The recently closed Cherkizovsky Market is only the first casualty in a war on “shadow” products that are “choking off” the country’s light industry sector, according to a ministry report.

Industry and Trade Minister Viktor Khristenko called for the government to draft a strategy regarding the country’s consumer goods trade up to 2020 in a report to the presidium on June 1, a copy of which was obtained by Vedomosti.

Despite state investment of almost $2 billion into the consumer goods industry in the late 1980s and early 1990s, the sector has been in a woeful state since the middle of the last decade, the report said.

Russian companies, seeing their production volumes plummet, have been selling their manufacturing equipment to businesses in Turkey and China, where the consumer products sector is booming.

In the meantime, the situation has given birth to an opaque and unregulated shuttle industry, where goods are made in sweatshops or illegally brought into the country. The federal budget loses about 650 billion rubles ($20.4 billion) in unpaid taxes annually, and price discrimination in favor of illegal goods has “literally choked” domestic production, the report said.

The situation has even affected the country’s military readiness. While the law calls for 51 percent of light goods used by the military to be manufactured by domestic producers, only 17 percent to 36 percent actually come from Russia, the report said.

A civilized, competitive market needs to develop in order to achieve that figure, with goods being sold in chain stores rather than in markets, the ministry said.

Prime Minister Vladimir Putin has expressed his outrage about the state of affairs. “It seems the fight against contraband is being waged, but there are not many results,” he said at the June 1 presidium meeting. “A result would be [to obtain] convictions, but where are the convictions?”

Putin then went on to mention “a certain market” where $2 billion in purportedly smuggled goods had been seized. Prosecutor General Yury Chaika later explained that the market in question was in fact Cherkizovsky.

Mayor Yury Luzhkov said Wednesday that the market was probably closed “forever.”

Its products will be moved to other markets, and “we will make room for domestic producers, while products of Chinese and Vietnamese origin will have to leave Moscow,” Luzhkov said, Itar-Tass reported.

Every stall at Cherkizovsky Market represents a closed Russian factory, said Deputy Industry and Trade Minister Stanislav Naumov. The market also acted as a wholesale base for many smaller markets in central Russia, he said.

There will be no victory over counterfeit goods and smuggling until dozens of similar markets are also closed, an Interior Ministry official said. He said an order to begin such actions has already come “from upstairs.”

Not all markets will be closed, but such retail points do need to be led to civilized methods, said Putin’s spokesman Dmitry Peskov. This includes payment of taxes and necessary customs control, he said.

Some retailers, however, feel differently. Contraband cannot completely be wiped out unless all markets like Cherkizovsky are closed, said Vladimir Melnikov, general director of Gloria Jeans, Russia’s largest clothing producer. “It’s true that this will leave about 500,000 people unemployed, but these are capable people. They will find jobs elsewhere,” Melnikov said.

It is specifically because of these markets that Russia does not have a single clothing retail chain with a turnover of $1 billion, he said.

The war against markets is not going to prevent contraband if the degree of corruption among state officials remains the same, said Vladlen Maximov, chairman of the coordination council at League of Freedom, a small-business union.

Cherkizovsky is a prime example of this, Maximov said. Before Putin directed his attention to the market, it was not subject to any serious complaints from authorities.

Checks should result in the persecution of all parties responsible for the supplying and selling of contraband goods, including customs and tax service officials, not just suppliers and sellers, said Madzhumder Mukhammad Amin, president of the Migrants of Russia Federation.