Putin and Xi at Beijing Olympics

US Has Failed to Counter Russia’s Import Substitution Strategy

On February 8, drowned out by the flood of commentary that followed his interview with Tucker Carlson, Russian President Vladimir Putin gave the Kremlin one week to prepare a draft decree on the Strategy for Technological Development of the Russian Federation and update its list of Russia’s most important science-intensive technologies.

For the past two years, Putin has emphasized the urgency of developing this equipment through domestic, independent production processes, and Washington has failed to take notice of this discrete economic transition.

When the West responded to Russia’s invasion of Ukraine with an exhaustive sanctions program and bans on specialized exports, Moscow was suddenly required to restructure its economy.

At first, this meant selling enormous quantities of its energy commodities to China to achieve the same level of economic growth. It quickly became obvious to Russian policymakers that this was not a sustainable long-term plan. Thus Russia turned to import substitutions, including in its nascent high-tech sector.

Russia has traditionally been a resource-based economy that exchanges its unfinished products such as oil, gas and coal for manufactured goods produced abroad. Now, in order to reduce its reliance on other countries, the Kremlin is pressuring factories and companies to furnish finished products that act as alternatives to those that were once principally imported from the West. To do so, Russia will need a robust indigenous high-tech sector.

National platform

Since the start of the year, Russia has made several noteworthy steps to reach this goal. It launched a national platform aimed at developing and implementing artificial intelligence (AI) – from cloud computing to neural-network models – in fields such as education, agriculture, and health care.

Putin demanded that the securities of fast-growing high-tech companies be placed on the Russian stock market and in investment platforms to promote their growth. And although very late to the game, a Russian joint company is building out the country’s first fifth-generation (5G) core network to substitute Ericsson, Nokia and Huawei.

Russia is not pursuing these objectives to amplify pre-existing industries with AI capabilities. It is doing this out of necessity.

Since the start of the war, it has found indirect methods of buying Western technologies despite sanctions and import bans. Indeed, in 2023, Russia imported close to US$2 billion worth of US and European chips through third parties such as China and Turkey.

American and European authorities are working to plug these holes with new sanctions packages that target dual-use goods and compel these third parties to respect Western restrictions, though since these efforts began in earnest last June, success has been limited.

Nevertheless, Moscow understands that the pressure is mounting and that it is in its interest to produce advanced technologies domestically. The president of the Russian Academy of Sciences, Gennady Krasnikov, explained in an interview this month that sanctions are an incentive for Moscow “to develop its own base of laboratory equipment and the production of consumable materials for experiments.”

Read the rest at Asia Times.

Axel de Vernou is a research assisstant at Yorktown Institute.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top