CC BY
2DOI: 10.29141/2658-5081-2022-23-4-2 EDN: JNACYT JEL classification: F51, O25, R11
Viktoria V. Akberdina Institute of Economics, Ural branch of RAS, Ekaterinburg,
Russia
System resilience of industry to the sanctions pressure in industrial regions: Assessment and outlook
Abstract. Geopolitical circumstances have drastically modified the development scenario of Russia's industry and the conditions for functioning of industrial regions. The paper studies the factors determining the system resilience of Russia's industry and the industry of the Greater Urals' regions under the anti-Russian sanctions. Methodologically, the research rests on the theories of wave and systems dynamics, in the context of which it provides insight into the concepts "shock", "turbulence", "system resilience" and "resilience", justifies the division of resilience factors into 'innate' ones conditioned by the emerged internal structure, and 'adaptive' ones connected with the implementation of industrial policy. The paper compares the factors behind the system resilience of the economies of Russia and its industrial regions for two periods, 2014-2015 and the first half of 2022, which feature identical external conditions, namely, the imposition of sanctions against Russia's industry by foreign countries. The Greater Urals is taken as a representative industrial macroterritory that includes industrial regions of different types: industrial, resource, resource-industrial and agro-industrial. The evidence comes from the Federal Customs Service and the Federal State Statistics Service of the Russian Federation, including the data on the national imports and exports for 2013-2021 and the data on national and the Greater Urals' industrial production output and indices for 2013-2021 and the first half of 2022, respectively. According to the findings, the 2014-2015 wave of sanctions did not provoke a serious crisis in regional industry in the Greater Urals, but created conditions for reducing import dependence, localising production within the region, optimising the structure and vector of foreign trade activities of industrial enterprises. However, the resilience factors, which were resourceful during the first wave, turned out to be insufficient for overcoming the crisis in 2022. The paper concludes that today the most relevant factors for industry are 'adaptive' resilience factors related to the implementation of the federal and regional industrial policy and in line with this provides potential avenues for increasing the system resilience of industry in Russia and its regions.
Keywords: system resilience; resilience; sanctions; industry; industrial region; the Greater Urals.
Acknowledgements: The research is funded by the grant of the Russian Science Foundation (RNF) no. 22-28-01674 (https://rscf.ru/project/22-28-01674/). For citation: Akberdina V. V. (2022). System resilience of industry to the sanctions pressure in industrial regions: Assessment and outlook. Journal of New Economy, vol. 23, no. 4, pp. 26-45. DOI: 10.29141/2658-5081-2022-23-4-2. EDN: JNACYT. Article info: received August 31, 2022; received in revised form September 15, 2022; accepted September 22, 2022
Introduction
The geopolitical conditions of the early 2022 have significantly changed the idea of future scenarios of the industrial development in Russia and its industrial regions. Back in 2021, these forecasts focused mainly on structural and technological changes, investment dynamics and labour productivity growth. Such an approach was supposed to increase the competitiveness of Russia's industry in world markets and to create conditions for building up the potential for smart industrial specialisation in industrial regions. Nowadays, the focus is shifting towards ensuring the system resilience of Russia's industry in the short term and looking for factors of long-term growth.
The sanctions pressure caused certain 'turbulence' in economic activity and business expectations. However, the extremely negative impact of sanctions risks is impossible to foresee for more than two years. Nowadays, there is a unique situation where the development trajectory is influenced by two diverging trends: on the one hand, the objective global technological trend predetermines the need for embedding Russian industry into the circuit of relevant technological changes, and on the other hand, there is a subjective politicised trend towards a technological embargo against Russia, which significantly undermines plans and projects for the transformation of the industry.
The purpose of the article is to identify the system resilience factors of Russia's industry and its industrial regions under the sanctions restrictions. To assess and predict these factors, we provide answers to the following research questions:
• how can the concepts "system resilience" and "resilience" in turbulent conditions be applied to industries and industrial regions? how can the factors of industry system resilience be classified?
• what conclusions can be drawn from a comparative analysis of significant industry resilience factors in Russia and its industrial regions in the first (2014-2015) and second (2022) sanctions waves? which of these factors can be identified in the indicated periods?
• what systemic measures of industrial policy should be implemented today in Russia and its industrial regions?
Theoretical foundations of system resilience
To obtain answers to the research questions above, we will take into consideration the following theoretical provisions.
First, let us assess the current situation from the standpoint of economic dynamics. Quite often in the academic literature and experts' publications, we can come across the words "shock" and "turbulence" in relation to the socioeconomic situation caused by anti-Russian sanctions. We will consider the correctness of using these concepts in relation to the situation in 2022.
In the theory of economic cycles, shocks are considered to be independent impulses of wave dynamics, which trigger the processes of forward and backward linkages that ensure cyclical development of an economic system. In macroeconomics, shocks are associated with non-price determinants that shift supply and demand curves and bring an economic system to a new equilibrium point. Shocks can have both positive and negative consequences, but in most cases these consequences are associated with the negative dynamics of the economic system and unfolding crisis [Chakrabarti, 2015].
By their nature, shocks can be both instantaneous and slow. Speaking about the economic situation in 2022, we can note a multi-crisis effect - the combined time impact of both instantaneous and slow shocks of financial, trade, pandemic and geopolitical nature [Akberdina, 2021]. Despite the fact that the deterioration of foreign trade and geopolitical ties over the past years has created a certain system of risk management at all levels, the introduction of unprecedented sanctions regimes in 2022 when the economy just started its recovery after the coronacrisis and the economy adaptation to the 2014 sanctions, obviously, came as a shock in the classical definition of this concept, namely: the economy's losing its stationary state, a significant deviation from the equilibrium point and a break in the structural ties of agents - recipients of shocks [Pilipenko, 2015; Kirman, 2018].
A distinguishing feature of 2022 was the combination of an instantaneous shock and the following economic turbulence. The concept "turbulence", which came to the economy from the mechanics of fluids and gases, can be interpreted as a particularly complex trajectory of short-term economic dynamics, in which the economic system moves forward under conditions of extreme instability and a high probability of bifurcation or even system breakdown. When it comes to turbulence, researchers and experts very often define this state as chaotic [Audretsch, Fritsch, 1994; Haltiwanger, Lane, 2008; Ayres, Macdonald, 2012; McGraw, 2014; Psomas, Kafetzopoulos, 2014;
Audretsch, Lehmann 2016; Gray, 2018; Vu, 2020]. However, considering the economy as a system, we note that in reality this is not an accurate enough understanding. Let us quote Professor Burlachkov: "Turbulence manifests itself as a field of velocities, that is, the movement of elements, previously belonging to a unified system, at different velocities. These elements do not move like particles in Brownian motion, but show spatial organisation and form whirlwinds" [Burlachkov, 2009, p. 91]. Thus, in turbulence conditions, the dynamics of some elements belonging to the economic system are characterised as accelerated, while the dynamics of other elements slow down, which, in fact, cause a "whirlwind" but not "chaos" at all. Therefore, striving for the accuracy of definitions, we formulate the following thesis: from the economic standpoint, the 2022 geopolitical and socioeconomic situation can be considered as turbulence, in particular, a situation in which the relative velocity of specific economic processes is not equal to zero. This thesis defines the next theoretical proposition related to the system resilience of the economy in general and industry in particular.
Second, let us define what is meant by system resilience in the context of economic shocks and turbulence [Petak, 2002; Kleyner, 2015; Gusakov, 2018; Kleyner, 2021]. Based on Kleyner' scientific works, we note that any economic system has "a fundamental structure consisting of four elements (subsystems) that differ from each other by the presence of boundaries in space (spatial localisation) and (or) in time (temporal localisation)" [Kleyner, 2015, p. 13]. Kleyner distinguishes such subsystems as "object", "environment", "process" and "project" [Kleyner, 2021, p. 21]. From the position of dynamics, the resilience of an economic system, according to Burlachkov, is determined by "the proportionality of changes in specific processes, while the relative velocity of individual elements of the system is not revealed" [Burlachkov, 2009, p. 93], that is, resilience is characterised by the equality of the velocities of the main economic processes. Thus, in order to equalise the velocities of a system's significant elements, it is necessary that a system itself possesses some special property. This property is resilience.
The literal translation of this word in Russian will allow understanding the essence of resilience which means "firmness", "elasticity" and "flexibility". Resilience directly correlates with the rate at which any system returns to its original state after a shock, completely absorbing the exogenous impulse [Akberdina, 2021]. The extent to which the economic system has the resilience property will determine how quickly it will overcome a recession, caused by a shock or turbulence, fully recover and continue to grow [Akberdina, Grebyonkin, Bukhvalov, 2015; Maley, 2019; Sangvikar et al., 2019]. In our article, published in 2021, economic resilience is defined as "the ability of an economy to fully recover from the shocks' impact of various nature due to internal adaptive properties" [Akberdina, 2021, p. 1416].
Initially, the concept "resilience" came to the social and economic sciences from ecology [Adger, 2000]. At the regional and industry levels, system resilience was studied by researchers from the Central Economics and Mathematics Institute of the Russian Academy of Sciences, who proposed to calculate the system balance index as an indicator of the sustainable economic growth [Kleyner, Rybachuk, 2019; Kleyner, Ry-bachuk, Steblyanskaya, 2021], as well as researchers from the Immanuel Kant Baltic Federal University [Shekhovtseva, 2020]. Representatives of the University of Cambridge developed the idea of resilience in relation to regions, considering the possibilities of its application to assess the system resilience of regional economies [Hill, Wial, Wolman, 2008; Davies, 2011; Martin, 2012; Fingleton, Garretsen, Martin, 2012; Courvisanos, Jain, Mardaneh, 2016].
Since by economic resilience we mean the system's ability to absorb or mitigate losses, reconfigure and renew itself, the factors of resilience must be searched within the system itself. This will reveal the factors that ensure the system's way out of the crisis. We identify two groups of economic system resilience factors: 1) 'innate', conditioned by its structural specificities and evolutionary trends; 2) 'acquired' (adaptive), associated with investing some additional efforts to smooth the effects of shocks.
Such a division makes it possible to further identify the industry's system properties of industrial regions and the mechanisms of regional industrial policy that allow withstanding the conditions of turbulent dynamics.
Materials and methods
The study used data from the Federal Customs Service of the Russian Federation on the volume of imports and exports of the Russian Federation for 2013-2021, and data from the Federal State Statistics Service on the volumes and indices of industrial production in the Russian Federation and the regions of the Greater Urals for 2013-2021 and the first half of 2022. The Greater Urals was chosen as a representative industrial macroterritory, which includes industrial regions of various types - industrial, resource, resource-industrial and agro-industrial. This unique territory of Russia traditionally includes seven subjects of the Russian Federation - Sverdlovsk, Chelyabinsk, Kurgan, Orenburg oblasts, Perm krai, the Republic of Bashkortostan and the Udmurt Republic. The presence of minerals and a special industrial status, the established historical path and unique specialisation - can these regional features become those system properties that will ensure the resilience of the Greater Urals in the next few years?
We used a comparative method to study the factors of the economy's system resilience of the Russian Federation and its industrial regions within the two periods (2014-2015 and the first half of 2022) with identical external conditions - the introduction of restrictive sanctions against Russia's industry by foreign countries.
Research results
System resilience during the 2014-2015 sanctions. The 2014-2015 sanctions were not as complex and numerous as in 2022 (Figure 1). At that moment, they affected a number of oil and gas and defence enterprises, and the list of 'unfriendly' countries was much shorter. However, this served as a trigger for rethinking the priorities of industrial development and industrial policy mechanisms [Druzhinin, 2020].
US, EU and Canadian sanctions against Russia's industry in 2014-2015 and 2018
• June-July 2014 - sanctions against a number of defence and raw materials companies;
• August 2014 - restrictions on the export and import of weapons and dual-use products, as well as about 30 nomenclature items for the extractive industry; a ban on development services for oil and gas projects;
• September 2014 - blocking assets of some defence enterprises;
• June 2015 - extension of sectoral restrictions; inclusion of sanctioned enterprises' subsidiaries in the sanctions list;
• August 2018 - additional ban on the import of dual-use products from the USA that can be used to create weapons (except for products for space and passenger flight safety)
Russia's counter-sanctions against industry
• August 2014 - a ban on the import of agricultural and food products (except for hard-to-replace ones) and light industry products.
Fig. 1. Sanctions of foreign countries and counter-sanctions of the Russian Federation in the
period 2014-2015
Developed after the 2014-2015 sanctions, State programmes and strategic documents clearly defined the range of industry priorities for the period up to 2030. These priorities were the nuclear power industry, microelectronics, shipbuilding, pharmaceutical and medical industries, transport and special engineering, agriculture and fisheries, the food industry, and the production of consumer goods.
The principle of import substitution and localisation of production has become the main principle of industrial development, which, along with the general trend to digital transformation, has turned into a large-scale national task. To address it, there were developed and implemented some industrial policy measures such as stimulating import substitution through the system of state and municipal purchases, targeted loans to industrial enterprises in priority areas (provided by the Industrial Development Fund and regional funds), road maps for import substitution in civilian industries (20 import substitution programmes), investment project support programmes, etc.
Assessing the results of the state measures implemented to support industry after the 2014-2015 sanctions, we can find some significant positive effects, which today have become a certain guarantee of resilience.
The year 2016 was the most unsuccessful year for Russia's foreign economic activity, when the import decreased by 43 % compared to 2013, and the export decreased by 47 %. After 2016, exports volumes almost completely recovered after the fall, and only the COVID-19 pandemic prevented exports from exceeding the pre-sanction level. As a result, the volume of foreign economic activity was only 7 % lower by the end of 2021 than it was before the imposition of sanctions (Figure 2). At the same time, the dynamics of industrial production in Russia was also quite positive, with the exception of 2015 (Figure 3).
billion US dollars
150
2013 2014 2015 2016 2017 2018 2019 2020 2021 —•— Imports —•— Exports Q % to the 2013 level
Fig. 2. Change in the volume of the Russian Federation's foreign economic activity, 2013-2021
2013 2014 2015 2016 2017 2018 2019 2020 2021 Fig. 3. Production index for manufacturing, % to the previous year
Has the country managed to maintain import substitution and boost competitive exports? The answer to this question is positive. Table 1 presents the information on imports of the Russian Federation and compares data for 2013 (the year before the start of the first sanctions wave), 2016 (the year from which recovery and growth began after the crisis caused by the first sanctions wave) and 2021 (the year preceding the second wave of sanctions). Thus, the import of agricultural and food products in 8 years decreased by 23.7 %, the import of vehicles, ships in particular, decreased by 27.2 %, and the import of metal waste - by 6.9 %. The decrease in import dependence on the supply of light industry products was slightly lower - by 6.8 %.
However, it was not possible to fundamentally remedy the problem of Russia's import dependence on the supply of machinery and equipment. In general, such imports decreased by only 1.6 % in 8 years. At the same time, the situation is a little better for some commodity items.
Table 1. Major imports of the Russian Federation in 2013, 2016 and 2021
2013, 2016, 2021, 2021/ 2013,%
Leading import industries billion US dollars billion US dollars billion US dollars
Agricultural and food products 43.3 24.7 33.1 -23.7
Chemical products 33.7 23.1 35.9 +6.5
Plastics, rubber and rubber products 16.2 10.2 17.4 +7.4
Clothing, footwear and textiles 19.6 11.7 18.2 -6.8
Metals and metal products 21.8 11.3 20.3 -6.9
Machinery, equipment and hardware 92.5 56.2 91.0 -1.6
Transport 44.8 17.4 32.6 -27.2
Total 271.9 154.6 248,5 -8.6
Share of leading import industries, % 86.2 86.0 84.8 -
Note: Tables 1 and 2 highlight significant changes in imports and exports, respectively, in 2013-2021.
Stimulating measures led to an increase in export. For agricultural and food products, it was two-fold, and for high value-added products in chemical industry and mechanical engineering it was 1.2-1.4 times (Table 2). However, the value of these volumes is still low. Raw material export of mineral products decreased by 30 %, and of metals, on the contrary, increased by 40 %.
Table 2. Major exports of the Russian Federation in 2013, 2016 and 2021
2013, 2016, 2021, 2021/ 2013,%
Leading export industries billion US dollars billion US dollars billion US dollars
Agricultural and food products 16.3 16.8 32.9 + 102.0
Chemical products 21.4 13.6 25.9 +21.0
Plastics, rubber and rubber products 6.4 4.8 9.7 +52.2
Mineral products 309.8 134.9 214.6 -30.7
Metals and metal products 40.8 28.4 57.3 +40.4
Machinery, equipment and hardware 13.9 10.9 16.9 +21.6
Transport 6.0 3.7 6.1 + 1.3
Total 414.5 213.1 363.3 -12.4
Share of leading export industries, % 78.8 75.9 74.0 -
It is important to note that there has been a profound transformation in the structure of import: the vector and the very structure of Russia's trading partners have changed. At that time 'unfriendly' countries significantly reduced the volume of imports. Import from Germany of such items as chemical products (-12 %), machinery
and equipment (-31 %), transport (-47 %) have declined for 8 years. The reduction in imports from the United States affected agricultural and food products (-73 %), mineral products (-65 %), machinery and equipment (-22 %), transport (-35 %).
After the 2014-2015 sanctions, Russia assigned a higher priority to the Asian vector' of foreign economic activity. As a result, import from China of such items as machinery and equipment (+57 %), metals (+29 %), chemical products (+126 %), plastics (+51 %), various manufactured goods (+25 %) increased considerably. There was also an increase in supplies from India, Belarus, Kazakhstan, Turkey, Taiwan, South Korea, and Singapore.
What effects appeared in the regions of the Greater Urals?
First, the import of key commodity groups decreased in 2013-2021 (Table 3). Obviously, the largest import volume of machinery and equipment was in the industrial Sverdlovsk and Chelyabinsk oblasts. By the end of 2021, import had decreased by 17 % and 41 %, respectively. The Orenburg oblast and Perm krai reduced equipment import the most. In the first case, it is due to a general decline in industrial production and investment activity. In the second case, the situation is associated with a high proportion of defence industry enterprises under sanctions, and therefore, a real refusal of imports along with the replacement with Russian alternatives.
Table 3. Decrease in the import of key commodity groups in the regions of the Greater Urals for 2013-2021
Machinery and equipment Chemical products
2013, 2021, A, 2013, 2021, A,
Region million million million A, % million million million A, %
US US US US US US
dollars dollars dollars dollars dollars dollars
Sverdlovsk oblast 1370 1140 -230 -17 383 319 -64 -17
Chelyabinsk oblast 1360 803 -557 -41 117 100 -17 -15
Tyumen oblast 905 742 -163 -18 26 145 119 +465
Perm krai 629 337 -292 -46 126 142 16 + 13
Republic of Bashkortostan 476 309 -167 -35 315 122 -193 -61
Khanty-Mansi Autonomous Okrug* 260 151 -109 -42 12 2 -10 -80
Orenburg oblast 168 79,1 -89 -53 6 15 9 + 167
Kurgan oblast 36 26 -10 -27 12 32 20 + 165
Yamalo-Nenets Autonomous Okrug* 695 1320 625 +90 0,3 2 1,7 +791
Udmurt Republic 190 196 6 +3 409 11 -398 -97
*Data for Khanty-Mansi Autonomous Okrug and Yamalo-Nenets Autonomous Okrug are given for 2015 (in 2013-2015, the foreign economic activity of the regions was considered to be a part of the Tyumen region).
Second, we can point to the growth in export of key commodity groups in the Ural regions for 2013-2021, the increase in export of metals and metal products was especially noticeable in traditional metal-producing regions (Table 4).
Table 4. Increase in the export of key commodity groups in the regions of the Greater Urals for 2013-2021
Mineral products Metals and metal products
2013, 2021, A, 2013, 2021, A,
Region million million million A, % million million million A, %
US US US US US US
dollars dollars dollars dollars dollars dollars
Khanty-Mansi Autonomous Okrug* 11,900 17,200 5,300 +45 1.3 0.4 -0.9 -73
Yamalo-Nenets Autonomous Okrug* 659 5,690 5,031 +763 2.9 0.0 -2.9 -99
Sverdlovsk oblast 342 385 43 + 13 4,630 5,820 1,190 +26
Chelyabinsk oblast 150 459 309 +206 4,290 5,960 1,670 +39
Tyumen oblast 48,300 142 -48,158 -100 56 32 -24 -44
Republic of Bashkortostan 12,400 1,130 -11,270 -91 241 168 -73 -30
Perm krai 2,860 2,520 -340 -12 178 198 20 + 11
Orenurg oblast 1,990 1,370 -620 -31 825 928 103 + 12
Udmurt Republic 970 55 -915 -94 50 100 50 + 100
Kurgan oblast 1,1 0.1 -1 -89 10 14 4 +41
* Data for Khanty-Mansi Autonomous Okrug and Yamalo-Nenets Autonomous Okrug are given for 2015 (in 2013-2015, the foreign economic activity of the regions was considered to be a part of the Tyumen region).
Third, the production in the manufacturing industries accelerated (Figure 4, Table 5). During 8 years in four regions of the Urals, the production index was not less than 100 %, that is, in the period 2014-2021 there was some growth observed. The Perm krai and Sverdlovsk oblast had a very high average annual rate in the entire period (13-14 % annually), whereas Bashkortostan and the Chelyabinsk oblast had a more moderate annual growth rate of 6-7 %. The only region in which there was a decline in production compared to the level of 2013 was Udmurt Republic.
In this period, the 'innate' resilience factors of the Ural industry at play were the substantial innovative potential of the industry and R&D sector, the potential for import substitution in the medium-tech segment, and significant reserves for the development of import-substituting industries (greenfield and brownfield sites). 'Adaptive' resilience factors were the mechanisms of federal and regional industrial policy implemented through the operators of support measures - the federal and regional
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110.0 1087 107.1 106.7 jn.fi
105.0 1041 1039 102.7
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Fig. 4. Average annual production index of manufacturing industries for 2013-2021, %
Table 5. Production index of the manufacturing industries in the regions of the Greater
Urals for 2013-2021
Region 2013 2014 2015 2016 2017 2018 2019 2020 2021
Republic of Bashkortostan 101.4 104.0 105.0 106.0 100.6 109.3 109.6 114.1 114.9
Udmurt Republic 102.9 97.0 113.5 83.3 92.8 81.1 96.9 130.2 95.1
Perm krai 104.6 104.0 109.0 114.0 122.3 123.9 110.7 120.5 121.7
Orenburg oblast 90.1 109.1 98.7 92.0 110.6 105.2 116.2 109.7 108.1
Kurgan oblast 100.4 914 128.2 90.6 96.4 105.8 98.9 127.8 118.4
Sverdlovsk oblast 104.3 101.7 128.5 114.0 116.0 106.9 106.3 118.0 126.9
Khanty-Mansi 99.2 103.5 103.9 104.4 94.8 105.9 106.4 104.4 102.6
Autonomous Okrug
Yamalo-Nenets 111.0 113.1 103.5 99.3 105.5 98.5 105.0 103.9 96.3
Autonomous Okrug
Tyumen oblast 112.7 118.8 80.3 105.4 111.6 139.1 105.5 103.5 110.1
Chelyabinsk oblast 100.4 103.3 109.7 105.7 107.1 110.1 103.8 110.0 110.6
Note: the period 2014-2016 is highlighted to indicate a decline in industrial production in the Russian Federation in general.
funds for industrial development, regional funds for supporting SMEs, VEB RF1, the Innovation Promotion Fund, the Russian Venture Company, the Russian Foundation for Information Technology Development and the Skolkovo Foundation, etc.
The new wave of sanctions and performance in the first half of 2022. The 2022 sanctions have become unprecedented in the history of the Russian industry. Without going into the details of the sanctions regime, we will outline the main problems and risks of the current situation in this year.
1 VEB.RF is a Russia's national economic development institution. https:Ato6.p^/en/
Undoubtedly, the main problem today is critical imports in the context of technological and commodity embargoes. Moreover, such imports are present in both intermediate products, which seriously hinders production (for example, microelectronics in the automotive industry), and end products, which limits demand greatly (for example, the pharmaceuticals market) (Figure 5).
Fig. 5. Critical import scheme in the industry of the Russian Federation
For Russia, all countries are divided today into two groups: 48 'unfriendly' countries (NATO, the EU, some countries of Asia and Oceania) and 'friendly' countries (BRICS, the EAEU and a number of other countries). If we split all 2021 imports into two corresponding groups, then we can conclude that our supplies of chemical products, plastics, vehicles and food products turned out to be undiversified (that is, more than 60 % of imports are imports from 'unfriendly' countries) (Table 6). The situation with a large part of imports - machinery and equipment - is better, since 54 % of products are imported from relatively 'friendly' countries, including China - 41 %.
Another problem is the export restriction imposed on Russian raw materials - oil, gas, metals, and coal (Figure 6). Here, in almost all positions, there is a high proportion of 'unfriendly' countries that buy raw materials mined in the northern regions of the Greater Urals (Khanty-Mansi Autonomous Okrug and Yamalo-Nenets Autonomous Okrug). At the same time, the problem with ferrous metals and copper is less serious. Thus, according to data at the beginning of 2022, the share of 'unfriendly' countries in the export of ferrous metals was slightly higher than a half - 52.7 %, in the export of copper - 35.7 %. The situation with the export of aluminum and its products turned out to be quite difficult - the share of export to 'unfriendly' countries at the beginning of 2022 was 70.2 %.
Table 6. Import structure of the Russian Federation as at the beginning of 2022, %
Enlarged commodity groups of import 'Unfriendly' countries 'Friendly' countries
total share including the share of a major importer total share including the share of a major importer
Machinery and equipment (31.0) 46.1 Germany - 9.7 53.9 China - 41.4
Chemical products (12.2) 76.7 Germany - 14.9 23.3 China - 11.7
Trasport(11.1) 73.3 South Korea - 19.1 26.7 China - 13.6
Metals and metal products (6.9) 48.7 Germany - 8.1 51.3 China - 26.6
Plastics, rubber and rubber products (5.9) 61.2 Germany - 13.4 38.8 China - 21.7
Textile (4.4) 21.1 Italy - 5.2 78.9 China - 33.8
Food products and drinks (4.1) 70.1 Germany - 9.6 29.9 Belarus - 9.3
Plant food (4.1) 26.9 Netherlands - 9.6 73.1 Turkey - 11.8
Hidden section (3.6) 88.1 USA - 45.1 11.9 Iran - 6.2
Other imports (16.7) - - - -
Crude oil and crude oil products Oil and petroleum products Coal
Petroleum gases Ferrous metals Aluminum and its products Copper and its products
81.7
82.5
64.4
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0
'Unfriendly' countries ■ 'Friendly' countries Fig. 6. Export structure of the Russian Federation as at the beginning of 2022, %
Let us assess how the 2022 sanctions affected the industry dynamics in the regions of the Greater Urals. Quite sensitive indicators characterising this impact are the production index for mining in regions such as Khanty-Mansi Autonomous Okrug and Yamalo-Nenets Autonomous Okrug (Figure 7), and the production index for manufacturing in other industrial regions of the Greater Urals (Sverdlovsk, Chelyabinsk, Tyumen oblasts, Perm krai, the Republic of Bashkortostan and Udmurt Republic) and its agro-industrial regions (Kurgan and Orenburg oblasts) (Figure 8).
110.0
January - July 2021 January - July 2022
Russian Khanty-Mansi Yamalo-Nenets
Federation Autonomous Okrug Autonomous Okrug
Fig. 7. Production index for mining, % to the corresponding period of the previous year
January - July 2021
January - July 2022
Fig. 8. Production index for manufacturing, % to the corresponding period of the previous
year
In the first half of 2022, the dynamics of resource regions of Khanty-Mansiysk Autonomous Okrug and Yamalo-Nenets Autonomous Okrug differed. The oil-producing Khanty-Mansiysk Autonomous Okrug had a 5.4 % increase compared to the same period of the previous year, but since the region showed a decline (-2.9 %) last year, this year's growth rate can be considered as a recovery. In the gas-producing Yamalo-Nenets Autonomous Okrug, production growth (105.4 %) slowed down compared to the first half of 2021 (110.0 %), but the region has not yet shown a decline.
Industrial regions, where metal industry and engineering were the leading industries, ended the first half of 2022 with a substantial drop compared to the first half of 2021. These include Perm krai (-5.3 %), Sverdlovsk (-4.7 %), Orenburg (-2.7 %), Chelyabinsk (-2.3 %) and Tyumen oblasts (-1.3%). The regions of the Greater Urals, where agriculture, timber and chemical industries make up a significant share of economy, namely Kurgan and Orenburg oblasts, republics of Bashkortostan and
Udmurtia, keep production volumes either at the level of the first half of last year, or with a slight excess.
In the current conditions, the internal 'innate' resilience factors of the Urals industry, which worked well in the first wave of sanctions in 2014-2015, turned out to be insufficient to overcome the crisis. Therefore, 'adaptive' resilience factors, associated with the implementation of federal and regional industrial policy, have become more effective. The most relevant 'innate' resilience factor is the possibility of complete production localisation of all industrial products components in the Russian Federation. The digital service "Import substitution" created by the Ministry of Industry and Trade of the Russian Federation in 2022, as well as the Register of industrial products completely manufactured in the territory of the Russian Federation posted on the GISP Register portal, show that the industrial regions of the Greater Urals have the potential for import substitution (Table 7). Thus, in the Sverdlovsk oblast, among 150 systemically important enterprises (43 of them are in Ekaterinburg) have a products certificate of Russian origin. There are 122 such enterprises in the Chelyabinsk oblast (27 of them are in Chelyabinsk), 79 are in the Perm krai (34 are in Perm), and 75 are in Bashkortostan (15 of them are in Ufa). A slightly worse situation is observed in the agro-industrial regions.
Table 7. The number of enterprises with a certificate for Russian origin products in the regions of the Greater Urals, units
Subject of the Russian Federation / capital Number of enterprises in a region / capital (as of October 15, 2022)
Sverdlovsk oblast / Ekaterinburg 139 / 43
Chelyabinsk oblast / Chelyabinsk 122 / 27
Perm krai / Perm 79 / 34
Republic of Bashkortostan / Ufa 75 / 15
Udmurt Republic / Izhevsk 34 / 11
Orenburg oblast / Orenburg 28 / 11
Kurgan oblast / Kurgan 21 / 12
Tyumen oblast / Tyumen 15 / 6
Khanty-Mansiysk Autonomous Okrug / Khanty- 6 / 6
Mansiysk
Yamalo-Nenets Autonomous Okrug / Salekhard - / -
The most demanded 'adaptive' resilience factors at the moment include the ability of regions to recapitalise regional industrial development funds. The corresponding order of the Government of the Russian Federation no. 884-r was adopted on April 14, 2022. According to this document, the Government allocated 4.3 billion rubles
for additional capitalisation of regional industrial development funds and established criteria that a region must meet in order to receive additional intergovernmental transfers for additional capitalisation. The regions of the Greater Urals with the most effective regional industrial development funds include the Sverdlovsk oblast (the share of Industrial Development Fund in project financing is 5.9 %), the Perm krai (3.1 %) and the Chelyabinsk oblast (2.8 %) (Table 8). To date, among the regional funds of the Greater Urals, only the Fund for the Technological Development of Industry of the Sverdlovsk oblast has been able to receive an opportunity for additional capitalisation in the amount of 202 million rubles (200 million rubles from the federal budget, 2 million rubles are co-financing from the regional budget). Additional funds allocated from the federal and regional budgets will be used to compensate industrialists for interest rates on loans.
Table 8. Investment projects supported by the Industrial Development Fund in the regions of the Greater Urals, 2015-2021
Region Number of projects Issued loans, million rubles Share of the Regional Industrial Development Fund, %
Sverdlovsk oblast 46 5 934.9 5.9
Chelyabinsk oblast 22 3 525.9 2.8
Perm krai 49 3 248.2 3.1
Kurgan oblast 11 2 510.6 -
Khanty-Mansiysk 9 1 813.2 -
Autonomous Okrug
Republic of Bashkortostan 21 999.7 1.2
Yamalo-Nenets Autonomous 5 910.6 -
Okrug
Tyumen oblast 6 862.1 -
Udmurt Republic 16 761.4 0.8
Orenburg oblast 2 170.1 -
Total 187 20 736.7 -
Identifying priority areas of industrial development and systemic measures.
The analysis of the two sanctions waves makes increasingly relevant the question of how, in these conditions, to determine the priority areas for the development of industry in a particular region (Figure 9). Undoubtedly, the study of the individual characteristics of a region will make it possible to identify the critical exports and imports, for which large-scale work should immediately begin to search for new trading partners. For these reasons, in many regions of the Russian Federation, together with business, operational headquarters have already been created to mitigate the consequences of the sanctions imposition. In traditional industries of specialisation,
it is necessary to prioritise the increase in sales in the domestic market of the Russian Federation through import substitution as well as the increase in exports to 'friendly' countries. And, finally, regional initiatives are needed to locate and develop industrial production, whose activities are aimed at import substitution throughout the country. The localisation of import-substituting industries will allow creating new industries of specialisation in the region.
Deep analysis of a region's individual characteristics
i
Systemic measures
Operational headquarters
Fig. 9. Algorithm for identification of industrial development priorities in a region
At the same time, systemic measures for the development and spatial distribution of industry are extremely important. The following measures can be recommended:
• making an 'inventory' of production and logistics chains and doing state planning of the spatial distribution of new industrial enterprises and production facilities;
• designing regional and macro-regional programmes for import substitution: a new approach to the integration of the country's economic space with an emphasis on large interregional and intermunicipal projects in industry;
• strengthening the role of systemically important enterprises (expanding the list of enterprises classified as systemically important enterprises, increasing the number and volume of state support measures provided to them, etc.);
• providing significant support for ongoing and planned investment projects (additional capitalisation of regional industrial development funds, interest rate compensation, etc.);
• changing approaches to intergovernmental relations and expanding the possibilities of regional and municipal industrial policy.
Search for partners
in the Russian Federation and 'friendly' countries
Priorities for industry's development in a region
i +
Traditional industries New initiatives - import substitution
of specialisation in the Russian Federation
Increasing sales in the domestic market of the Russian Federation due to import substitution
Increasing inter-regional trade with neighboring regions
Increasing export
Conclusion
In recent years, the Russian industry has accumulated a fairly high potential for growth, and the systemic measures of state support and the implementation of national projects and government programmes have created the conditions for technological renewal and digital transformation of basic industries. At the same time, the sanctions of 2014-2015 became a kind of 'vaccination' and developed immunity to the impact of negative restrictive measures from foreign countries, since it was during this period that the main principles for the long-term development of Russian industry were formed, and enterprises and industries gained valuable experience in working under sanctions.
Summing up, we can conclude that 2022 will be a turning point in the development of Russia's industry and industrial regions. The internal economic conditions that have developed at the moment, the accumulated production potential of the economy, as well as the systemic and selective measures of industrial policy being implemented, allow us to speak about the prevention of a negative development scenario.
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Information about the author
Viktoria V. Akberdina, corresponding member of RAS, Prof. of RAS, Dr. Sc. (Econ.), Deputy Director for Science. Institute of Economics (Ural branch of RAS), Ekaterinburg, Russia. E-mail: akberdina.vv@uiec.ru
© Akberdina V. V., 2022
