Page 31 - RusRPTJul24

profits, and fuel inflation. Still, the Russian government and businesses have been in survival mode ever since the start of the war, and devising various ways to keep doing business under ever stricter sanctions has become part of everyday life. Moreover, Russians are not constrained by the procedures and approvals faced by Western bureaucracies, and are buoyed by previous successes on the sanctions front.
In the two and a half years of war, an entire infrastructure of intermediaries in various jurisdictions has sprung up, schemes for swiftly restoring supply chains interrupted by sanctions have been developed, and payments in yuan and rubles have been settled using local infrastructure.
The new sanctions, therefore, could only really have seriously wreaked havoc with the Russian economy if they had been introduced at the beginning of 2022. Now their influence will only be fully felt in the long term—and the impact will not be limited to the Russian economy.
The whole world is closely watching the sanctions battle between Russia and the West, uneasy over the growing politicization of the global financial system. Apprehension is rising not only in Asian countries and the Persian Gulf, but also within the European Central Bank, which is concerned about the euro’s declining share in world reserves. There was demand for an alternative financial infrastructure even before the war between Russia and Ukraine.
Cutting off Russian banks from the SWIFT payment system, along with secondary sanctions, has proved a powerful incentive to accelerate the development of China’s Cross-Border Interbank Payment System, India’s Unified Payments Interface (UPI), and other alternatives. There is still a long way to go before there is a real threat to the dominance of the dollar, but the trend toward the fragmentation of the global financial system cannot be reversed now.
By Alexandra Prokopenko for Carnegie Endowment for International Peace
2.10 Russian struggling with import substitution, study finds
Import substitution has become a matter of survival for Russia after extreme sanctions cut off supplies of many products, especially in electronics.
In this area, Russia was very dependent on Western countries, and now it is Russia that is under the most stringent import bans. It was not possible to achieve miraculous success in import substitution of Western electronics in two years, a study by the Bank of Finland predictably showed. But in a quarter of the product categories that experts studied, it was possible to replace Western products.
To assess the extent of Russia's success in import substitution, senior economist at the Bank of Finland Institute for Emerging Economies (BOFIT) Heli Simola analyzed the production and import volumes of 22 types of technological products - from circuit boards and wires to engine parts and elements of computing devices - from January 2017 to March 2024 .
31 RUSSIA Country Report July 2024 www.intellinews.com