How Russia is Trying to Take the Sting out of Western Technological Sanctions

Russia is rarely seen as a major technological player in today's world, where the main technological rivalry is between the US and China. The technological sanctions against Russia, such as export controls on dual-use technologies, parts of arms and drones, and computer, electronic and optical components from the West, are aimed at making it more costly for Russia to wage its war against Ukraine, not at beating it in a technological race. Russia is highly dependent on technology from abroad. Yet the Russian economy has shown remarkable resilience in the two years since the imposition of sanctions. Despite adverse conditions, Russia is exercising a certain agency in its technological development. What strategies are enabling Russia to survive technologically?

‘Technological sovereignty’ with a little help from Russia’s friends

Russia is striving for ‘technological sovereignty’. Minister of Industry and Trade Denis Manturov proclaimed this goal on 15 July 2022 and announced a turn to an interventionist industrial policy to achieve it. But this interventionist turn has been under way for some time, at least since the early 2010s. The war and the resulting sanctions have only made it more decisive. Sovereignty means that a country has enough power in a certain area to be able to make autonomous decisions and act. But it is not the same as autarky. Even with a limited group of ‘friendly countries’, Russia is committed to building new technological alliances and strengthening existing ones.

Russia can only benefit from the technological rivalry between the US and China in one way – by allying with China. However, China has to balance its interests in relation to Russia with the risk of secondary sanctions, which Chinese high-tech companies in particular are likely to face if they cooperate with Russia. As a result, cooperation projects are still scarce, especially in the digital economy. In other areas, such as industrial automation technologies and space industry technologies, such projects are gradually emerging. And China is one of the countries through which ‘parallel imports’ – imports of sanctioned goods – take place.

Russia is also developing technological cooperation with other countries: fellow authoritarian regimes such as Iran, Egypt or Cuba; the countries of the Eurasian Economic Union – Belarus, Tajikistan, but also Turkmenistan and Uzbekistan; the BRICS countries, especially India; Vietnam, Malaysia, Turkey, the United Arab Emirates and Singapore; as well as selected other African and Latin American countries. Russia has introduced ‘digital attachés’ who will work in Russian embassies in most of these countries, as well as in the OECD countries of Germany and South Korea. There is also a national International Cooperation and Export project and a number of export promotion institutions in Russia.

The switch to homegrown IT solutions

Export orientation is a notable development in Russia's industrial policy, where it is trying to capitalise on the frustration with ‘the West’ in the countries of the Global South. However, import substitution – replacing imports with domestic products – remains an important focus, particularly in the case of software as an important element of cybersecurity. Before Russia’s full-scale attack on Ukraine, 90 per cent of the software used by the Russian state was still of foreign origin, despite import substitution measures. After February 2022, replacing foreign IT solutions with homegrown ones became an even greater priority for the Russian government. It is in this context that so-called industrial competence centres were founded. The Ministry of Digital Development has created 54 such centres and allocated 37.1 billion roubles (about USD 407 million) to them. Some of them are developing software for the oil, gas and metallurgy sectors, where digitalisation promises efficiency gains. However, the success of these centres has been limited so far: In a recent survey of Russian IT engineers by Russoft, the association of Russian software producers, only 7.2 per cent saw real benefits from these programmes.

One software replacement centre is the Industrial Competence Centre for General Mechanical Engineering of the Military-Industrial Complex (MIC), which brings together companies such as the tank manufacturer Uralvagonzavod and the Krylov State Research Centre, which is involved in the production of military ships. The MIC needs access to sanctioned technologies, such as integrated circuits (chips). Western Sanctions do not seem to be having the desired effect here: Reports show that much of Russia's military production continues to rely on Western technology.

In general, integrated circuits (chips) are a weakness of the Russian economy. This is why Russian companies producing chips, such as Yadro and Baikal Electronics, rely on open source technologies – in particular the open source chip architecture RISC-V. Open source technologies were originally intended to free technology from the grip of monopolies and democratise access to it. But now voices in the West are arguing that authoritarian regimes should not be able to access them. However, even if measures were taken to this effect, shell companies, most likely based in Hong Kong, would then help Russia to continue to access these technologies.

Deregulation for the sake of innovation

Another strategy Russia is using to develop its technologies is deregulation. Every authoritarian regime is different – while some regimes prioritise control and restrictive regulation, others leave or create legal loopholes that create legal uncertainty and encourage opaque business and corruption. Russia is deregulating the development and use of certain technologies, such as AI or blockchain, to incentivise domestic companies to work on innovation. It also wants to use its lax regulation of personal data to its advantage by stimulating data-based businesses. Here we have an interesting case where deregulation, rather than regulation, is the instrument of protectionism.

In conclusion, Russian technology policy is a dynamic area that needs to be monitored. Despite comprehensive sanctions and the significant technological advantage of Western countries, Russia has been able to improve its technological situation, not least by harnessing the economic dynamism of non-OECD countries. It is also exercising its agency in the technological sphere with comprehensive programmes for technology development. Although Russia has been pursuing a technological and industrial policy since the early 2010s, the government has intensified these measures since the imposition of sanctions in 2022, with a focus on the substitution of Western IT technologies.

Russia will not be able to radically improve its technological position within a few years. It could, however, find niches for competition in certain technology sectors, thus ensuring economic resilience at a more advanced level than is currently the case. Nevertheless, it will only gain access to cutting-edge technological solutions through parallel imports – the sourcing of Western technology via third countries – or in some cases cooperation with China.

Dr Ewa Dąbrowska is a post-doctoral researcher in the Cluster of Excellence ‘Contestations of the Liberal Script (SCRIPTS)’ in Berlin. Her current research project explores the emerging economies’ efforts to achieve digital and technological sovereignty in the context of the geopolitical changes associated with the war against Ukraine.