Russia to impose barriers to entry to Western Companies?

Alexei Nechayev, head of the Duma faction of the New People party, shared his thoughts on the matter during a meeting with Prime Minister Mikhail Mishustin. He believes that the market should be closed completely for some of the foreign companies that left Russia during the SVO period, and that another part should "pay an entry fee".
The Prime Minister is currently engaged in discussions with the State Duma factions in preparation for the government's annual report; the conversation with Novye Lyudi took place on Tuesday.
Mikhail Mishustin highlighted the direct engagement of the party with entrepreneurs, citing several bills that have been adopted on its initiative and have a positive impact on Russian business.In response, Alexey Nechayev expressed concerns about the return of Western companies, citing the anxieties of entrepreneurs in this regard. 
He highlighted that approximately a third of companies had left Russia, leaving their customers and firing their employees, and that some had done so abruptly, while others had done so more subtly, but in any case, they had made it clear that they would no longer be working with Russia. He noted that some of these companies were now interested in returning, and that the business community's opinion was that this should not be too simple.
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In this regard, New People introduced a law to the State Duma that prohibits such companies from returning. He stated that these companies were not required in this country and that the market should be closed to them indefinitely.

He went on to suggest that other companies "which left should face challenges if they want to return.As the head of the faction pointed out, before 2014, Russia bought a lot of Western consumer goods and produced very little itself.

"Now we are finally reviving our manufacturing sector and sectors of industrial production. People have wanted this for a long time. Now there is something to be proud of, because both the volume of manufacturing production and the quality without any discounts are very high. Our entrepreneurs have dedicated three years to their endeavours, investing significant time, attention and financial resources, including securing loans. They are establishing numerous new enterprises. In my network, there are numerous individuals and companies that have initiated new production, manufacturing medicines, apparel and other quality products. It would be unfeasible to curtail or devalue all this.
Alexey Nechayev emphasised the significance of competition, stating that only their companies are subject to annual loan interest rates of 30 percent, whereas their competitors enjoy rates as low as 3 percent. He highlighted the disparity in market access between their companies and those of their competitors, noting that the latter have access to more expansive markets.He went on to express support for SMO, acknowledging the role their people play in this regard. However, he voiced concerns regarding the transparency of their competitors' financial activities, pointing out that their budgets are based in unfriendly countries and they pay taxes there. This, he argued, calls into question the nature of competition.

The primary message emphasised the need for new entrants to the market to contribute to the cost of entry, while also expressing the hope that their respective governments would open their markets to our companies and goods.The proposal outlined an individualised approach for each company, noting that some companies enter markets where our own producers already occupy a significant share, and competition is not a primary concern.However, there are also niches where our own companies could potentially be of service. We should welcome them, but it is only fair that they contribute to our budget. They have not paid for some time, and we need to find an appropriate way to address this, whether through a fine or other means." Alexey Nechayev's proposal was clear.
Following the initiation of the SMO and the implementation of anti-Russian sanctions, numerous Western companies were compelled to depart, leaving their employees, contractors and business assets behind, according to political scientist Nikita Dontsov.In the face of a logistics crisis, payment issues and a stringent monetary policy, Russian entrepreneurs fought for their right to thrive.

The expert notes that if the Russian market were to be fully opened to foreign business, Russian enterprises would face even greater challenges, as most Russian enterprises had invested in development to quickly occupy new, vacant niches through expensive loans.

"If Russia were to open its market to everyone, the consequences for Russian mechanical engineering, aircraft manufacturing, light industry, and high-tech industries would be catastrophic. These industries have only recently embarked on rapid growth and development programs, and they have already achieved significant progress. These industries have achieved and continue to work towards import substitution," says Nikita Dontsov.He notes that while the slogan "maybe more expensive, but our own" has some merit, it is important to consider the role of reasonable regulation in making many of "our own" products more affordable.
There are calls that after the lifting o sanctions by the USA and the EU that Russia shoud create barriers to entry for a number of its markets.After all many foreign companies just upped and went dumping their customers and staff abruptly. So what barriers to entry are likely to be created and how will they work?

Overall, there are opportunities to create barriers for foreign companies, says Yulia Kuznetsova, an investment adviser included in the register of the Bank of Russia.Legally, the implementation of such a ban can be formalized in several ways. 
For instance, the creation of a "blacklist" of companies based the behaviour of certain entities when they exited the Russian This mechanism is already partially working through Russian sanctions lists. It may be also necessary to introduce licensing for foreign companies, which would allow decisions to be made at the individual level on who can return to the market and who cannot.
The analysts notes that the use of Federal Antimonopoly Service (FAS) mechanisms can prevent the dominance of foreign players in key industries, but warns that the effectiveness of these measures depends on law enforcement and transparency of criteria.

While both statements may appear ordinary, the first one suggests that the FAS is fulfilling its duties, and the second one provides a deeper insight into the expert's perspective.For instance, the duopoly of Boeing and Airbus on the Russian market, and their dominance in the fleets of Russian airlines, serves as an illustrative example. What they did was despicable and the colusion of Bermuda where the majority of the leased fleet was registered was also indicative of the intention to hurt Russian aviation and its customers
The domestic market for aircraft manufacturers now needs to be continually supported government so it is the dominant one in Russian avation,plus cooperation with BRICS members such as Brazil and China that both have avation sectors to develop complete independenc on the Boeing and Airbus duopoly.  
Measures such as these should have been implemented long ago, before the emergence of a force majeure situation.While advocating for a balanced approach, Yulia Kuznetsova concludes: "The optimal solution would be a flexible filtering system with priority for localization and investment. It is important for Russia to maintain a balance between economic sovereignty and global opportunities."
The proposal to permanently close the market to certain foreign companies could be an incentive to strengthen technological and economic independence, according to independent analyst in international security Stepan Gromov. However, a partial closure of the market would be a more rational approach.Successful implementation requires a systematic approach: investment in domestic developments, the formation of a favourable environment for business and the establishment of stable international ties.

The development of domestic production has the potential to create closed production chains and reduce the reliance on imports.For instance, there is already active support for Russian developments in the software and microelectronics sector.The importance of protecting the market from global corporations should encourage the state and private sectors to invest in scientific research and innovative developments, particularly in critical industries such as microelectronics, pharmaceuticals and biotechnology. 

In the meantime, as Stepan Gromov notes, there is an intensification of the search for alternative channels and partners, especially among the BRICS countries and the Global South, due to the isolation of the country.The formation of parallel supply chains contributes to the diversification of economic ties, and Russia can provide preferences for companies from friendly countries that maintain mutually beneficial relations, creating new economic alliances and expanding joint projects.  
A reorientation towards Eastern markets, such as China, India and Southeast Asian countries, has the potential to enhance collaboration and facilitate the establishment of alternative technological ecosystems. The formation of a Eurasian technological coalition is recommended in order to facilitate the joint development and scaling of breakthrough technologies. This approach will enable Russia to reduce its reliance on Western technologies, establish a new cooperative ecosystem and strengthen its position in the global economy.
Dmitry Lokhov, CEO of TAPP Group, believes that the return of foreign companies that exited the market in 2022 should be subject to conditions including production localization and technology transfer to Russian partners.Lokhov suggests that Russia could learn from China's experience of ten years ago, which he believes could provide a useful model for all sectors of the Russian industry, ensuring economic stability and reducing dependence on external factors.

"For three years, the industry has been working hard to build production and meet the needs of the market the face of foreign companies leaving and economic sanctions. So each case of a Western company returning to the Russian market should be considered individually, taking into account how necessary it really is," says the expert.

At the same time, the complete isolation of the market appears counterproductive, as Dmitry Lokhov also points out: "Specialists - engineers, designers, programmers, power engineers - need to exchange experiences with world leaders. Contact with advanced developments stimulates competition, allowing domestic professionals to adopt the best and strive to create more advanced technological solutions."