[Asia Economy Reporter Kim Hyunjung] Russia's long-pursued 'self-sufficient economy' strategy is expected to collapse under the intensified Western sanctions. Companies unable to procure key parts or materials are shutting down amid failure to reduce import dependence.
On the 20th (local time), The Wall Street Journal (WSJ) reported, "The years-long effort by Russia to strengthen its economy against the West through sanctions imposed after the Ukraine invasion has proven ineffective." WSJ stated, "Some parts of Russia's automotive industry are closing due to shortages of foreign parts, and pet food and pharmaceuticals are disappearing from shelves."
Since the annexation of Crimea in 2014, Russia has pursued a self-sufficient economy, known as the 'fortress strategy,' to counter Western sanctions. Between 2015 and 2020, Russian authorities invested 2.9 trillion rubles (approximately 33.843 trillion won) in import substitution programs, accounting for 1.4% of total budget expenditures during the same period. However, the subsequent GDP growth rate lagged behind the global average, and Russians had to endure more hardship than before the Crimea annexation. By the end of 2020, Russia's real income had fallen by 9.3% compared to 2013. According to a study published in a 2019 Russian journal, the ban on food imports caused consumers to incur an additional annual cost of about 4,450 rubles.
The situation has only worsened since then. According to the Gaidar Institute for Economic Policy, about 81% of manufacturers last year complained that they could not find Russian substitutes for necessary imported goods, and over 50% expressed dissatisfaction with the quality of domestically produced products. Both figures are the highest since the survey began in 2015.
A study by the Higher School of Economics in Moscow found that in 2020, 75% of non-food consumer goods sold in the Russian retail market were imports. For telecommunications equipment, this figure rose to 86%. Total imports accounted for 20% of GDP in 2020, higher than China's 16%.
Russian automobile manufacturers have been hit by shortages of imported parts such as semiconductor chips. On the 16th, the leader of the Republic of Tatarstan in Russia warned that the truck manufacturer Kamaz's production had dropped by up to 40%, and up to 15,000 employees could face unemployment until the company's supply chain issues are resolved.
The energy industry is also showing warning signs. Russia's oil and gas fields are very aging. While they relied on Western systems to replace them, related projects have all been postponed or canceled due to Western sanctions.
Janige Kluge, a researcher at the German Institute for International Security Affairs, pointed out, "Small economies like Russia cannot produce advanced technology products on their own," adding, "Russia's ambitions were unrealistic from the start."
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