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 analysed 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 .

It was not possible to replace almost half of the categories (nine product categories) with imports – their domestic supply either decreased after the start of the war or remained the same against the backdrop of a significant drop in imports, the work says.

Examples include electronic integrated circuits, single-phase AC motors and coaxial cables – all of which are important to the efficient operation of information technology, telecommunications, and home appliance equipment. Tungsten-halogen incandescent lamps also belong to this group, but their domestic production collapsed already in 2021 and has not recovered since then, Simola points out.

For five products the situation has not changed. These are plastic cards with a magnetic stripe, electric batteries, AC motors and transmitting equipment, including receiving equipment (radio communication transmitters, television signals, etc). For example, in the cases of cards, a small increase in production compensated for the same small loss in imports; for batteries and AC motors, neither imports nor production volumes changed.

Russia managed to partially replace imports in two categories of goods: parts for electric motors, generators and transformers, and printed circuit boards. Over the past two years, their imports have fallen sharply, and domestic production has increased, although not enough to compensate for the fall in foreign supplies. Import substitution of the first category of goods began in 2021, the second – after the start of the Russian invasion of Ukraine.

And finally, for six product categories, the data suggests that import substitution was successful: domestic production increased significantly against the backdrop of a fall in imports. These are receiving and transmitting equipment (separately), alarms, lead-acid batteries, parts and accessories for computer equipment and thermostats.

For most of them data is only available in monetary terms, so a significant part of the growth in production can be associated with rising prices. On the other hand, for some goods the increase in the cost of production is 100-700% in two years – and this clearly cannot reflect the price effect, Simola points out.

The BOFIT economist was unable to draw clear conclusions about in which cases Russian industry succeeds in import substitution and in which cases it does not. It is only clear that there is no direct dependence on the complexity of the equipment being replaced: in the production of technologically simple cables there is no import substitution, but in the production of relatively complex receiving and transmitting equipment it has successfully occurred, the economist notes.

“Russia is especially dependent on technologically sophisticated imports. This makes import substitution even more difficult for the country, given its weak performance in most high-tech sectors and technological innovation development,” concludes Simola, but at the same time admitting that based on a sample of 22 products, it may be difficult to draw definitive conclusions for the Russian electronics industry as a whole.