International Trade Cases 1 8
International Trade: CASES (1-8)
CASE - 1
LUKOil CASE
Russia’s GDP grew by 7 percent in 2004, which marked five straight years of growth. The growth was also higher than that of any other G8 country. Russia’s oil and gas sector has fuelled the growth, accounting for about 25 percent of its oil production and exports the other 70 percent.
This dependence on petroleum exports makes Russia quite vulnerable to what happens in global petroleum markets. When the price per barrel of oil changes by $1, Russian revenues change by about $1.4 billion in the same direction.
In recent years, so much oil has been discovered in Russia that the country now has 15 percent more proven reserves than Saudi Arabia. In addition, diplomatic negotiations to solicit
Russian support for the war against the Taliban and Qaeda in Afghanistan gained Russian control over oil exports from oil-rich Azerbaijan and Kazakhstan in Central Asia. Russian supplies are so large that the Moscow bureau chief of a New York-and London-based energy intelligence group said, “The country is choking on the crude it produces.” However, because of fierce rivalry in the global oil industry, Russian control of so much oil is no guarantee it can sell at an acceptable margin. Thus, Russia depends on its oil companies to export sufficient oil to pay for imports, primarily machinery, to spur its economic development needs. The economic development is essential, both because Russia GDP per capita in 2004 at purchasing rice parity of $8,900 was well below that of any other G8 country and because Russia’s oil sector (a capital-rather than labor-intensive industry) employs less than 1 percent of it population.
LUKoil is Russia’s largest oil company and is either the world’s largest or second largest private owner of proven reserves. (Analysis disagree as to whether LUKOil or ExxonMobil is larger. Some of the world’s largest oil companies such as Saudi Aramco for Saudi Arabia and
Pertroven from Venezuela, and their reserves
CASE - 1
LUKOil CASE
Russia’s GDP grew by 7 percent in 2004, which marked five straight years of growth. The growth was also higher than that of any other G8 country. Russia’s oil and gas sector has fuelled the growth, accounting for about 25 percent of its oil production and exports the other 70 percent.
This dependence on petroleum exports makes Russia quite vulnerable to what happens in global petroleum markets. When the price per barrel of oil changes by $1, Russian revenues change by about $1.4 billion in the same direction.
In recent years, so much oil has been discovered in Russia that the country now has 15 percent more proven reserves than Saudi Arabia. In addition, diplomatic negotiations to solicit
Russian support for the war against the Taliban and Qaeda in Afghanistan gained Russian control over oil exports from oil-rich Azerbaijan and Kazakhstan in Central Asia. Russian supplies are so large that the Moscow bureau chief of a New York-and London-based energy intelligence group said, “The country is choking on the crude it produces.” However, because of fierce rivalry in the global oil industry, Russian control of so much oil is no guarantee it can sell at an acceptable margin. Thus, Russia depends on its oil companies to export sufficient oil to pay for imports, primarily machinery, to spur its economic development needs. The economic development is essential, both because Russia GDP per capita in 2004 at purchasing rice parity of $8,900 was well below that of any other G8 country and because Russia’s oil sector (a capital-rather than labor-intensive industry) employs less than 1 percent of it population.
LUKoil is Russia’s largest oil company and is either the world’s largest or second largest private owner of proven reserves. (Analysis disagree as to whether LUKOil or ExxonMobil is larger. Some of the world’s largest oil companies such as Saudi Aramco for Saudi Arabia and
Pertroven from Venezuela, and their reserves