Russia Faces Persistent Import Substitution Challenges Amid Sanctions
Recent findings show that more than half of Russian industrial enterprises struggle to find domestic suppliers capable of replacing imported equipment, materials, and components. The figure stands at 53 percent, based on a study cited by RBC and attributed to economist Sergei Tsukhlo from the National Institute of Economic Forecasting at the Russian Academy of Sciences. This assessment highlights a critical gap in the domestic supply chain that has persisted despite efforts to boost homegrown production.
When compared to 2022, the outlook has only marginally improved. Back then, 62 percent of industrialists reported that import substitution was not feasible. The shift is small, yet it marks a trend toward gradual reinforcement of domestic capacities, even as long-standing dependencies on foreign goods remain a barrier for many sectors.
Rising costs are another major concern for half of the business community. Specifically, 28 percent of industrialists reported difficulties in servicing imported equipment, a symptom of broader financial strain and supply-chain disruption. This financial pressure feeds into the broader caution that firms feel as they navigate sanctions and the evolving global trade environment.
Respondents also pointed to several other consequences tied to sanctions. About 37 percent cited the restructuring of technological chains as a primary adjustment, while 16 percent warned that product quality could suffer. Additionally, 13 percent noted a reduction in overall production. These indicators together paint a picture of a manufacturing sector reconfiguring itself under external constraints and shifting economic realities.
Prime Minister Mikhail Mishustin has repeatedly emphasized the importance of import substitution in Russia’s machine tool industry. The government has signaled a commitment to accelerating domestic production capabilities and diversifying supply sources, but progress varies by sector and by the depth of dependence on foreign components.
Analysts have also speculated about the broader impact of political and economic developments on exchange rates and import costs. In the period following a major US presidential election, experts predicted shifts in the dollar exchange rate that would influence import pricing and the affordability of advanced equipment for Russian manufacturers. These currency dynamics add another layer of complexity to the import substitution challenge, influencing planning and investment decisions across industries.
Overall, the data underscores a complex environment where Russia is steadily building its domestic capacity while coping with ongoing constraints. The balance between tightening sanctions, evolving global markets, and government-driven industrial policies will continue to shape the pace and scope of import substitution efforts in the coming quarters. The emphasis remains on creating resilient supply chains, upgrading technology, and supporting industries most exposed to external shocks .