Diversification of the Russian economy in the face of economic sanctions

The aggravation of political relations with Western countries led to the emergence of the idea of developing the import-substituting production. Partially, it can be perceived as a policy of self-sufficiency, partially - as a new course for the modernization of the domestic economy and diversification of domestic production. Actually, all of these can be attributed to a "one more" attempt to get rid of the Dutch desease.

Russia is present on the world market mainly as a supplier of energy resources. Domestic production maintains a high scientific and technical level only in certain industries (nuclear power, space, defence industry), in general it is inferior to the leading market players by key criteria of efficiency and quality. In the market of new technologies, Russia's share is only 0.3%, while the United States – 39%, Japan – 30%, Germany - 16%.1 According to Rospatent estimates, the import of intellectual property in Russia exceeds exports by 11 times.2

The capabilities of the domestic industry to manufacture the equipment necessary for the re-equipment of production are limited. Even when an enterprise develops a specific project and has the means to invest, the obstacle is the lack of potential partners and specialists capable of working in the field of innovative entrepreneurship. According to experts of the Institute of Economic Policy, the main problem of import substitution is "the absence of domestic analogues of any quality".

An indispensable condition for both diversification and import substitution is an increase of investments in the renewal and expansion of fixed productive assets. Meanwhile, the economic downturn does little to boost the investment. The prospects for the resumption of economic growth are very uncertain. Not any shifts, suggesting the possibility of eliminating root causes are noticeable.

One of the most noticeable consequences of the crisis in the Russian economy was the depreciation of the ruble, accompanied by an acceleration of inflation. The faster growth in prices relative to wages growth rates has cut real incomes of the population and became another factor of demand squeezing, which, in turn, affected the volume of investments, including investment in importsubstituting production.

The weakening of the ruble had a certain protectionist effect and stimulated import substitution. The depreciation of the ruble has increased the price competitiveness of domestic producers, making investments in Russian assets cheaper for foreigners. However, the rise in the cost of imports influenced not only those goods that compete with domestic products, but also those that are not produced in Russia, but are necessary for the development of the importsubstituting industries. Their appreciation led to the increase of the cost of investment projects.

The progress of import substitution is traced almost exclusively in the field of food production. The fall in oil prices only in theory contributes to the disposal of the Russian economy from the "Dutch disease." Firstly, today it is difficult to say how long the period of cheap oil will last. Secondly, the weakening of the attractiveness of the extractive industries is not enough for investment to flow into the manufacturing industries.

As shown by the analysis carried out at the Institute of Economic Policy, the process of import substitution is slowing down. The inability to find domestic materials and equipment of the appropriate quality requires manufacturers to access the external market. A part of manufacturers, having refused attempts to further increase import substitution, went on to "import preservation", and some, whose steps along this path turned out to be unsuccessful - to the "import-broadening".3

To start structural reorganization in conditions of external financial and technological restrictions is extremely difficult. But there is no other way for our country. The Russian economy has already used all the opportunities it has given to delay the transition to an intensive development model.

Implementation of import substitution policy is hampered by the technical backwardness of many branches of Russian industry, the prevalence of outdated equipment, and the lack of qualified personnel. In a short-term, it is impossible to improve the situation on these key parameters. We cannot do without importing the necessary equipment, technologies, components and materials, the value of which increased with the fall of the Russian currency. The Russian economy needs foreign investments, especially direct ones, which are accompanied by technology transfers. Reducing their inflow will further retard the development of the domestic economy and enhance its technological backwardness.

Hopes for obtaining financing and technology from China are justified only partially. Practice shows that Chinese banks are very cautious in lending to

Russian companies. Because of the high valuation of our risks, they require expensive guarantees and often stipulate the issuance of a loan by the purchase of Chinese goods. Chinese corporations that could invest in the Russian economy limit themselves to general statements and protocols of intent. It should also be borne in mind that the Asian countries themselves are mainly consumers, not producers of advanced technologies.

The restoration and expansion of ties with European and American firms in the field of production and scientific and technical research remains a prerequisite for a profound modernization of Russian industrial production. In this way, one of the conditions for the successful implementation of tasks in the field industrial diversification is the normalization of political relations with the leading countries of the West.