International trade - Essay Example

It has made remarkable foreign investments, mostly in its nearby countries, owing to its huge capital reserve and high market prices. For LUKoil, foreign acquisitions are a means of acquiring experienced workers and technological know-how to gain efficiency and effectiveness in both domestic and global competition. It has acquired 800 U.S. stations from ConocoPhillips and 100 per cent of Getty Petroleum in the United States. It is imperative for both Russia and LUKoil to export petroleum in order to fulfil their economic goals.

However, LUKoil’s future ability to export may be hampered by the sorry state of political relations of Russia both inside and outside the nation. Thus, to make sure that the company operates successfully, it must lay more emphasis on foreign investments and relations with the oil companies in the West. Russia’s position as an oil exporter can be explained on the basis of the theory of absolute as well as competitive advantage. Russia ranks eighth largest in the world in terms of its oil reserves and hence the country enjoys the natural gift of such a comparative advantage.

As compared to Saudi Arabia, Russia presently has 15 more established oil reserves. Besides, the country enjoys not only natural but also acquired advantages with respect to oil production. In the global oil market the prices are determined by the basic laws of demand and supply. Of Russia’s total oil production, just 27 per cent is put to use for inland purposes and the remaining 73 per cent is exported. Moreover, its oil companies have come up as major players in the global competition. Thus, factor proportions theory is also valid for Russia’s competitive advantage.

The country similarity theory can also be applied in this case if we consider the fact that a major part of its foreign expansion corresponds to the countries that were formerly a part of the Soviet Union. In addition to this, Russia’s global position as an oil exporter can be