Natural resources: A determining factor of geopolitical risk in Russia? Revisiting conflict-based perspective

Abstract

Geopolitical risk has recently gained attention in the empirical literature as a significant factor influencing various economic sectors and financial indicators. The relationship between natural resource rents and Geopolitical risk (GPR) has been explored to some extent, focusing on how geopolitical risks affect natural resource rents. However, fluctuations in natural resource rents could also have feedback effects on Geopolitical risk. For this purpose, we analyzed the impact of disaggregated natural resources and GDP growth on the geopolitical risk of Russia by utilizing the data from 1988 to 2021. The bound cointegration test findings conclude that a long-run equilibrium relationship exists among the associated variables. Applying a long-run estimator, the Autoregressive Distributed Lag (ARDL) model results indicated that GDP and forest rents increase GPR. In contrast, oil rents, coal rents, and mineral rents have a decreasing effect on GPR. Moreover, the impacts of resource rents were found to be heterogeneous. The study suggests policies related to promoting economic diversification and addressing income inequality, sustainable forest management practices, and ensuring equitable distribution of benefits that can help reduce social and economic inequality, which may decrease geopolitical risk.