Russia’s trade sanctions on the West, Ukraine and Turkey in 2014, and Moscow’s parallel policies attempting to substitute for imports and boost local production are not bearing much fruit, argues Ben Aris from BNE Intellinews in a new piece analysing the freshest Russian trade data.
“We and most other observers had looked forward to the publication of the structure of 2015 GDP by production by Rosstat in order to see whether import substitution had happened last year,” Alfa Bank’s chief economist Natalia Orlova wrote in a recent note. “Unfortunately, the answer was ‘no’.”
Russia’s retaliatory sanctions imposed on European agricultural products, and more recently nearly anything made in Turkey, have driven food prices through the roof and stoked a problematically high level of inflation last year. But it was supposed to have the benefit of encouraging import substitution and giving Russia manufacturing and small- and medium-sized enterprise (SME) sectors a fillip. It seems none of that happened and the only tangible results has been a smaller selection of more expensive, but lower quality products to choose from for the average Russian shopper.
Arguably the only gains from the sanctions were made in Russia’s agricultural sector, which was the only sector to grow in 2015, expanding by 3.1 % y/y. While the leading conglomerates have been earning extraordinary profits, the overall share of the agricultural sector has remained the same – 3.5% of GDP, reports Alfa – and still close to the 3.2% of GDP it has been for the last five years.
Indeed, the overall structure of the economy has barely been affected by the sanctions and tumbling ruble. While imports have tanked over the last two years, tumbling by 42% y/y in 2013-15, the make-up of imports has barely changed: these remained at the same 38% of total consumption level they have been at for years. In other words, Russians have not changed what they buy, only the amount of those things they buy.
The rest of the article is available to read here.
