why circumvention of sanctions was not always useful

“Don’t cook the pot,” cried the girl in the Brothers Grimm fairy tale, drowning in porridge. Participants in the Russian technology sector also began to live out this story in 2023. Throughout the first year of hostilities and an avalanche of restrictions, businessmen and officials feverishly set up schemes to break through the sanctions blockade. But when the “road of life” was successfully paved, such movement began along it that now many are not happy. It turned out to be even more difficult to compete with Western equipment supplied by parallel imports than with official supplies. But you can’t just lower the barrier – even what is really needed will be blocked. The situation requires more subtle, flexible self-isolation mechanisms, which do not seem to exist yet.

We can already confidently admit that the Russian technology sector has not only learned to survive under sanctions – the industry mastered this skill back in 2022, having spent most of its adrenaline reserves on the first two or three packages of restrictions from the EU and the US – but was also able to start from – to develop somewhere under them. Thus, if you believe Rosstat data, based on the results of January-October, production volumes of technological products in the Russian Federation mainly grew at a double-digit rate.

For the year as a whole, the Ministry of Industry and Trade expects an increase in production volumes, for example, of radio and microelectronics by more than 30%.

The trend is confirmed by the manufacturers themselves. Thus, Fplus is talking about a “multiple” increase in output and doubling of revenue. Yadro assures that “the indicators are growing faster than the market ones.” Many other players note an increase in production “on average by 20–30%,” primarily due to the jump in government and defense orders.

What they cannot do in Russia yet (and this is still a very, very long list of components and equipment), they have learned to import with the help of cunning and not very trade and logistics chains and specific entrepreneurs.

In many ways, Russian statistics, which have been closed since 2022, give almost no idea about this, but the conclusions of Western analysts are quite definite – a wide “road of life” has been paved for the supply of technological products to Russia. In June, Politico noted that imports of needed components had “reached pre-war levels.” Throughout the year, quite serious foreign media published one after another investigations that “the sanctions machine is not able to cut off countless channels for the supply of equipment and components to Russia.”

“It’s like an endless game of whack-a-mole,” one New York Times source complained in a December article. But success, as it turned out, has a downside – Russian companies have to play by the same rules.

The spontaneous and poorly controlled market that has developed under sanctions forces domestic manufacturers to compete not with a small number of large foreign vendors, polite, correct and caring about their image, but with hundreds of LLCs for whom the law is not written.

Often these companies are owned by former employees of Russian divisions of tech giants who know all the ins and outs, but are no longer bound by the rules. They can import even exactly the same equipment that came before the crisis cheaper – after all, there is no need to include in the price the costs of staffing, marketing, service and other customer care. These players not only sell familiar equipment that fits the technological systems of buyers, but also dump, Russian manufacturers complain.

But domestic technology, even without comparison with foreign technology, still, let’s say, has room for improvement.

Buyers are primarily interested in price and efficiency, and not in the presence of a conclusion from the Ministry of Industry and Trade on domesticity.

As a result, throughout the second half of the year, associations of manufacturers and business associations, at first privately, and then without hesitation, spoke about the need to limit imports. Of course, not completely (the fact that Russian equipment consists mostly of imported components is not news for a long time), otherwise our own production will stop. Somehow so that domestic factories get what they need, and their competitors get stuck at customs.

For example, ANO VT proposed limiting the parallel import of not all servers, but only those whose analogues are produced in Russia – these are one- and two-unit machines. “Business Russia” sent proposals to limit the import into the country of equipment and components of certain brands: IBM, DELL, HPE, etc. At the same time, according to unofficial data, manufacturers proposed that regulators strengthen control over the implementation of state-owned companies and companies with state participation in compliance with quotas for the purchase of Russian equipment .

But manually setting up imports is a complex task both in terms of formulating rules and administering their execution. Russian regulators (as well as Western ones, it must be admitted) are accustomed to operating with straightforward and understandable mechanisms of protectionism: duties, fees and embargoes. And it is much easier to threaten a cudgel with a narrow circle of local representatives of large foreign companies who value market shares, KPIs and quarterly bonuses, rather than a scattering of nominal founders of individual entrepreneurs and LLCs.

Meanwhile, passions are growing, and the problem of the excessive efficiency of mechanisms for circumventing sanctions, which unexpectedly made the Russian market completely competitive and democratic, will have to be resolved. The authorities in this situation have three obvious options. You can go the usual way and close the barrier – in the end, they cried and got by without French cheese. You can start sawing out the restrictions with a thin jigsaw. Or you can, of course, remember the golden rule “if it works, don’t touch it” and allow the new free market to regulate itself.

Nikita Korolev