy. Moreover, Russia has been at war with one or the other countries which has weakened its economy to a substantial level. Even if global investors try to start a venture in Russia their strict rules and regulations restrict the global players to take part in the Russian economy. Even with the presence of abundant natural resources, Russia is not able to produce the desired output because of the ignorance of its government and legislative rules (Kapusuzoglu Ceylan, 2017). Consumerism in Russia is not very market friendly which is why generic products are not manufactured and sold in Russia. Investors are scared of the market responses and from the attitudes of the government which is not very business oriented. Russia has about 70% of their assets owned by the state which prohibits investment and entrepreneurship in business ventures. These risks are quite substantial for a businessman to invest in Russia. 3. Russian economy can only be uplifted through incorporation of big oil companies like Royal Dutch Shell, Gazprom, British Petroleum and Sianco which are very deep pocketed and have the economic leverage to break the shackles of sanction rules in Russia (Berdysheva Romanova, 2017). Oil is still the most prominent factor which can revive Russian economy if big oil companies are allowed to trade in the Russian oil.The main barrier for the upgradation of Russian economy is its strict rules and sanction regulations which can be modified for the oil companies if they are willing to have proper negotiation with the Russian government (Kapusuzoglu Ceylan, 2017). References Berdysheva, E., Romanova, R. (2017). Rethinking prices during an economic crisis: Calculation as a new mode of consumer behavior in Russia.International Journal of Consumer Studies. Kapusuzoglu, A., Ceylan, N. B. (2017). The Impact of Russian Economy on the Trade, Foreign Direct Investment and Economic Growth of Turkey: Pre-and Post-Global Financial Crisis. InGlobal Financial Crisis and Its Ramifications on Capital Markets(pp. 275-286). Springer International Publishing.