- Sanctions against Russia will hit tech goods, former finance official Oleg Vyugin told Reuters.
- Russia’s technology industry relies on imports, so it will have to recreate those goods domestically.
- Russian technological development will decline if the situation is not improved, said Vyugin.
Russia could be in for years of decline in technology development due to sweeping sanctions over the war in Ukraine, said Oleg Vyugin, a former senior finance ministry and central bank official. Reuters in an interview on Tuesday.
This is because when it comes to technology, Russia relies on imports, and imports are affected by sanctions and boycotts. As a result, the country will have to develop its own products to replace those imports.
“The world will move forward, but Russia will only use some second-rate technology and spend huge resources to recreate what already exists in the world, but cannot be imported,” said Vyugin, who was deputy finance minister and deputy governor at the Bank of Russia. He withdrew from the Moscow Stock Exchange this year.
Vyugin also told Reuters that “sanctions are working” because Russia’s economic growth has been negatively affected.
Vyugin’s comments contrasted with positive assessments of President Vladimir Putin’s economy. In early September, Putin said that the country’s economy was coping with Western sanctions. Almost seven months after the war, Russian economy still looks resilient. The economy of the energy giant is supported by energy exports due to high prices, which were on the rise even before the war.
But imports into Russia were severely limited, as can be seen in record high current account surplus of $70.1 billion for the second half of 2022. The current account surplus is a key indicator of trade and investment flows, and trade is a large component of the measure.
Russia has tried to counter the sanctions by substituting imports from non-sanctioned countries or domestic options. But success is limited, analysts say Bruegel, research center based in Brussels, he wrote at the end of March.
“High-tech products are developed using inputs from many countries, but few can function without inputs from the European Union or the United States,” the analysts wrote. “As a result, a single economy cannot replicate the capabilities of a global network.”
Semiconductor chips, aviation parts and medical goods are among the hard-hit imports, noted Bruegel analysts.
Russian state-owned airline Aeroflot has already begun removing spare parts from operational planes due to supply shortages caused by sanctions, Reuters published in August.
“If the situation does not change, Russia will experience a gradual decline in the level of technological development,” said Vyugin.