The majority of Russian companies have managed to adapt to sanctions by finding new suppliers and replacing raw materials, materials, services, and software, according to a study by the Russian Union of Industrialists and Entrepreneurs (RSPP). Mainly, equipment and components are now being procured from new foreign counterparts, and some companies have succeeded in establishing supplies from "unfriendly" countries. However, there is no significant shift in business reorientation towards the East. The development of domestic production remains challenging due to a lack of skills and market capacity.
Data from a recent study by the RSPP indicate a successful adaptation of Russian businesses to sanctions compared to the previous year. The survey was conducted among 150 large and small companies in Russia. In comparison to 2022, the urgency of import substitution has decreased across all categories of products—equipment, components and assemblies, materials, and raw materials. While about one-third of entrepreneurs reported critical needs for product substitution last year, this figure now ranges from 3.1% (raw material procurement) to 14.8% (equipment procurement). Despite this, the need for substitution remains high: it is 13.8% for raw material procurement and 37-38% for equipment and components procurement.
The main challenge in import substitution is still the absence of Russian equivalents or their unsatisfactory quality, mentioned by more than 50% of respondents. In cases where Russian equivalents are comparable in quality, their cost is significantly higher than imported ones.
Another problem is the lack of necessary expertise and scientific-technical base for substituting foreign products, reported by 74% of respondents. More than half of the respondents also note insufficient demand from Russian companies to achieve economies of scale.
6.5% of respondents stated that they have taken niches left by foreign companies leaving Russia, while a third of the surveyed companies only have plans for this. Most companies expressed their lack of readiness to organize the production of import-substituting products themselves. Only about 1% of companies claimed successful import substitution on their own. For services and software, this figure is slightly higher—5%.
In the domestic market, companies managed to find suppliers of materials (69% of enterprises), raw materials (73%), services (76%), and software (79%). For equipment, components, and assemblies, companies preferred to find new suppliers in "friendly" countries. About 10% of companies found opportunities to purchase equipment, components and assemblies, materials, and software from suppliers in unfriendly countries, using various methods to bypass sanctions.
The share of exports in the revenue of organizations fell from 26% before the military escalation in Ukraine to 20% after. Around 20% of survey participants reported that their export revenues increased after February 24, 2022. The geography of supplies also changed slightly. While 77% of companies conducted foreign trade with EAEU countries before February 24, after that, it increased to 90%. Trade with European countries decreased from 63% to 20%.
Reorientation to new markets is almost not observed: supplies to the markets of the Middle East decreased from 28% to 23%, and to the markets of South America—from 28% to 13%. The situation in the markets of South, Southeast, and East Asia remains the same: about a third of enterprises trade with these countries, as it was before the start of the military operation.
Source: Kommersant
