Staunton, June 30 – Western sanctions and Ukraine’s decision to end arms exports to Russia have already hurt some sectors of the economy and prompted some to call for making Russia completely independent of the international economy, but such moves, a Moscow commentator says, would only make Russia’s current problems even worse.
Viktor Dyatlovich, a journalist for “Russky reporter,” has surveyed a number of branches of the Russian economy to see how sanctions or a drive toward autarchy will affect those branches and the country as a whole. His conclusions should be sobering to Russians and others alike (expert.ru/russian_reporter/2014/24/za-kamennoj-stenoj/?partner=5687245
But one can use that possibility however implausible to see how autarchy would affect the Russian Federation in key branches.
The journalist divides the branches he surveys into three groups. Group One includes the military-industrial complex, construction, and metallurgy. These branches are the least dependent on imports already and could albeit at the price of delays and higher costs shift relatively quickly to domestic production.
There would be a slow-down in the domestic production of weaponry like drones possibly for several years. In construction, there would be small bottlenecks but no basic problems. Experts say, the journalist reports, that in that area, “Russia could move to complete self-supply tomorrow.”
Group Two includes space exploration, agriculture, electronics, IT, machine building, chcemisty and petroleum processing. In these sectors, Dyatlovich says, Russia’s “dependence on imports is essential but not critical.” A Russia cut off from the world economy would have to spend more and would have lower quality products, but it could do survive.
Complete autarchy in space exploration would be “a complete utopia,” experts say. Russia currently imports 65-70 percent of the electronics it needs in this sector. If it couldn’t or wouldn’t do so, the country would have to rely on rockets developed in the 1950 and 1960s which had far fewer electronic components. That could be remedied with time.
The average Russia wouldn’t notice this at least at first, the journalist continues. Electronic items for personal use like smartphones and televisions would still be available, although they would become “significantly more expensive. But that is all.”
Russia could even develop mines to obtain rare earth minerals needed in this sector, although that would take time, and the relevant ministry has currently allocated only 23 billion rubles (750 million US dollars)of the estimated145 billion rubles (40 billion US dollars) that would take.
Food production would also suffer. Russia currently imports 70 percent of its seed potatoes from abroad and much of its meat. And ramping things up would be hard because the country now does not have a single factory producing diesel motors for trackers and other farm equipment. It could produce them but at much higher costs and only over time.
Group Three includes branches of the Russian economy that would be most seriously hit by total sanctions or the pursuit of autarchy. They include light industry, machine building, and medicine. In these sectors, there is little or no possibility for a rapid substitution of imports with new domestic production.
Many kinds of clothing would become unavailable. Machine tool building, “one of the weakest links of [Russian] industry” and the base for many others, would not be able to manage at all well. And critical medicines would become unavailable and Russian public health would suffer enormously.
In 2006, Dyatlovich says, 99 percent of all machine tool purchases in terms of price were from abroad. Now, the situation is slightly better but not much. And many Russian firms in this area are going bankrupt, especially in high-rent areas like Moscow. Reversing this would be very, very hard.
But in some ways, the sector that would be hardest hit by total sanctions or the pursuit of autarchy would be in medicine. In 2012, the Russian government identified 563 key medicines. Only 94 of them were produced by Russian companies. 202 were produced “exclusively abroad” and imported. At present, “almost 95 percent of antibiotics in Russia are prepared from imported components.”
This is, the journalist says, “a question of national security,” although it is far from clear that the Kremlin agrees. Before the USSR collapsed, the country produced “almost three hundred substances for medicines. Now, it produces only a handful. And this branch will not be restored, whatever efforts the government makes.”In Russia today, Dyatlovich says, “there simply are no bases for domestic production of highly effective substances for antibiotics of the latest generations.” Moreover, “in the course of the last two decades, the scientific potential which would have allowed the rapid development of contemporary substances has disappeared.”
One figure alone highlights this: At the present time, some 600 Russian pharmaceutical plans produce medications which are significantly less effective than those of the same category manufactured abroad. Changing that is a matter of generations not months or even years. In the meantime, the Russian people will suffer.