The intersection of geopolitical risks and energy investments: lessons from BRICS nations

Résumé fourni par la source

Given the increasing reliance on public-private partnerships (PPP) in energy infrastructure across emerging economies, understanding how geopolitical instability influences these investments is crucial. This study aims to assess the impact of geopolitical risk (GPR) on PPP investments in the energy sector (PPE). The study employs a panel dataset covering BRICS economies from 1985 to 2023 and utilizes the CS-ARDL model to capture both short-run and long-run effects while addressing cross-sectional dependence and heterogeneity. To ensure robustness, the GMM model is applied. The empirical results indicate that GPR has a significantly negative impact on PPE, implying that heightened uncertainty discourages private sector participation in large-scale energy projects. The causality analysis confirms a bidirectional relationship between GPR and PPP energy investments, indicating that geopolitical instability not only affects investment decisions but may also be influenced by energy sector dynamics. The findings emphasize the need for strong institutional frameworks, risk mitigation mechanisms, and strategic financial incentives to sustain PPP investments in energy despite geopolitical uncertainty. Additionally, regional cooperation and GPR insurance mechanisms could help mitigate uncertainties, ensuring long-term sustainability of energy infrastructure development. This study contributes to the literature by integrating geopolitical risk into the discourse on energy financing through PPP, a largely overlooked aspect in prior research.

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