Index
1. Russian economy situation2. Shale gas boom
3. Recent situation
4. When should you invest at Russia?
1. Russia economy situation
The picture above represents the goods that Russia exports to other countries.
Dark brown is oil and gas
Light brown is mining industry
Pink is Fertilizer and chemistry
Yellow is agriculture
Blue is manufacturing
It`s clear that their manufacturing industry is not developed.
Moreover, through this graph, we can definitely know that petroleum has a huge effect on the Russian economy.
Therefore, if you see the Russian GDP and oil prices, the graph is quite similar!
In summary, the Russian economy is concentrated at raw materials and oil. Therefore, their economy is easily influenced by oil prices.
2. Shale gas boom
In the past, humans couldn't use oil or gas from shale (it's type of a rock).
But around 2009 US technicians developed technology called 'fracking'
and 'fracking' allowed humans to extract oil from shale.
In the shale, there are larger amounts of gas and oil than usual oil fields.
Therefore, US oil production tremendously increased after 2009.
Because of US oil production and bad economies of China and Europe, world oil prices decreased dramatically.
After the decrease of oil prices, the Russian economy worsened.
The most impressive thing is the exchange rate.
Previously, it was 30 Roubles per US Dollar. But after the decrease in oil prices, it became 80 Roubles per US Dollar.
Because of the Rouble`s low value, Russian consumer price inflation became really high.
It`s almost 18%!
Therefore, Russians decided to decrease consumption.
Because of a decline in consumption, Russian industrial production decreased quite a lot.
Therefore, the credit grade of Russia dropped too.
In summary, because of the US shale boom + bad economies of Europe and China => oil prices decreased => bad economy in Russia.
3. Recent situation
Recently, oil prices are increasing.
Moreover, the Rouble's price is increasing too.
Therefore, inflation will be decline in a few years.
In summary, an increase in oil prices is making the Russian economy better now.
4. When should you invest at Russia?
This is the expectation from the World Bank:
As you see, this model depends on oil prices.
In summary, the key determinant for investment in Russia is international oil prices. We can predict this by monitoring US oil production plans, Chinese and European economy!
Thank you for reading my article!
