Notorious events in the Crimea and in the southeast of Ukraine have caused major changes in European and American economic policy concerning the Russian business and, subsequently and promptly, reciprocal measures on the part of the Russian administration. Development of sanction and countersanction movement has been the main topic for discussion among politicians and housewives over 2014-2015. As for the real business, over the last two years it has been learning to exist and operate by trial and error in the circumstances concerned.
Sanctions against certain persons and organizations such as major Russian banks and state companies are just a tip of the iceberg. Private companies, producing and supplying military, dual-purpose products and other goods, which have been included into sanction lists of importing countries for some reason, have also faced difficulties.
There are cases when organizations, which activities are in no way related to producing military and technical products face prohibitive measures from foreign states. Thus, the reality is that western companies demand representation and warranties from their Russian partners that the latter do not sell or purchase goods, works and services in the Republic of Crimea. Some contractors refuse to sell certain goods to Russian buyers by freely interpreting international legal norms and internal legal acts of their countries. There are also situations when the representatives of foreign companies completely refrain from any contacts with their Russian partners.
In response to western sanctions and acting in accordance with the relevant Decree of the President1, the Government has imposed a ban on the import of certain types of agricultural products, raw materials and food whose countries of origin are the states supporting sanction policy towards Russia.
Despite the questionable legal status of both prohibitive measures of western countries (for instance, it is technically impossible to restrict the trade with the Republic of Crimea only by not restricting the trade with the Russian Federation2) and the Russian countersanctions, restoration of status quo should not be expected anytime soon. Apparently, we will have to adjust to a new reality, which may last for several years.
Import substitution is probably a term, which can be very often heard in connection with any mentioning of sanctions and countersanctions. However, the import substitution issue has been on the agenda of the Russian legislators and law enforcers for a long time. It became a subject of active discussion in the beginning of the 2010s but it has significantly developed only by now.
Imposing western sanctions may be considered the beginning of the new phase of interest towards the import substitution. Then the Russian rule-making has gone “from decree law to legislative regulation” and “from prompt political response to economic efficiency”. In this regard, two directions of legal regulation of import substitution have been singled out: first, imposing prohibitions and restrictions on the import of certain goods into Russia; second, state campaign to support domestic producers.
As mentioned earlier, the first step was the Decree of the President of the Russian Federation On Applying Certain Special Economic Measures to Ensure the Safety of the Russian Federation. This document declares prohibitions and restrictions to foreign economic operations providing the import of certain types of agricultural products, raw materials and food, which country of origin is a state decided to impose economic sanctions towards the Russian legal entities and (or) natural persons or which acceded to this decision, into the Russian Federation3.
Pursuant to the Decree, the Government has approved the list of products prohibited for import into Russia4. It was initially assumed that the Resolution would be effective for one year but the analysts’ forecasts came true, it is currently assumed that it will be effective at least until August 05, 2016. In the course of extension of the Resolution, the list of goods prohibited for import has not changed.
By the middle of 2015, it became clear that the countersanctions would be extended for another year. At the same time, the Government has decided to tighten control over the implementation of imposed prohibitions and restrictions. The right to confiscate and to make a decision on destruction of “sanction” products has been granted to the following government authorities: the Federal Customs Service, the Federal Service for Supervision of Consumer Rights Protection and Human Welfare and the Federal Service for Veterinary and Phytosanitary Surveillance5.
In this regard, the powers of customs authorities are still controversial. It is known that since the accession of Russia to the Customs Union the very notion of the border of the Russian Federation for customs purposes has lost its meaning. During the export or import of goods only the fact of transfer (or prohibition of transfer) of goods across the customs border of the Customs Union may have a legal effect. Any prohibitions or restrictions to the transfer of goods across the customs border of the Union may be formally introduced only by the decision of the Customs Union Commission and shall apply to its entire territory but not to the territories of certain states. That notwithstanding, the authorities of the Federal Customs Service detain and destroy the goods imported in violation of the established prohibitions to the best of their abilities (and within the scope of their powers).
As for other bodies authorized by the Government, their activities are related to goods already released for free circulation in Russia. In other words, even the goods legally transferred across the customs border of the Customs Union may be confiscated and destroyed by one of the following authorities: the Federal Service for Supervision of Consumer Rights Protection and Human Welfare and the Federal Service for Veterinary and Phytosanitary Surveillance, if they detect the availability of “sanction” goods in public circulation in Russia.
The Government has stipulated the following terms of destruction of goods:
As we can see, the prohibitions and restrictions to import and sales of “sanction” goods in Russia are of rather political and legal nature. Unfortunately, it is possible to speak of appealing the decisions on confiscation and destruction of such goods only in a part of appealing the labeling of certain commodity items as “sanction”.
During the first year of the “Ukrainian crisis”, the Russian legislators did not pay any significant attention to the import substitution, having concentrated mainly on assertion of sovereignty of the Russian Federation. The first legal act concerning the import substitution was adopted in the very end of 2014, it was the Federal Law On Industrial Policy, which proclaimed the transition from raw materials export economy to innovation-driven economy, ensuring the defense capability and security of the state, and employment of population as the main objectives of industrial policy7.
Probably the most important innovation of the law in question is the legislative setting of priority of the Russian goods over foreign goods during public purchases8. It should be noted that the purchase of the Russian goods for state and municipal needs has become not a right but an obligation of state and municipal customers. This requirement shall also apply to purchase of goods by legal entities with state participation9. Other than that, despite an outright declarative nature of this law, it has become an important stage of lawmaking by having become a springboard for introducing amendments into the other, sectorial and special, legal acts.
Currently the state support (by which we also mean the support on behalf of major government-sponsored enterprises) is also given to the following industries:
So far, we can only conjecture whether the beneficial effect of import substitution exceeds all difficulties, which the Russian business faced. Apparently, everyone will answer this question for themselves. We will not assume how many years or decades it will take to achieve all goals. Having survived multiple crises the Russian business got used to waiting.
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