President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin in an interview with Kommersant FM

Import substitution in Russia must be selective. President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin stated this in an interview with Kommersant FM. The country should produce only those products that will be competitive in the global market, Shokhin is sure. At the St. Petersburg Economic Forum, radio news columnist Konstantin Eggert spoke with him.

— Following the meeting of the Russian Union of Industrialists and Entrepreneurs with President Putin, you said that the question of completely abolishing the funded part of pensions was no longer on the table; Prime Minister Medvedev said that he had made an independent decision on the fate of this very funded part. How smooth is the interaction with the authorities in this area?

“This is just one example, but it shows that it is not so easy to achieve results. Yes, we raised the question, the president said: “We will not cancel,” after which the prime minister held several meetings before saying: “Yes, we will not cancel.” And the same can be said about other elements, for example, the president’s message - the president says: “We need this, that,” and then the interpretation begins. For example, that it is necessary to freeze tax conditions: the first interpretation is “What are the conditions - are they just bets, or can the bets not change and expand the tax base, or play in another way?” Therefore, we, businesses, even when we receive the approval of the president, do not need to relax, we need to work with the government, and with ministries, and with deputies, and so on, because they can all report on the implementation of instructions by the very fact of adopting this or that normative - a legal act, a law, and so on, but we don’t need checkers - we need to go.

— Let’s talk about sanctions, which were an important topic at the forum last year, and today stand as a backdrop to this: is it possible to assess what effect they had on the Russian economy? Because last year there were a lot of bravura statements: “We don’t care about sanctions, it’s all nonsense, it won’t have any impact.” But apparently they have an effect. What are the main pain points?

— Of course, they have an impact, but what is characteristic is that even before the sanctions were introduced, President Putin, in one of his addresses to the Federal Assembly not in 2014, but in 2013, said that the reasons for the decline that began to be outlined are influenced not only by external factors , which we used to blame in the same 2008-2009, and our clumsy, cumbersome structure of the economy is also to blame - dependence on the export of hydrocarbons and so on. All the words were said before oil began to plummet, when sanctions were actually introduced, and as a result, it is now difficult to understand which factor contributed more significantly - the fact that our internal incentives for economic growth have faded, or whether the sanctions have interrupted those incentives , which could appear in the context of the May decrees, and the wonderful ideas contained in the president’s messages, and so on. By the way, how does the current forum differ from the past: indeed, our colleagues made bravura statements that they don’t care about sanctions, we will substitute imports, and so on. Foreigners asked about how the sanctions are, aren’t they causing much of an impact? And then there were no sectoral sanctions against the banking system as such, against the energy system, and so on. They were more or less personified.

— And they were more political in nature.

— Political.

— And greater targeting of specific banks and so on.

- Yes, and there were even popular statements: “Here, I’m on the list, I’m proud to be with such respected people.” Now, of course, everyone is assessing the medium-term consequences of the sanctions, everyone understands that even if the sanctions are lifted at the beginning of next year, they will not all be lifted, because Crimea remains Crimea, and the settlement in the east, no matter how deep it turns out to be, will still still won't help.

— Will the Crimean issue remain?

— Yes, I hope there won’t be a Crimean war, like in the middle of the 19th century, but they will definitely leave some sanctions in place to show their rejection. And second: many will already be banking on some risks that may be associated with geopolitics, and Russia will be discounted among investors, and all other things being equal, if you can choose between the Russian market and another developing one, of course, some will gravitate towards these calmer harbours. As a result, we must count on those who are already in Russia, who know Russia, and who understand that Russia is a capacious market, that it has qualified personnel, that it is a more predictable economic policy, despite all its shortcomings, than in many developing countries , and so on. And we need to convince these people that, despite the sanctions, we retain these investors and attract them to new projects not with counter-sanctions, not with some home-grown import substitution technology, but with such import substitution that is focused on exports, that is, on global competition, on integration into global value chains and so on, and that we are outweighing these sanctions with a radical improvement in the business investment climate.

— But the need to abandon unilateral dependence on hydrocarbons and the need for export-oriented production have been talked about for many, many years, however, now they have begun to talk about this very actively in the context of sanctions, this international tension. To what extent can we expect that this will be realized this time, if it has not been realized before?

— When the crisis broke out in the fall of 2008, we invited key deputy prime ministers Igor Shuvalov and Arkady Dvorkovich to a meeting of the board of the Russian Union of Industrialists and Entrepreneurs. And then Igor Ivanovich Shuvalov said the following phrase: “No matter how quickly this crisis ends, then we will not have time to solve our structural problems,” because in our country only a crisis can force something to seriously change in economic policy, in the structure of the economy, and so on Further. In my opinion, now no one believes that the crisis will end quickly, but at the same time it does not seem that we are following any proactive line. We do not react strongly to the crisis; the anti-crisis program is a program for plugging some obvious holes. The main directions of government activity in the new version are correct, but rather general words without specific mechanisms and tools that still need to be developed. As a result, we don't make it in time. What if the sanctions really are lifted, and what if prices really go up? And then what, will we wait for a new crisis again? What is really needed is political will. Alexei Kudrin proposed at the forum to organize early presidential elections.

— By the way, how would you comment?

— To be honest, we have other technologies besides early elections. Some on the sidelines said: maybe we should start with the government, maybe shake up the government, if it wants to become more active, it will have time to become more active, if not, a new team will do it. But as for the presidential elections, any election is populism. No matter how you look at it, you can’t do without populist promises—to increase pensions, wages, and spending on health care and education; it’s all the more obvious that all this needs to be done. But in a crisis, holding elections is unwise. And only relying in these proposals on the precedent that parliament decided to be re-elected three months earlier is a politically illiterate judgment.

— Two questions about Ukraine. First, do you already have your own assessment of how much a certain break, the ongoing break in economic ties with Ukraine, cost Russia?

- Can I come from the other side - “how much does a break in relations cost Ukraine”? At the end of last year at the G20 in Brisbane, I had the opportunity to talk with the IMF leadership - both with the head of the fund, Christine Lagarde, and with her first deputy, David Lipton, whom I have known for a long time, so I can have a heart-to-heart talk with them. They both separately told me the same thing: we can’t survive Ukraine—the IMF, the European Union—without Russia. The main way to restore Ukraine’s economy is to restore production, trade and economic ties with Russia.

- But this won’t happen now, will it?

— Unfortunately, the West, represented by the same IMF and the European Union, is not able to convince Ukraine that for them the rupture of relations and production cooperation, including demonstrating their independence, independence, and so on, in the hope that the West will will help - this is not an option. Ukraine continues, severing relations with us, causing damage to many sectors of the economy. Suffice it to mention the same engine industry - Zaporozhye Motor Sich, as a supplier of engines for all helicopters and some fighter aircraft, is ceasing to work in the military-technical sphere, and we need to spend a lot of money to replace this.

— How much will it cost Russia?

— That’s why it will cost Russia, of course, and moreover, it’s still very important to integrate here - well, the military-industrial complex is a special matter - but in all other cases to integrate into the supply chain. We should not produce everything that we lost in Ukraine at home. We need to produce those parts of this complex equipment or the final product where we can prove our competitiveness, then European, American, or some other components will come to us to produce diesel engines, it is clear that in microcircuits we will not catch up with Southeast Asia and " Silicon Valley,” but, nevertheless, to find these competitive niches not in order to start producing everything here in the classical style, but to integrate into supply chains, to integrate into added value chains. We need to use this situation of breaking production ties with Ukraine just for this.

— Last question: is the Economic Association Agreement between Ukraine and the European Union coming into force, is Russian business ready for this?

“We are afraid of what President Putin has repeatedly said. Technical regulation, technical product standards, the fact that Ukraine is rapidly introducing European standards does not mean that they will be able to work according to them. They may want to, but they won't be able to. Why - because the standard is introduced as follows: the first page changes - it is in Ukrainian, and the rest of the text is in English, there is not even a translation. How to work with such a technical standard? Therefore, they will formally work according to European standards, but in reality according to old Soviet ones. This cannot but worry, this same double standard even in the system of technical regulation, in the standardization system. The same goes for customs procedures. When we asked for a delay, we said: we will introduce electronic customs declaration and so on, we will introduce an electronic mechanism for confirming the country of origin and so on, then please, then any free trade zone, any association, and so on. The European Union, of course, if it acted more rationally, without politicization, would offer movement, if not at the same speed, but at similar speeds for Ukraine and Russia. We have about 20 roadmaps in specific areas; moreover, in January 2013, an agreement was reached to resume negotiations on a free trade zone, on a new basic agreement that is built on a free trade zone.

“But against the backdrop of sanctions, this is impossible.

“Against the background of sanctions, of course, this is impossible, but, nevertheless, many of these negotiations are of a technical nature. Moreover, the presence of this thorn in the form of Ukraine allows us to return to technical negotiations, because these are mainly procedures, activities not of governments, but of special structures such as Rostekhnadzor, Rosstandart and so on. Therefore, it is possible, but this requires the political will of all interested parties.

"The anti-crisis program is a program for plugging some obvious holes"