Parallel import mechanism under international sanctions: Aspects of Russian demand for foreign-made investment goods

The article assesses the impact of sanctions imposed by unfriendly countries and the parallel supply mechanism on the dynamics of Russian imports of investment goods. The study period includes Q1 2012—Q2 2025 and involves examining two waves of sanctions imposed by unfriendly countries, beginning in 2014 and 2022. The study considers a two-period sanctions model (sanctions of the first and second waves), as well as a three-period sanctions model, identifying within the second wave: a) the stage of the initial launch of the parallel supply mechanism (Q2 2022— Q4 2022) and b) the stage of active application of the parallel supply mechanism (Q1 2023—present). The effects of sanctions and the parallel supply mechanism are estimated using a demand model for investment goods imports, incorporating microeconomic (price of capital goods), macroeconomic (exchange rate, income dynamics, and the level of entrepreneurial confidence of firms), and institutional factors (sanctions, parallel imports). Using the full study sample, including supplies from neutral and unfriendly countries, a comparatively high sensitivity of Russian demand for investment goods imports to price changes (elasticity coefficient of –0.7), as well as to changes in the dynamics of firms’ income and changes in the real exchange rate of the ruble (elasticity coefficients are 0.3 and 0.5) is revealed, with a near-zero sensitivity to changes in the level of entrepreneurial confidence of firms for the study period. A comparatively low impact of the first-wave sanctions on the physical volumes of supplies of foreign-made equipment is revealed with opposite effects for unfriendly and neutral countries, and it is also shown that the active stage of the parallel supply mechanism made it possible to offset, on average, more than 20% of the negative impact of the second-wave sanctions on the volume of Russian imports of capital goods. Within the three-period sanctions model, a U-shaped distribution of the sanctions’ effects over time is observed. It was found that neutral countries actively exploited the historical opportunity to expand their presence in the Russian market during the period of trade sanctions imposed by unfriendly countries. A list of product groups that, all other things being equal, respond most actively to the authorization of parallel supply mechanism was developed, which can be used to adjust import substitution policy.