Oleg Vyugin, former Russian finance ministry and Bank of Russia official, said “sanctions work.”
Maxim Shemetov/Reuters
Sanctions against Russia will hit tech goods, former finance official Oleg Vyugin told Reuters.
Russia’s tech industry relies on imports, so it will have to recreate those goods domestically.
Russia’s tech development will decline if the situation doesn’t improve, said Vyugin.
Russia could be in for years of decline in technology development due to sweeping sanctions over the Ukraine war, Oleg Vyugin, a former high-level finance ministry and central bank official, told Reuters in an interview on Tuesday.
That’s because when it comes to tech, Russia relies on imports, and imports have been hit by sanctions and boycotts. As a result, the country will have to develop its own products to substitute those imports.
“The world will move forward, but Russia will only use some second-grade technology and spend huge resources to recreate what there already is in the world, but can’t be imported,” said Vyugin, who was a deputy finance minister and deputy governor at the Bank of Russia. He retired from the Moscow Exchange this year.
Vyugin also told Reuters “sanctions work,” as Russia’s economic growth has been impacted negatively.
Vyugin’s comments stand in contrast to President Vladimir Putin’s positive assessments of the economy. In early September, Putin said the country’s economy was coping with Western sanctions. Almost seven months into the war, Russia’s economy does continue to appear resilient. The energy giant’s economy has been bolstered by energy exports on the back of high prices, which were on the rise even before the war.
But imports into Russia have been severely crimped, which shows up in a record high current account surplus of $70.1 billion for the second half of 2022. Current account surplus is a key gauge of trade and investment flows, and trade is a big component of the measure.
Russia has tried to counter the sanctions by substituting imports with those from non-sanctioning countries or with home-grown options. But success has been limited, analysts at Bruegel, a Brussels-based think tank, wrote in late March.
“High-tech products are developed using inputs from many countries, but few of them can function without inputs from the European Union or the United States,” wrote the analysts. “As a result, a single economy cannot replicate the capabilities of the global network.”
Semiconductor chips, aviation parts, and medical goods are among the heavily impacted imports, the Bruegel analysts noted.
Russian state-owned carrier Aeroflot has already started stripping spare parts from working aircraft due to sanctions-induced supply shortages, Reuters reported in August.
“If the situation doesn’t change, Russia will see a gradual decline in the level of technological development,” said Vyugin.