Interaction between geopolitical risk, natural resources and export diversification: a study of sustainable development amidst regional conflict

This paper examines the inclusive sustainable development of Russia’s economy amidst geopolitical risk (GPR) and its richness in natural resources with access to markets. The Russia-Ukraine conflict is expected to have a severe impact on the sustainable development of both economies. The objective of this study is to examine the inclusive sustainable development of Russia in a dual development perspective of the economy and environment under GPR. Based on this objective, the authors adopt a two-model (economic and environmental) approach to expose the impact of GPR on both economic and environmental development of Russia. Russia’s quarterly data from 1995Q1 to 2021Q4 were applied with a multi-scientific approach (quantile regression and dynamic autoregressive distributed lag -DARDL) to comprehensively examine Russia’s sustainable development amidst GPR. Apart from GPR, other variables -natural resources (NR), export diversification (EXP), primary energy consumption (EC), and foreign direct investment (FDI) -were applied in the nexus and the modeling of the study under a two-model ( economic and environmental developments ) approach. Findings from both methods confirmed the adverse effect of GPR on both economic and environmental development. Export diversification is weak in sustaining Russia’s economy and its environment. Natural resource rent has an adverse effect on both economic and environmental development in Russia. While primary energy consumption is supporting the economic development, it is impacting negatively on the environmental development through economic growth. Finally, FDI depicts an asymmetric impact on both Russia’s economy and environment. From the findings, there is a need to adopt diversification plans such as geographical diversification, product and market diversification, and consistence and resiliency in the supply chain of its resources and products to avert the consequences of GPR on the economy. Deepening its regional bloc relationship and expanding its exports to new partners will restore and strengthen Russia’s economy. Also, careful handling of Russia’s natural resource rent with efficient redistribution of its revenues can be a channel to revive the economy and the environment.