Barriers to entry
Most categories of imports are not subject to sanctions on either side or import substitution programmes. Sanctions against Russia are applied against individuals rather than categories of goods with the exception of some advanced oil drilling technologies. Sanctions against foreign countries are confined to the food and drink sector, particularly protein goods and fresh produce. These have been summarized in one of our earlier posts.
Import substitution efforts are largely confined to food and drink and pharmaceuticals. Even in financial services, where sanctions against Russian interbank payment systems have been threatened, the private sector uses internationally supplied services such as SWIFT, Visa, Mastercard and Union Pay.
Russian state tenders have become increasingly biased towards local suppliers to the limit of WTO rules. Volga Trader will summarize the main points in another blog post. In practice, to take part, it is necessary to have a local subsidiary or a very reliable local partner. Even so, some element of local content is required. A few sectors, such solar energy, have local content skewed such that only firms that manufacture in Russia (not simply install) can compete.
But there are opportunities
Other than the observations above, the Russian private sector is an open marketplace. All contenders are welcome. The Russian government recognizes that Russian industry has to be internationally competitive. This means that the Russian domestic market must include the best foreign competitors. So, it is pursuing a two track policy of open market competition in the private sector to build competitiveness and protection in state purchases to build up local champions and protect itself from the threat of sanctions.