Alexander Firanchuk, Senior Researcher at the Gaidar Institute’s International Trade Department explained to RBC why it is difficult for Russia to reduce its dependence on raw-material exports and which factors hinder the development of non-commodity sectors.
According to the expert, restrictions on access to foreign technologies and investment are hindering the development of manufacturing and the export of high-tech products. Furthermore, the growth in investment seen between 2022 and 2025 should not be viewed as a sustainable trend; it was largely driven by the need to replace equipment following external shocks. At present, investment activity is cooling, while a new economic development trajectory is still taking shape.
Alexander Firanchuk noted that import substitution is not effective in all sectors. Establishing domestic production facilities requires significant investment, which is difficult to recoup given limited domestic demand. Furthermore, localizing assembly does not always equate to independence from imports, as production may still rely on foreign components and equipment.
“When it comes to import substitution, it is highly dangerous to pursue the goal of replacing everything; development costs would run up against the limits of the market size, which is unlikely to be large enough to make such investments profitable. It is more important to develop sectors that can boost the overall efficiency of the economy, including through expansion of their exports. In certain key industries, it may be feasible and appropriate to sacrifice efficiency in favor of forced import substitution for reasons such as national security, but this list should not be too extensive,” the economist noted.
According to Alexander Firanchuk, it will be difficult to significantly increase the exports of high-tech goods under the constraints imposed by sanctions. Unlike raw materials, such products require more complex, long-term contracts, as well as reliable after-sales technical support. Therefore, to reduce dependence on revenues from raw material exports, it is essential not only to develop domestic processing capabilities, but also to diversify the economy and establish competitive manufacturing sectors.