Russia's Manufacturing Industry Imitates Import Substitution, Deteriorates Technologically Intelligence

(MENAFN- UkrinForm) According to Ukrinform, the Foreign Intelligence Service of Ukraine stated this on its website.

"As of February 2026, most Russia's manufacturing companies have been unable to find adequate domestic replacements for foreign spare parts and equipment. Businesses have partially adapted to the sanctions regime in the only way available to them – by reducing product quality and production efficiency," the statement said.

In 2026, the number of companies reporting worsening product characteristics due to dependence on imported components has increased. The share of firms forced to rebuild technological supply chains has also grown because imported raw materials cannot be replaced with Russian alternatives.

In several sectors, so-called "formal import substitution" is thriving.

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In machine tool manufacturing, the share of domestic production in the final product has reached 70%, but dependence on imported numerical control systems and sensors remains at 80–95%.

Systemic problems have not disappeared: difficulties in finding alternative spare parts, rising production costs and final prices, and limited opportunities to work with suppliers from so-called "friendly" countries.

Since 2024, negative factors have consistently outweighed adaptation efforts.

According to S&P Global data, the manufacturing Purchasing Managers Index (PMI) in February 2026 stood at 49.5 points – below the threshold of 50, indicating a prolonged contraction in manufacturing activity.

The sector is moving toward a model of "partial import substitution," where only the assembly of final products is localized, while key technological components continue to be imported. Some indicators of industrial activity are being sustained solely by defense production, while civilian sectors are stagnating.

As Ukrinform previously reported, the financial condition of medium and large Russian enterprises continued to deteriorate by the end of 2025, with the number of loss-making companies rising to 18,200 – a 16% increase year-on-year.

Photo: Foreign Intelligence Service of Ukraine

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