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Владимир Карасёв

Points of growth in the sanctions scope

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Рoints of growth in the sanctions scope

The sixth Eastern Economic Forum is approaching. This international communication platform not only presents important directions, but also shapes a new reality.

Experts are preparing to assess the prospects for the development of the Far East and integration with the economy of the Asia-Pacific region. But the Eastern Economic Forum is also an occasion to touch upon the topic of anti-Russian sanctions, which catalyze the new reality. It is an occasion to talk about the resilience of the Russian economy to external challenges.

Will Western sanctions become an irritant and a stimulus for domestic production? Can the cooling of relations with the West harden the Russian economy? Let us recall the opposite historical examples when a period of warming in international relations between the USSR and the West led to an economic crisis and the collapse of the state.

Despite the imposition of sanctions, the Russian economy has shown its resilience. It has coped with this external challenge. We are currently seeing growth in economic indicators.

The import substitution program was launched in 2014. It has been implemented in many areas. This can also be said about the agricultural sector and food production. Food security issues have been completely resolved. Russia is currently experiencing significant growth in the production of food and agricultural products.

The sanctions imposed on industrial enterprises have only strengthened them. Cooperation ties have been restored within the Russian Federation itself, as well as with countries producing similar products in the Eurasian Economic Community.

A vivid example is the successful projects in the implementation of Sukhoi Superjet aircraft, which are now purchased by Russian airlines both for domestic and some international routes.

The world leader in the production of equipment for the nuclear power industry, the state corporation Rosatom, continues to work as usual. And the sanctions have had almost no effect on this work. Modernization is currently underway at the existing facilities built both during the Soviet era and during the period of ROSATOM's operations.

And it turned out that sanctions are not as scary as they are described.

The military-industrial complex is virtually unshaken, as evidenced by the latest Russian weapons systems.

Note one of the results of the fifth Eastern Economic Forum (September 2019): India ordered Russian weapons worth $14.5 billion.

As we can see, the world has not come to a head with those countries that have joined the anti-Russian sanctions.

Although the highly liquid part of the world market is in Western Europe and North America, it is counterbalanced by the Asian and Pacific markets (China, India, Brazil). In addition to Russia's contacts within the Eurasian Economic Community, there are also contacts within the BRICS and SCO, which allow the implementation of projects in energy, arms sales, etc.

Here is an example of such contacts (BRICS and SCO). The Russian company Uralchem is one of the major producers of potassium fertilizers. Our main consumers here are Brazil, India and China.

But the list of partners does not end with the EurAsEC, BRICS, and SCO countries. We should not forget about Mongolia, which is now actively cooperating with Russia (let me remind you that Mongolia is one of the countries where the Russian coronavirus vaccine has been registered).

We have to admit that there is a problem with free access to semiconductor products, composite materials, and high-end electronics produced by foreign companies. But there is also good news. Already in the near future is expected serial production of quantum notebook "Graviton", made in Russia, which will work in the operating system Linux. This allows in the future to gradually abandon both foreign software and foreign hardware complexes.

Sanctions against Russia are a double-edged sword. And it often strikes the same person who grabbed it first.

Large companies such as Boeing, Siemens, Daewoo, Kia, Hyundai, and other engineering giants have only suffered losses because of the sanctions imposed on Russia. They have lost a market that is never empty. It is eagerly occupied by Chinese and Russian companies. More than two dozen automobile assembly plants operating on Russian territory have helped to avoid a considerable increase in the price of cars and a shortage of them on the Russian market.

Well, who has been made worse off by this?

Let me remind you that sanctions did not prevent Siemens from supplying turbines for energy facilities in Crimea when Russia had to promptly respond to the energy blockade of the peninsula imposed by Ukraine. When foreign companies have an interest in the Russian market, they find an opportunity to bypass sanctions and supply equipment to Russia.

It should also be noted that the only automobile company that left the Russian market because of sanctions is the American corporation General Motors. At one time it stopped producing Opel cars in Russia. Now, despite the sanctions, they have resumed production of Opel cars. But at the moment, production of Ford vehicles has been temporarily stopped (although production of Ford light commercial vehicles continues).

The level of production of medical equipment in Russia has increased significantly since 2014. According to financial reporting portals, the production of medical equipment and instruments in Russia today as one of the types of economic activity is declared by about 2 thousand operating companies. At the same time, about 100 large companies work with complex equipment - these are either proprietary products or medical equipment produced under license from foreign manufacturers. And almost all current Russian health care institutions are primarily equipped with Russian-made equipment, which by all characteristics is not worse than foreign analogues.

Our pharmacology has managed to withstand the sanctions. That is, sanctions measures proved ineffective on this front. And domestic pharmacology confirmed its consistency during the pandemic. Moreover, it has strengthened its credibility.

On the one hand, as our experts predicted, the Russian Federation was not allowed to participate in the "world championship" of covid vaccines (where, like in sports, politics prevails). But this did not prevent many countries from ordering the Russian vaccine.

Let us compare the situation with neighboring Ukraine. While Russian pharmacology in the pandemic created its own vaccines one after another, when every citizen of the Russian Federation could get vaccinated, Ukrainian medicine waited until the spring of 2021 with its hand outstretched for the first imported vaccines to arrive. And yet, back at the beginning of the last decade, the level of Ukrainian pharmacology allowed us to talk about its prospects.

Russian specialists assisted Kazakhstan, Italy, Serbia, and Belarus in the fight against the pandemic. This is further evidence of the high level and authority of Russian medicine.

Rostec Corporation, despite any sanctions, continues to actively produce helicopters. And over the past few years, more than 150 air ambulance helicopters have been delivered across Russia as part of the development of national healthcare.

Today's development of the Northern Sea Route has given a significant boost to the production of icebreakers as well as ships specialized for use in Arctic conditions. For example, under Project 22220 (LC-60Y), Baltic Shipyard has already built the Arktika icebreaker (which will join the Russian nuclear icebreaker fleet in the fall of 2020) and the Sibir and Ural icebreakers are being completed.

Despite any sanctions, Russia is actively developing the Arctic. The Arctic program is not stalled, but is moving forward.

It is natural that the Arctic topic was popular at the last Eastern Economic Forum (September 2019).

One of the results of the fifth forum was the creation by the gas company NOVATEK and Sovcomflot of a joint venture, Modern Arctic Marine Transportation (SMART), to build 17 Arc 7 LNG tankers. These Arctic-class LNG tankers are required for NOVATEK's Arctic LNG-2 project to produce natural gas and to produce liquefied natural gas on the Gydan Peninsula.

Also at the fifth forum, SSC Zvezda and Samsung Heavy signed a contract to design gas carriers for Arctic LNG-2.

Another result of the last forum was the signing by NOVATEK and its partners of a protocol on the final investment decision on Arctic LNG-2. The cost of the project is $21.3 billion. Three lines of 6.6 million tons each (2023, 2024 and 2026) were scheduled to be launched.

Paradoxically, the sanctions against Russia have forced its economy not only not to relax, but also to build muscle. On many fronts, points of growth have emerged.

And an example of the opposite. After 2014, the Ukrainian government was often stroked on the head by Western supervisors, showing almost parental care. Lulled by false messages, the country is losing its sober self-esteem. We remember how eagerly today's Ukraine joined the Western sanctions against Russia, Belarus. And what has it achieved? Let's take just one aspect, a very revealing one. Ukraine is positioned as an agricultural country with traditional pork breeding. But today Ukraine is the main buyer of Russian pork!

Isn't that a reason to wonder who slipped a pig to whom with the anti-Russian sanctions?

And the Russian manufacturer has proven that it always comes back from sanctions raids "rested, tanned, and with souvenirs”.

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Edited by Владимир Карасёв

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Reads like a hired blog poster. Yay Russia!

Russia has always been 'resilient'. Most of the people living in the more rural or wilderness areas pretty much get by with whatever they can find. Supposedly half of all houses in Russia are built by the people that live in them.

Russia has always been the target of raiders, including the Crimean Khanate, Napoleon, Hitler, and others. Russia has a population of 142 million that has to defend the largest border in the world. This tends to permeate a lot of thinking in both the government and the military.

Given that Russia shares a border with China, is 'near' the US, and practically next door to the industrial powers of Europe, vast amounts of GDP have to be invested in submarines, aircraft, missiles, and the military personnel to support all of it. These efforts get subtracted out of the consumer economy and government services like health care and education.

Ideally, Russia should work out agreements with its neighbors that limit the necessity for military investment. Given the number of countries on Russia's borders, any deal with one foreign country is in competition with the interests of some other foreign country, so it's impossible to get along with everyone. Russia is pretty much stuck.

Russia's borders tend to be 'leaky', which means that things that shouldn't get in and out invariably do - some of this is people, some of it is products, and a lot of it is information. And, a lot of money.

Economic systems follow the path of least resistance. Economic trade areas tend to settle on areas that no one much cares about, and never makes much progress when someone's ox is being gored. In the original NAFTA, the US agreed to allow Mexican trucking companies to carry freight on US highways. The US Teamsters blocked it no matter what the treaty said.

So these things present plenty of opportunities for grandstanding and some tinkering on the margins. Substantial changes are rare.

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