Russians face the prospect of Soviet-style shortcomings as sanctions bite

Moscow is already facing serious challenges.

The Russian aviation industry, for example, is facing a crisis over purchasing spare parts from Western aircraft manufacturers. About 80 percent of the Russian commercial fleet is made up of foreign-made aircraft, mainly Airbus and Boeing, both of which have ceased operations with Moscow.

Ural Airlines, which owns more than 50 Airbus aircraft, estimates it will be able to fly safely just a few months before the “cannibalization” of other aircraft begins, landing permanently to dismantle some aircraft. Low-cost airline Pobeda, part of the state-owned Aeroflot group, has reduced its fleet from 41 to 25 aircraft, using ground planes for “cannibalized” parts.

Meanwhile, Ericsson and Nokia’s decision to shut down their business with Russia has forced mobile phone providers to suddenly search for second-hand towers and parts of the world to maintain and expand the network that extends roughly to the United States. and to Europe. It seems that China’s Huawei also doesn’t want to fill the void by indefinitely delaying the implementation of next-generation 5G technology in Russia, a service that providers seek before invading Ukraine.

“In five years there will be a huge gap between Russia and the rest of the world,” said Russian technologist Grigory Bakunov.

Following the recent departure of French carmaker Renault, Russia is moving to resume production of Moskvich, a Soviet-era manufacturer that went bankrupt two decades ago for failing to meet foreign quality standards. Its rebirth, potentially with the help of China, could start producing local alternatives or see a new generation of dirt blocking Russia’s roads.

But delays in supply have led not only to high-tech assembly lines, but also to imported materials. “The sanctions against the Russian Federation have violated almost all the logistics in our country,” Russian Transport Minister Vitaliy Saliyev told reporters during his visit to Russia’s Astrakhan region last week.

Under the heading of the Russian economy

While the ruble has rebounded from winter sanctions, the Russian government’s treasury has abundant oil revenues. European countries have stalled their moves on promises to reduce dependence on Russian oil and gas, the largest exporter, despite Moscow increasing sales to Asia.

This month, JPMorgan found that the sanctions-induced recession would be less acute if it lasted longer than expected. Some economic indicators, including electricity consumption, indicate better-than-expected business activity.

But look under the Russian title and focus on a darker image.

Russia has never been the bearer of the standard of globalization. In the list of the most globalized economy published by the KOF Swiss Institute of Economics, Russia is in 57th place out of 64 countries, after Albania, Mauritius and Georgia. After the first wave of Western sanctions in 2014, after Moscow annexed the Crimea region to Ukraine, Russia turned inward and tried to rely more on domestic production.

But that shift didn’t work at all. Russia has achieved some success in food production, reduced its dependence on imports and satisfied the surplus of domestic demand. However, the 2021 report from the Russian Central Bank showed that 65% of domestic companies still need imports for production.

Sanctions have now closed the door to a wide range of these important remedies. While many of them weren’t explicitly banned, their usability disappeared as foreign companies shied away from the stigma of doing business in Russia. For Russians, reduced consumer choice and low expectation of quality date back to the tragic era known for Wendy’s advertising for Soviet fashion shows in the 1980s, when “casual wear”, “evening wear” and ” Russian “swimwear” were the same. Boring smoky gray.

“Especially for something more sophisticated, they will have to rely on what models or models that may be 10 or 20 years old can produce and use,” said Thomas Malmloff, a researcher at the Swedish Defense Research Agency. “Technological deficiencies [with the West] It will grow and they will not be able to break it. “

Industries that need microchips and other hard-to-reach advanced technologies will suffer the most. “Cars, tanks, sanitary ware, even printed paper. “This is where you need microchips, but also special chemicals and other hard-to-obtain imports for Russia,” said Anders Aslund, an economist who has studied Russia extensively.

Mass migration of technical workers makes Russian IT another casualty of the war

Russian-made aircraft in the aviation industry also rely on important components of Western manufacturing. Several Russian airlines operating the Russian Sukhoi Superjet 100 have informed the government that they can no longer provide adequate maintenance of the Franco-Russian SaM146 engine. According to Russian business newspaper RBC, airlines have warned that most of their Russian-built fleet could land in the fall if a solution is not found quickly.

Even the most optimistic analysts say it may take at least a few years for Russia to develop commercial aircraft assembly lines made almost entirely from domestic components. Other analysts suggest it could take much longer if this happens.

“On the commercial front, we do not find it particularly appropriate for them to continue or start producing competitive domestic civil aviation aircraft in the short or medium term,” said a senior Biden administration official, speaking on condition of anonymity. Anonymity for reviewing internal reviews.

Before the invasion, most of the Russian commercial fleet was chartered by foreign companies: planes hijacked by Moscow after sanctions. Most aircraft are registered in Bermuda and Ireland, where local inspectors have certified their airworthiness. European aviation authorities have expressed concern that Russian airlines have limited technical and engineering support for aircraft maintenance and that Russian inspectors do not have the necessary experience.

Some Russians are particularly concerned that the Russian aviation regulator, Rosaviatsia, is softening the rules on who can provide aircraft maintenance right now, when Western companies can no longer or will not. The task will lie with local companies whose skills and training have been questioned by critics. Russia is starting to issue its own airworthiness certificates, largely identified by foreign inspectors.

“Russia’s safety record previously was perhaps not perfect at the Indonesian level,” said aviation analyst Volodymyr Bilotkach. “But now a Russian airline flight is turning into a Russian roulette game.”

Lack of American alcohol and Italian fabric

Businesses in Moscow still operate in restaurants, fearing that the sanctions of a few months ago would have forced them to close. It is a sign, at least in the capital, that money from oil exports and the government are heading towards lowering interest rates and raising wages and pensions. Some establishments have tried to adapt to local food. However, the biggest problem is drinking.

Russian distributors estimate that the United States exports around 7 million liters of whiskey, rum, gin and bourbon to Russia each year. They turn to smaller, lesser-known brands to fill the void.

“Even if all other cities in Russia will suffer and there will be little bread to eat tomorrow, there will still be money in Moscow,” said the owner of a cocktail bar in Moscow on condition of anonymity as he had no authority. by investors. To discuss business. “Also, people seem to be used to the situation. My main problem right now [the lack of] American alcohol. “

Where the commodity is still available, they are often more expensive, contributing to higher inflation than in the West, or of lower quality.

Speaking on condition of anonymity, the owner of a textile factory in the Moscow region said: “Look, I’ll be honest, if we were to sew high quality clothes, we would usually go and buy some nice Italian fabrics.” Anonymity for fear of government repression. He said the company is still working on its current inventory of high-quality fabrics, but is now considering whether to switch to low-cost clothing production if it closes after stocks run out. “The quality of what is in Russia is definitely not the same,” he said.

Cracks appear in the Russian elite as the elderly begin to invade anxiety

Natalia, the owner of a logistics company in Moscow, who refused to give her surname out of fear of the government, spoke about how the sanctions have helped to raise prices. Banning EU trucks from entering Russia or Belarus means that land goods must now be unloaded at the border, then loaded onto new trucks that can travel in Russia and abroad. Meanwhile, the flight ban has shut down a legion of airlines.

“What happened? What do you think is going on?” The price goes up, up and up, “he said.

Where possible, Russian producers have tried to fill the gaps by entering the Turkish and Asian markets. But supply chain disruptions linked to the pandemic have hampered this effort.

In addition, many Russian assembly lines are designed with European or Western technologies or materials in mind. “The assembly lines are sometimes connected to French conveyors or bearings from the United States and Germany,” said Natalia. “Change isn’t as easy as you think.”

He also said that the parts needed to run the businesses, including furniture and coffin makers, were also affected by the reluctance or reluctance of foreign suppliers to submit export declarations showing that these parts will not be used by the military. targets.

At best, it means latency; He said what was sent in two weeks now takes six weeks. But some parts used by Russian furniture manufacturers and the Russian defense industry, such as industrial fan blades and rubber seals, have been suspended indefinitely.

“The production of shoes, clothes, sausages, such products will not stop, but we will return to Russia in the 60s, 70s, 80s, when the quality was worse and the price was higher. “When can you actually get the product,” he told her.

“I remember if you wanted to cook, you had to go to the store, get a number and queue,” he continued. But not for hours or days. Sometimes you wait six months in the kitchen. I fear those days will return.