Regional features of contemporary economy and international relations
Regionalfeatures of contemporary economy and international relations
Moderneconomies have both similarities and differences, which are based onthe key factors that drive each economy. The present study consistsof three parts. The first part addresses the regional features ofcontemporary economy in Moscow, West Siberia, Ukraine, Georgia, andKazakhstan. This section identifies the key factors that driveeconomic growth, some of which are common in different zones. Thesecond part focuses on the contemporary relations between Ukraine andRussia, while the third section addresses the contemporary relationsbetween Georgia and Russia.
Regionalfeatures of contemporary economy
Moscowand Moscow region
Moscowis the largest economic center of Russia and sets the pace fornational economic growth and development. Moscow, the capital city ofRussia, accounts for about 22 % of the national GDP with a per capitaGDP of approximately $ 24,000, which is equivalent to levels ofdeveloped economies (Bedrick 8). Currently, the economy of Moscow isdriven by three major sectors whose dominance distinguishes thecity’s economic progress from other economic hubs in the region.First, Moscow has remained the largest and the manufacturing centerin Russia in spite of the fact that the manufacturing sector declinedsignificantly after the collapse of the Soviet Union. Research showsthat the industrial capacity of Moscow depends more on the City’shighly skilled labor than the availability of raw materials(Encyclopedia Britannica Incorporation 1). Its industrial region,which is occupied by small and long-established factories, stretchesfrom northeast to east of the city. Most of these industries focus onchemical processing, furniture making, food processing, textile, andtechnology.
Secondly,Moscow serves as the Russia’s chief financial center that housesthe head offices of nearly all financial institutions in the country.The growth of financial sector began in the 1990s following the fallof the Soviet Union (Encyclopedia Britannica Incorporation 1). Duringthis period, many investors decreased their investment in engineeringand manufacturing and invested more in the service industry, mainlythe financial sector. Over the years, financial institutions haveestablished their offices in the city whereby 58 % of the Russianbanks, 86 % of the large banks were hosted by Moscow by the year 2012(Bedrick 9). This implies that the services industry, especially thebanking sector, is a major contributor of the Moscow’s economicgrowth and development.
Third,Moscow has a well developed transport sector that facilitates themovement of people and goods in and out of the city, which enhancesthe overall economic efficiency of the city. The city is served byfive commercial airports, including Domodedovo, Sheremetyevo,Vnukovo, Ostafyevo, and Bykovo international airport (PushkinInstitute 1). Moscow is also connected to other regions by passengerterminals (including North River and South River terminals) and aboutnine railway stations that serve the city and its surrounding. Othermeans of transport include the roads that serve about 2 millionvehicles per day, taxi, city tram, bus, monorail, and city metro(Pushkin Institute 1).
WestSiberia is one the key economic centers of Russia, but its geographyand economic activities differ significantly from those of othereconomic region. South Siberia has two major economic activities thathave increased its significance in spite of its small population.First, the West Siberian oil reserve provides approximately 70 % ofthe fossil fuels consumed in Russia every year (Ulmishek 1). It isestimated that the West Siberian basin contains approximately 144billion barrels and 1,300 trillion cubic feet of crude oil and gasrespectively. The basin extends over an area of about 7,439kilometers squared towards the eastern portion (Ulmishek 1).Currently, the oil field in West Siberia is underexploited and thediscovery of fossil fuels that are easy to exploit has increased theeconomic significance of the region.
Secondly,West Siberia has larger tracks of arable land that are used inpracticing agriculture as an economic activity. West Siberia has afairly flat landscape with larger livers, but the southern part hasfertile land that is suitable for agriculture. It is estimated thatabout 80 % of the total population of Western Siberia live in theWestern region (The School of Russian and Asian Studies 1). Thesouthern part of Western Siberia has several highlands (such as AltaiMountain) that act as sources of large rivers, including Irtysh.Climate and topography of Western Siberia favor the large scaleproduction of rice, livestock, oat, and sugar beets.
Ukraineis a country is a located in the Eastern part of Europe, which adiversified economy. This means that Ukraine depends on a wide rangeof economic sectors, which include energy, tourism, corporations, andtransport among others. Ukraine has large oil reserves, most of whichare under the sea along the east coast of Crimea and along the coastof the Black Sea. The fuel reserves located in Skifska and Foros areestimated to yield about 7 million tons of crude oil every year(Matlack 1). However, most of these reserves have not been exploitedand this has resulted in Ukraine’s reliance on Russia for oil andgas supply. Ukraine has both natural and man-made features thatcontribute to its competitive advantage in the world tourismindustry. Research shows that Ukraine currently posses approximately2.2 % of the European tourism market and ranks eighth in the totalnumber of tourist visit (Lozynska 1-2). The key tourist resourcesinclude natural resources (including mineral waters and uniqueclimate), historical resources, ecological resources and recreationalresources (such as pre-Carpathian, coast of Crimea, and CarpathianMountains). The availability of this wide range of resources is themajor cause of diverse forms (including sports, aquatic, religious,cognitive, and ecological) of tourism in Ukraine. This means thattourism is one of the key pillars of Ukraine’s economy.
AlthoughUkraine has not improved most of its road network system since thefall of the Soviet Union, it has focused on more efficient and modernmeans of transport, such as railway and air transport. Railwaytransport is preferred by many people because it is reliable andcheap compared to other means of transport (Lonely Planet 1).Although Ukraine’s airline industry is not ranked as one of theworld’s safest airlines, it has one of the fastest growing aviationsectors. The development of the largest world cargo plane (AntonovAn-225 Mriya) is evidence that Ukraine is focused on air transport asa key pillar of economic development (Lonely Planet 1).
Ukraineis one of the countries that have successfully utilized technology toadvance its economy. The use of technology has allowed Ukraine investin heavy industry and gain a breakthrough in key economic sectors,including motor vehicle and aircraft production (Hobocth 1). Thismakes Ukraine one of the European countries with economies that willpotentially grow at a high rate in the future. However, political andlegal reforms are necessary for economic efficiency to be realized.
Georgiais a country located in the Caucasus of Eurasia, between EasternEurope and Western Asia. Although Georgia has a diversified economyit, have major economic pillars, namely tourism and transport.Tourism has been recorded as the major driver of Georgia’s economy,which generates about $ 19 billion from domestic expenditure and $1.7 billion from international expenditure annually (Speno 12). Inaddition, the tourism industry has created about 241,000 jobs, whichgenerates approximately $ 6.9 billion of income to Georgians who workin the tourism industry. Moreover, tourism generates about 1.6billion of revenue in the form of tax to both the state and the localgovernments every year (Speno 12). Progress in the tourism sector hasopened an opportunity for further diversification of the economyfollowing the increase in the rate of growth of the service industry(including motels and restaurants), manufacturing (including arts andpublications), and agriculture.
Georgiahas well developed transport systems, which consist of road, rail,shipping, and air. The strategic location of Georgia in the Caucasusfacilitates the importation of goods from by other European countriesthrough its sea ports, especially the coast of the Black Sea.Establishing the rail connections between the sea ports and interiorof the country has been a priority of the government of Georgia(Georgia Railway 1). In addition, the modernization of the railwaynetwork in Georgia has increased the preference of Georgia ports bythe neighboring countries (including Turkey and Ukraine), whichimports goods from Azerbaijan through the ports of Georgia. Moreover,Georgia has focused on the development of international airports withthe objective of increasing its connection with the rest of theworld. This implies that the government of Georgia values thetransport sector as one of the key economic drivers.
Kazakhstanis a transcontinental and the largest landlocked country that islocated in central Asia. The key economic pillars of Kazakhstaninclude natural resources, agriculture, transport, and banking.Kazakhstan has an abundant supply of natural resources that areeasily accessible and heap to extract. Research shows that Kazakhstanranks the second largest reserve of chromium, uranium, and zinc,third largest reserve of manganese, fifth copper reserve, andposition 11 in the world largest oil and natural gas reserves(International Crisis Group 1). The extraction of natural resourcesaccounts for the largest proportion of Kazakhstan’s industrialoutput. The existence of large deposits of natural resources hasattracted the attention of developed economies (including theEuropean countries) as well as rapidly developing economies (such asChina) to Kazakhstan. This implies that the exploitation of naturalresources is the major economic pillar for Kazakhstan.
Agricultureis also a major sector that makes a significant contribution to thenational GDP. Kazakhstan farmers grow a wide range of crops(including potatoes, vegetables, grain, and melons). The rapiddevelopment of the Agricultural sector has made it among the largestsource of employment (about one third) in Kazakhstan since it gainedindependence (Pomfret 1-2). This has resulted from the increase inthe range of crops produced and the size of agricultural land.However, environmental degradation that occurred in Kazakhstan duringthe time of the Soviet Union presents a significant challenge tofarmers.
Thetransport and the banking sectors are emerging economic pillars ofKazakhstan. Although the transport system of Kazakhstan may not beranked as one of the best in the world, the government has madesignificant progress in developing the road network and constructionof modern railway. The banking system, on the other hand, is animportant sector that cannot be undermined. The banking sectorexperienced rapid expansion in the early 2000s, but it was seriouslyaffected by the global financial crisis of 2008 (International CrisisGroup 1). However, the two sectors (banking and transport) have ahigh potential for rapid growth in the near future.
Ukraineand Russia have a complex relationship that is characterized times ofwar and times of unity and strong economic ties. The relationshipbetween the two countries dates back over one thousand years ago andcontinued during the Soviet Union (Bates 1). The long-termrelationship between the two countries is evidenced by the two majorfactors. First, citizens of the two countries have invested millionsof dollars in the neighboring country. Research shows that over 7.5million Russian works and live in different parts of Ukraine,especially south of the Crimea and eastern region of Ukraine (Bates1). Another study shows that the Russian companies that have investedin Ukraine account for about 7 % of the foreign investment (Calamur1). This implies that trade between the two countries might havestarted before the formation of the Soviet Union. Secondly, the twocountries share linguistic ties where common ethnic groups reside inboth countries. It is estimated that about 2 million Ukrainians havea Russian origin and about 25 % of the 46 million Ukrainians claim tothat Russia is their mother tongue (Bates 1). This means that thelong-term relationship goes beyond mere economic ties.
Russiavalues the good relationship with the neighboring countries as asource of security and economic progress. Russia has no naturalborders (such as mountain and rivers) in its western frontier.Consequently, the government of Russia thinks that maintaining thesphere of influence on the neighboring countries, especially Ukraineas a reliable source of security (Bates 1). This means that Ukrainecannot allow enemies to invade Russia through its borders if a goodrelationship exists between Ukraine and Russia. In addition, the twocountries value each other as long-term and reliable trade partners.Ukraine serves as the largest export destination for Russia andRussia supplies cheap goods (such as natural gas and oil) to Ukraine(Bates 1). The two countries have free trade agreements that makethem special trade partners. However, there is no balance of tradebecause Ukraine imports more from Russia than it export to it, whichmeans that Russia may suffer more if Ukraine finds a new market toimport products from.
Althoughthe two countries value their relationship with each other, therehave been two sources of discord between them. The two factors havecaused a serious ongoing conflict between Russia and Ukraine to anextent that they are careening towards war with each other. The firstcause of conflict between Ukraine and Russia is the futureorientation of Ukraine’s economy with major augments being whetherUkraine should take the direction of the European Union or it shouldmaintain close ties with Russia. The ongoing conflicts betweenUkraine and Russia stemmed from the decision of the president ofRussia an economic deal presented by the European Union. Theintension of the European Union was to lure more countries in theEastern Europe to join the union (Curran 1). This gave rise to theconflict of interest between the citizens of Ukraine and Russia,causing the ongoing conflicts. The desire of the Ukrainian was toextend Ukraine’s involvement with the European Union, especiallythe countries of the Western Europe that have more productive andmodern economies (Curran 1). The offer given by the European Unionwas in favor of the long-term pursuit of Ukrainians who have beenseeking for economic reforms that would bring their economy in linewith those of established economies of the Western countries. Thedecision of the former president (Viktor Yanukovych) to postpone thesigning of the deal was perceived as a betrayal of the people’swish and this resulted in his impeachment and the ongoing crisis(Curran 1).
Russia’sdesire, on the other hand, was to protect its sovereignty in theregion and its economy. This means that the desire of Ukrainians tojoin the European Union would destroy the relationship betweenUkraine and Russia at the disadvantage of Russia. For example, theintegration of Ukraine into the European Union would result in amassive influx of cheap, but high quality products from Europeancountries into Ukraine (Curran 1). These products would eventuallyget into Russia because of the existing free trade agreements betweenUkraine and Russia, thus destroying Russia’s economy. This hasdestroyed the long-term relationship between the two countries andsubjected them to the risk of engaging in the international war.
Thesecond source of dispute between Ukraine and Russia is the ownershipof the Peninsula of Crimea. Crimea has been under the leadership ofthe government of Ukraine since the fall of the Soviet Union, but theresidents of Crimea (majority Russians) have been seeking for moreautonomy from Ukraine. The majority of Russians (56 %) believes thatCrimea is part of Russia because they believe that the Soviet leaderKhrushchev Nikita gave out the region to Ukraine in 1954 when drunk(Bates 1). Currently, Russia has sent its troops to seize the Crimeawith an excuse that the people of Crimea have voted for secessionfrom Ukraine to join Russia. This has further destroyed therelationship between the two countries because Ukraine feels that itsterritory has been taken by the use of force. It is evident that theownership of Crimea Peninsula is one of the key factors that havedestroyed the relationship between Ukraine and Russia.
Therelationship between Georgia and Russia is characterized by theexistence of a geopolitical paradox that is multi-layered. The twocountries have experienced times of conflict over sovereignty andpower in the post-Soviet period. According to Tsygankov (2-8) theoccurrence of Rose Revolution in the year 2003 has subjected therelationship between Georgia and Russia into four challenging cycles.The first stage, also referred to as the nascent cooperation wascharacterized by the change of leadership in Georgia, which gave apromise for a new relationship with Russia. This gave a newopportunity for the new president of Georgia to negotiate with Russiaon matters pertaining to removal of Russian military from Georgia andreducing the issue of passports to residents of disputed regions ofSouth Ossetia and Abkhazia (Tsygankov 4).
Thesecond stage (2004-2006) was referred to as the passive containment.During this period, Russia was accused of supporting separatism inGeorgia, but opposing it at home. Although the railway connecting thetwo countries was opened during this period, a series of events (suchas mysterious bursting gas pipes and closing of land connectionbetween the two countries) weakened their relationships. The thirdstage (2006-2008) was referred to as an active containment. Thisperiod was characterized by open confrontations between Georgia andRussia. Some of the key events that further reduced the warmth oftheir relationship include the George’s action decision to arrestRussian intelligence staff and the break of peace talks. The fourthstage (the 2008 confrontation) was characterized by expression ofbitterness that had accumulated for many years. This marked thebreak-up of the relationship between eh two countries.
Thecontemporary relation between Georgia and Russia can be analyzed onthe basis of the theory of offensive realism. This theory holds thatstates are expected to maximize power and attain regional hegemony(Tsygankov 9). Under this perspective, Russia would be expected tocontrol Georgia using all the available strategies, especially theuse of military force to overcome resistance. There are two keyindicators of the fact that Russia has been using an offensivestrategy to win control over Georgia. First, Russia played a majorrole in freezing and separation of South Ossetia and Abkhazia fromGeorgia. Russia sent military forces to support separatists in thetwo regions and facilitated the massive expulsion of residents ofGeorgian ethnic (Indans 134). The objective of this action was toreduce the significance of Georgia in the region by facilitating itsdisintegration, which resulted in adverse effect on their relations.
Secondly,the clash of the relations between Georgia and Russia can be viewedas a symptom of the strategic positioning of Russia and the West inthe South Caucasus. This implies that the decision by Russia to usethe military force to conquer Georgia is an attempt to attain powerand protect its energy security in the region over the Europeancountries (Indans 138). The struggle demonstrates the conflict ofsecurity as well as political-military policies between regionalpowers (including Russia, Georgia, Abkhazia, and South Ossetia) andglobal powers (including the United Kingdom as well as the UnitedStates). In addition, energy security is an essential policyinstrument for Russia given the fact that the European countriesimport about 25 % of their energy from Russia with an estimate thiswill rise to 40 % by 2013 (Indans 139). This means that thedependence of the European Union on Russia for energy supply willcontinue being a significant instrument for Russia to express itspower and sovereignty, not only in the region, but also at globallevel. This means that the effort of the European Union to intervenein the ongoing suppression of Georgia by Russia will not lead to aviable solution. Therefore, the relationship between Georgia andRussia will continue to worsen at the disadvantage of Georgia and theadvantage of Russia, which is expressing power and supremacy.
Thetransport sector, manufacturing, financial sector, technology, andnatural resources are some of the key regional features that aredriving economies of the regions considered in the present study.However, exploitation of natural resources is only significant in afew regions, including West Siberia and Kazakhstan. The relationshipbetween Ukraine and Russia has been unpredictable, with most of theconflicts being generated by the struggle for Crimea Peninsula andRussia’s attempt to retain control over Ukraine’s economy bypreventing its integration into the European Union. Similarly, therelationship between Georgia and Russia has been complex, withincidents of conflict resulting from Russia’s attempt to establishits power and supremacy in the region and at the global level.
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