The Impact Of The Changes In The Oil Market On The Performance Of Stock Market Of The Russian Federation

The Russian Federation is an important energy resource exporter that has gone through the transformation from the "military superpower" to the "energy superpower".Its energy diplomacy and influence is on the agenda of the global energy market.However,the particular course of Russia’s energy strategy is determined by the internal factors such as a structure of the oil industry and the performance of the stock market.In order to highlight the importance of the oil industry for the government of the Russian Federation,the thesis reviews the policy of the Russian government towards oil industry from different aspects:subsoil use,extraction from the continental shelf of the Russian Federation,Production Sharing Agreements,the procedures for making foreign investment in business entities of strategic importance for the Russian Federation.This thesis reviews the institutional organization of the Russian oil sector in order to investigate the dynamic relationship that exists between the economy of the Russian Federation and the oil industry.The thesis estimates a Vector Autoregressive(VAR)model,Generalized Impulse Response function,and Variance Decomposition to explain the relationship between the Russian Stock Market Performance and the oil sector.More specifically,we examine three aspects of oil market changes including the demand changes,supply changes and unpredictable price changes that are not caused by the dynamics of supply and demand,using the vector auto-regression model with generalized impulse response function.Our results have found that a positive supply change,demand change and price change has a positive effect on the performance of the stock market of the Russian Federation.In addition,we examine what are the potential challenges for Russia’s oil sector,in particular,in terms of demand,supply and unpredictable price changes that are not caused by the dynamics of supply and demand,taking into consideration the main indicators of the oil industry development.The policy implications suggested offer the possible measures focused on the improvement of the investment climate and attracting technologies and innovations into the oil industry of the Russian Federation.In addition,we underline the necessity of strengthening cooperation with Russia’s main partners in the oil trade,for instance People’s Republic of China,taking into account that it follows the intention of Russia to become an"energy superpower" and goes well with its energy strategy.