BOFIT Viikkokatsaus / BOFIT Weekly 2022/11
Russia has responded to Western sanctions by restricting exports of goods in order to both mitigate harm to Russia and amplify harm to Western economies. Russia has also closed its airspace to the aircraft of many countries.
The government’s decree of March 9 forbids the export of various products that have been previously imported to Russia until the end of this year. The ban applies to wide range of goods that includes certain pharmaceutical products, as well as various types of machinery, equipment and transport vehicles. Exports of some of these products to other member countries of the Eurasian Economic Union (EAEU) is allowed with official permission.
As for goods originating from Russia, the government has banned the export of many wood products until the end of this year to destinations such as EU countries that have been determined to be “unfriendly” to Russia. The value of these exports was $500 million in 2019 (0.1 % of Russia’s total exports of goods and services). 65 % of that was exported to Finland. Russia’s ministry of industry and trade has recommended putting a temporary end to fertiliser exports and ending altogether the export of certain chemicals to the EU. The value of these exports was about $8.5 billion in 2019 (2 % of Russia’s total exports). Further restrictions have been imposed on exports of grain and sugar, and their export even to other EAEU countries has been severely restricted. The goal is to assure availability of domestic supplies of grain and sugar and limit the rise in their prices in domestic markets.
According to media reports, the government has also discussed a temporary lifting of tariffs on critical import goods to assure their availability and quell price increases. The proposed list of critical goods includes vegetables and grain products, certain raw materials for such industries as pharmaceuticals, textiles and construction, as well as spare parts for airplanes.
There is also discussion in Russia on how to treat foreign firms that are planning to leave the market. One proposition brings up the possibility for imposing an accelerated bankruptcy process on foreign firms meeting certain criteria that attempt to leave the market and putting a Russian administrative firm in charge to continue the firms operations. No decision on the matter has yet been reached, however. The possibilities for foreign investors to repatriate capital from Russia are already severely limited.