Technology import substitution fits wider Russian aims

Subject

Russian import substitution for machinery and equipment.

Significance

In response to sectoral sanctions imposed by the United States and EU since 2014, the Russian government has pursued an economy-wide import substitution programme to encourage local development and production of technologies. The policy will be sustained because no end to Western sanctions is in sight, and it fits the government's broader aim of encouraging competitive hi-tech industries and -- for political as well as economic reasons -- making Russia less dependent on more advanced economies as well as on its own oil and gas sector.

Impacts

• The government's commitment to fiscal discipline will restrict funding to projects with verifiable future payback.
• Spare capacity in the hi-tech defence sector will be turned towards non-military production, probably beyond 2020.
• Import substitution necessitated by Russia's 2014 ban on certain food imports have spurred crop diversification and growth in farming.