The Influence of Financial and Industrial Policy on Harmonization of European and Asian Integration Processes

Abstract

JEL Classification Codes: E42, E52, F00, G38. 1. Introduction The aim of this study is to determine the characteristics of financial and industrial policies implemented in context of Western sanctions, as well as existing demographic, infrastructural, and institutional limitations, on the development of Russian economy. Continued dependence on global oil and gas prices, low diversification of Russian economy, and other factors limit its potential growth. Historical experience of Russia and other countries of the Eurasian Economic Union suggest that overcoming these constraints requires significant time and effort. Therefore it is necessary to develop effective anti-crisis financial and industrial policies that would stimulate growth of Russian economy, which is the principal driving force behind the formation and integration of the Eurasian Economic Space. Economic sanctions imposed by the European Union and the USA have limited the access of Russian companies and commercial banks to capital and technologies required to implement their investment projects, and thus have creating obstacles to the sustained growth of Russian economy. The uncertainty of prospects for Russia's economic growth and the harmful effects of prolonged recession require the identification of specific factors limiting the development of integration processes in the globalizing economy. In order to improve Russia's economic situation, the investment scenario of economic development must be implemented, wherein price increases for certain products might lead to a relative reduction in prices in the economy as a whole. 2. Theoretical, Informational, Empirical, and Methodological Grounds of the Research This study rests on the theoretical framework formed by conceptual approaches to the market economy theory, institutional design, financial economics, modern concepts of the economic growth theory and the new industrialization, and other factors that determine the direction of contemporary industrial policy, which forms in the context of economic sanctions based on an integrated system of risk management and import substitution programs (Arslan-Ayaydin et al., 2014; Averina et al., 2016; Boldeanu and Tache, 2016; Carstina et al., 2015; Tcvetkov et al., 2015; Theriou, 2015; Budik and Schlossberger, 2015; Thalassinos et al., 2015). In order for Russian economy to grow, it needs hard currency and technological resources required for the development and implementation of investment projects. Sanctions imposed on Russia restrict its ability to raise funds in global financial markets in order to implement its energy projects, and thus they increase the risk of prolonged economic recession. Economic and technological sanctions imposed on Russia by the Western countries have limited the access of Russian companies and commercial banks to the global capital market, and thus their ability to borrow funds and attract investments. Prolongation and extension of these sanctions by the European Union and the USA would certainly limit Russia's economic growth and decreases its financial stability. Despite certain volatility in the global financial market caused by the United Kingdom's decision to leave the European Union (Brexit) following the referendum held on June 23, 2016, the current state of the world economy has not deteriorated. The pace of economic growth in major developed economies has remained stable, and in developing countries, including the Eurasian Economic Union, it has not decreased significantly (Rupeika-Apoga and Nedovis, 2015; Liapis and Thalassinos, 2013; Medvedeva et cd., 2015; Allegret et cd., 2016; Sharma, 2014; Salimova and Makolov, 2016; Sibirskayaeta]., 2016). Authors of this study evaluate and verify the factors affecting Russia's economic growth, which in 2016 demonstrated better dynamics than in 2014. Naturally, the prospects for economic growth could be positively influenced by increasing oil prices; however the forecasts suggest $50 per barrel at best. …