Between the hammer and the anvil: The impact of economic sanctions and oil prices on Russia’s ruble

Exchange rate fluctuations strongly affect the Russian economy, given its heavy dependence on foreign trade and investment. In the aftermath of the conflict between Russia and Ukraine that broke out early 2014, the Russian ruble lost 50% of its value against the US dollar. The impact of the conflict on Russia may have been amplified by sanctions imposed by Western countries. However, as Russia is heavily dependent on natural resource exports, another factor behind the deterioration could be the sharp decline in oil prices starting in summer 2014. Using high-frequency data on nominal exchange and interest rates, oil prices, actual and unanticipated sanctions, we provide evidence on forces underlying the ruble exchange rate. The analysis is based on cointegrated VAR models, where fundamental long-run relationships are implicitly embedded. The results indicate that the bulk of the depreciation can be related to the decline of oil prices. In addition, unanticipated sanctions matter for the conditional volatility of the variables involved.     

Which sanctions matter? analysis of the EU/russian sanctions of 2014

We use a quasi-natural experiment of reciprocal imposition of trade sanctions by Russia and the EU since 2014. Using UNCTAD/BACI bilateral flows data we take this unique opportunity to analyse both sanctions. In particular, we study the effectiveness of narrow versus broadly defined sanctions, and differences in the effectiveness of sanctions imposed on exports and imports. We show that the Russian sanctions imposed on European and American food imports resulted in about an 8 times stronger decline in trade flows than those imposed by the EU and the US on exports of extraction equipment. These results do not appear to be driven by diversion of trade flows via non-sanctioning countries. Hence the difference in sanctions’ effectiveness can be attributed to the limited retroactivity of Western sanctions, which allowed exemptions for exports made pursuant to contracts made prior to 2014.     

Energy exports,globalization and economic growth: The case of South Caucasus

We examine the effect of energy exports and globalization on economic growth using the bias-corrected least square dummy variable model in a panel of five South Caucasus countries (Azerbaijan, Armenia, Georgia, Russia and Turkey) over the period of 1990–2009. We provide evidence that higher energy exports and globalization expand economic growth. Also, we find that higher economic, political and social integrations are associated with higher growth rates. Furthermore, we find that greater energy exports contribute to higher growth rates in the course of globalization. In particular, higher energy exports lead to higher growth rates in the period of increasing economic and political integration. We therefore emphasize that energy exports, global integration, and their interaction effects are important determinants of economic growth in the South Caucasus region.     

Market Power with Interdependent Demand: Sale of Emission Permits and Natural Gas from Russia

With implementation of the Kyoto Protocol, Russia will most likely be able to exert market power in the emission permit market. But, as Russia is also a big exporter of fossil fuels, the incentives to boost the permit price may be weak. However, a significant share of Russia’s fossil fuel exports is natural gas. If a high permit price boosts the demand for natural gas through substitution from more polluting fuels and thus increase gas profits, this may increase the incentives to exert monopoly power in the permit market. Moreover, a large fossil fuel exporter may use its market position to influence the effective demand for permits. Hence, the relationship between permit income and fossil fuels exports runs in both directions. In this article, we explore the interdependence between the revenues from permit and fossil fuel exports both theoretically and numerically. A computable general equilibrium model suggests the fact that Russia as a big gas exporter has small effect on the incentives to exert monopoly power in the permit market. Moreover, Russia’s monopoly power in the permit market has a small, but non-negligible impact on the optimal level of Russian gas exports.     

Oman's trade and opportunities of integration with the Asian economies

This paper investigates the determinants of trade between Oman and its major Asian trading partners in order to gauge the impact of the process of trade liberalisation. The empirical findings based on the gravity model indicate that Oman's imports from Asia are strongly determined by Asian population, Asian per capita gross domestic product (GDP), real exchange rates, distance and Oman's per capita GDP. The results also provide strong evidence that Oman's oil exports to Asia are strongly and equally determined by Asia's and Oman's population. Our findings reveal that while distance is not a friction to Oman's oil exports, it has a weak regressive effect on non-oil exports. Our results also indicate a negative but statistically insignificant effect of trade liberalisation on non-oil exports. These findings certainly have policy implications in terms of Oman–Asia trade relationship and in particular the need for more policy intervention to liberalise the non-oil exports sector so as to facilitate its wider integration within Asia.     

Russian exports of emission permits under the Kyoto Protocol: The interplay with non-competitive fuel markets

The paper analyses optimal strategies for a country that has market power in an international market for emission permits at the same time as a domestic fuel producer participates in a non-competitive fuel export market. In particular, the effects of coordinating fuel and permit exports are explored. We show that such coordination may either increase or reduce the optimal mark-up on permits, depending on the degree of substitution between alternative fuels.When the fuel market is oligopolistic, coordination of permit and fuel exports may lead to a strategic disadvantage in the fuel market, which makes such coordination unprofitable. However, illustrative numerical simulations suggest that Russia will benefit from coordinating its permit exports with its oil and gas exports during the Kyoto commitment period.     

Geopolitical fantasies,national strategies and ordinary Russians in the post‐communist Era

New geopolitical writings that have developed in the post‐Soviet period are predicated on different ideological and historical perspectives and against the formal statements of Russia's place in the world from President Vladimir Putin and enshrined in the document ‘Concept of the Foreign Policy of the Russian Federation’. Four geopolitical schools can be identified, ranging from the fantastic notions of extreme Eurasianism to the reformers’ goal of tying Russia firmly to the West. Formal statements concentrate on Russia's regional prominence in Eurasia and on close integration into the world economic and political systems. However, ordinary Russians display little interest in these geopolitical writings or in the foreign policy actions of the Russian state, except in special cases where the Russian military are actively involved on Russian territory or the ‘near abroad’. In this regard, Russian public opinion has increasingly become like that of the Western democracies, generally disinterested in foreign policy and focused on their personal day‐to‐day lives.     

The Impact of Economic Sanctions on South African Exports

In the mid‐1980s many nations imposed sanctions on South African exports, most of which were subsequently removed during 1991–3. I estimate the effect of eight industrialized economies' sanctions on their imports from South Africa. Outliers are found to strongly influence the parameter estimates. Failure to take account of them leads to the conclusion that sanctions by the (then) European Communities most adversely affected South African exports. In fact, robustness checks reveal that the United States' Comprehensive Anti‐Apartheid Act played the largest role, reducing bilateral imports by a third. The broader implications of these findings for estimating gravity equations are discussed.     

Trade policy and ecology

Trade sanctions on product exports are often used as measures for conservation of stocks of living resources. Two opposing approaches are investigated. The harvest approach argues that sanctions reduce the harvest, and thus protects the stock. It is shown that this does not consider the long run effects nor the effects of sanctions on the management system. The investment approach argues that increased price protects the stock, making the species a profitable investment. It is shown that this approach does not consider the asset effects of price changes, and that the sanctions usually increase the stock in an one species analysis. If the wildlife competes for land the conclusions may be different, but still sanctions usually works. If the manager has a joint management of several species, the stock effects of sanctions are ambiguous, depending on both the species interaction, and the profitability of the harvesting from each of them. In this case it is not possible to use intuitive reasoning, sanctions give distortions to all stocks simultaneously. The threat of extinction depends crucially on the unit cost in harvesting of depleted stocks. The paper concludes that trade policy is a too general measure for the management of living resources, and may implicate important economic distortions to the ecological system.This study is partially funded by the Research Council of Norway (Environment and Development). I thank Derek Clark, Tore Thonstad, Frode Steen and two anonymous referees for helpful comments.     

Foreign Direct Investment,Merchandise and Services Trade in a Transition Economy: The Case of Cambodia

Since the liberalization of trade and investment in the 1990s, inward foreign direct investment (FDI) has been seen to play a greater role in forging trade flows, integration into the regional and international markets and economic development for a transition economy such as Cambodia. Despite her recent progress in attracting FDI and fostering trade, the direction of causality between inward FDI, exports and imports of merchandise as well as services has not been empirically explored. The findings show that inward FDI not only can promote both merchandise and services exports but also indicate the presence of backward and forward linkages, which could result in positive externalities. However, based on the impulse response analysis, it seems that merchandise exports are more vulnerable than services exports to an unanticipated shift in FDI inflows in the medium run.     

United Nations Sanctions on North Korea's Luxury Goods Imports: Impact and Implications

This article examines the impacts of UN Security Council sanctions on North Korea's banned luxury goods imports from 2004 to 2017 by investigating the bilateral trade flows between North Korea and its 71 trading partner countries. This analysis provides some evidence that the sanctions were effective only for those countries that implemented the sanctions. Overall, it is difficult to conclude that United Nations Resolution 1718, which was mainly targeted to ban luxury goods exports to North Korea, was effective in curtailing North Korea's import of luxury goods for the time period from 2006 to 2007. The article argues that the lack of a clearly defined list of luxury goods and the lack of enforcement are important reasons for the ineffectiveness of the sanctions.     

Inequality and credit growth in Russian regions

We test the Rajan hypothesis using data for Russian regions from 2000 (after the ruble crisis) to 2012 (before the introduction of international sanctions). The Rajan hypothesis predicts that rising income inequality leads politicians to expand credit for the poor, which in turn, fuels a consumer credit boom. Russia provides a unique research opportunity becaise it is a post-communist transition country with 75 diverse regions. We find that a rise in income inequality is positively correlated with personal loan growth in Russia. We also find a statistically weaker, albeit economically larger, relationship between economic inequality and corporate credit. Taken together, our results provide support for the Rajan hypothesis in a country with extreme regional differences and a long history of populist policies.     

Recent trends in trade among developing countries

The paper presents the early results of empirical work on trade among developing countries. The main conclusion is that non-fuel trade among developing countries, excluding capital surplus oil exporters, remained a remarkably stable share of their total trade between 1963 and 1977. This constancy does, however, conceal two interesting opposing trends: The share of manufactures exported to developing countries has been falling sharply, while that of non-fuel primary commodities has been rising, the latter largely because of the demands of the newly industrializing countries. Nevertheless, the dynamism of manufactures has meant that they make up an increasing share of trade among developing countries. Four particular points emerge from the evidence: (i) there is no obvious sign of a bias against trade among developing countries, except whatever effect their own commercial policies may have; (ii) the more inward-looking countries tend to send a higher proportion of their exports to other developing countries and regional integration strengthens this effect; (iii) exports of manufactures to developing countries are much more capital intensive than those to industrialized countries; and (iv) exports to developing country markets may not be the vital first stage for capital goods exports that is sometimes supposed.     

How productivity and domestic output are related to exports and foreign output in the case of Sweden

In this paper we examine the relationships between two sets of three variables: Swedish real exports, Swedish real GDP, and foreign real GDP in one set; and Swedish real exports, Swedish total factor productivity, and foreign real GDP in the other set. The foreign real GDP facing Sweden is proxied by total OECD real GDP minus Sweden's real GDP. Multivariate tests for integration and cointegration show that the variables in each model are cointegrated. We also perform Granger causality tests on these variables in our examination using the Toda-Yamamoto procedure. We discover bi-directional causality between Swedish real exports and Swedish real GDP (or Swedish total factor productivity). Foreign real GDP is shown to Granger cause Swedish real exports, but no significant causation of foreign real GDP on either domestic GDP or total factor productivity was found. A change in foreign real GDP thus appears to affect Swedish output and productivity only indirectly, through changes in Swedish exports. JEL classification:F41, F43, C30, C32     

尹朗局势的发展及中国对策

当前伊朗的紧张局势左右着国际原油价格的走势，并呈现剧烈震荡的格局。美国以怀疑伊朗试图发展核武器为由，不断对伊朗进行制裁，其真实目的是控制石油资源且石油必须以美元结算。俄罗斯是伊朗在中东地区的传统贸易伙伴，为了维护自己的利益，围绕“石油美元”这一焦点问题与美国产生了激烈的竞争和错综复杂的关系。中国作为一个爱好和平的国家应积极寻找各种对策以稳定伊朗局势。     

Kicking a crude habit: diversifying away from oil and gas in the twenty-first century

Abstract

This article investigates the correlates of diversification away from oil and natural gas dependence in the context of the twenty-first century resource boom (and bust). In a sample of 40 oil- and gas-dependent economies, the majority showed significant sectoral diversification of GDP, but exports remained highly concentrated in fuel exports. Regression analysis indicates that countries that began the boom with higher levels of oil and gas dependence, poorer countries, and those with significantly larger- or smaller-than-average populations were more successful in diversifying their GDP during the commodities boom. Governance matters – more effective, capable bureaucratic structures are associated with greater GDP diversification away from oil and gas – though the effects are not uniformly positive. For any given level of government effectiveness, stronger rule of law is associated with less GDP diversification. Education appears to affect GDP and export diversification differentially. Consistent with endogenous growth theory, countries with more educated populations saw greater growth in their nonresource sectors than countries with less educated populations, though education is associated with greater export concentration. Internal economic diversification in the twenty-first century has been less a matter of policy formation and implementation, and more a matter of factors that shape the policy-making environment.     

The Shifting Geopolitics of Russia’s Natural Gas Exports and Their Impact on EU-Russia Gas Relations

In the sphere of natural gas, Russia and the EU share an interdependent relationship: Russia is the single largest supplier of natural gas to the EU, while the EU is Russia’s largest gas export market. In May 2014, a deal was struck between Gazprom and the China National Petroleum Corporation to enable large-scale Russian gas exports to China. What impact could this deal have on the EU-Russia gas relationship? This article analyses Russia’s existing and proposed gas production and export infrastructure for the delivery of natural gas to Europe and to China, and the extent to which increased gas exports to the East could result in the limitation of Russian gas exports to Europe. It is concluded that, due to its dependence on new gas production in eastern Siberia and the construction of new, purpose-built pipeline infrastructure, the Gazprom-CNPC deal of May 2014 will not have a significant impact on Russia’s gas exports from north-western Siberia to the EU. The launch of talks aimed at delivering Russian gas from the Yamal Peninsula to China via the ‘western route’ opened the first possibility for Russia to balance its gas exports between East and West. However, this is unlikely to generate price competition between Europe and China, due to Gazprom’s inability to extract a ‘European’ price for its gas exports to China. This suggests that Gazprom will not re-direct significant volumes away from Europe towards China, but rather will seek additional export volumes.     

Foreign Direct Investment,Sectoral Effects and Economic Growth in Africa

Abstract

Many small, frontier equity markets in regions such as Africa and Eastern Europe have opened in recent years. As in other larger emerging markets, important issues for investors are the extent of financial integration with exchanges in other countries and, if some reasonable degree of integration is found, whether such markets still provide diversification opportunities. Here, we will examine a frequently used metric of integration by testing for the existence of common trends, or cointegration, in these frontier markets. While common stochastic trends are found, results show that coefficients on cointegrating vectors are at times negative, and reaction to deviations from the long-run trend are often slow, thus indicating that frontier markets are a good source of diversification opportunities despite a degree of integration.     

Watching out for regional separatism in the Russian far East: Ideological cueing of territorial security,economic incentives and cultural identity

Why has regional separatism failed to materialise in the post‐Soviet Russian Far East despite the region's remoteness from Russia's European heartland, its proximity to the Pacific Rim economies, the decline of economic support from Moscow, and a ‘frontier’ culture of resistance to Moscow's rule? Focusing on political developments in Primorskii Krai ‐ the key frontier province in the Russian Far East ‐ the study finds that territorial security, economic incentives, and cultural identity affect proclivities for regional separatism selectively, depending on ideological and institutional constraints in which centre‐periphery relations are embedded. In the absence of ideological commitments and enforceable institutional rales and norms, centre‐periphery conflicts devolve into economic bargaining and rule‐manipulation by elites for quick material gains. The changing ideological context amidst post‐Soviet institutional transition in Russia provide the most consistent explanation of conflict dynamic between Primorskii Krai's leaders and Moscow, of the non‐emergence of regional separatism, and of gross economic mismanagement of the province.     

物流发展、FDI与出口贸易结构优化——基于中部地区的实证分析

基于中部六省1994-2012年的统计数据,通过对物流发展水平指标提取主成分,发现中部地区物流发展综合水平在不断提升,特别是入世后得到迅猛的发展;采用资本、技术密集型产品占工业制成品出口额的比重测算的结果显示,中部地区出口贸易结构正由劳动密集型向资本、技术密集型演化。借助SVAR模型实证表明:中部地区FDI与物流发展水平及出口贸易结构之间呈现了良性互动效应,但物流发展水平只是与FDI显现了互动,而未能有效促进出口贸易结构优化,在吸引FDI促进出口贸易结构优化方面,物流依然是中部区位优势中的一块短板。基于实证结果的启示,文章最后提出中部地区应考虑将提高区域物流信息化水平、实现区域物流一体化及标准化等作为政策的着力点,改善物流业软环境,才能更好地吸引FDI有效推动经济转型、产业升级及出口贸易结构优化。