Russia Market Opportunities

Russia Market Opportunities

In Russia, the coronavirus has resulted in a smaller decline in the economy than in most European countries. The reason is primarily the large share of state-controlled sectors of the economy, where the state was able to direct fiscal and monetary stimuli during the pandemic, as well as the lower base (GDP/person) from which the decline was realized.

However, in an international comparison, Russia supported its economy less than many other countries (in % of GDP), therefore the impact on the real income of households is significantly negative, around a 5-6% decrease for 2020. Last year, industrial companies concentrated mainly in the hospitality industry, production and distribution of heat, coal mining and rail passenger transport. On the contrary, construction, retail, IT and telecommunications, agriculture and the food industry and waste management recorded profits (there, however, only thanks to extraordinary government support of 9 billion roubles).

To restore economic growth, Russia relies on high oil and gas prices and more than $170 billion saved in the National Welfare Fund, where it deposits surpluses from oil revenues. Unemployment has so far increased only slightly and is gradually falling. The highest value during the pandemic was 6.6%, falling to 5.8% in March 2021. Economic growth should exceed 2% of GDP this year, most estimates agree on an interval of 2.0-2.5%.

So far, the government has invested about 4.2% of GDP in supporting the economy. It contributed to the salaries of the affected companies, enabled a six-month deferral of tax payments, and subsidized loans for replenishment of working capital to large so-called systemic companies. Hard-hit construction companies have the option to extend the validity of their building permits, which expired at the end of 2020, by one year.

Thanks to the low government debt, Russia should also have no problem borrowing money on the financial markets to deal with the effects of the crisis, even if the loans have to pay higher interest than developed countries. However, the government does not intend to borrow yet, and it also promises not to raise taxes.

Post-COVID-19 opportunities for foreign exporters


Despite the development of the domestic industrial base and the pressure on foreign car companies to produce cars in Russia, there are still major problems with the quality of suppliers, used production technologies and production parts. There are often insufficient quality technologies for the production of precision pieces and welding, mechanisms for fixing and processing car interiors and mechatronics.

According to allcountrylist, domestic production is absent or does not reach the required quality for electrical components, reducers, electric motors for wheel hubs, batteries and electrical sensors and transmissions. All of these components or technologies are imported by Russia, even though the government is pushing foreign suppliers to manufacture on Russian soil.

Even with government financial support on offer, which can reach up to thirty percent of project costs, the volume and quality of domestic production will be an issue for several years, providing opportunities for foreign suppliers.

Civil aviation industry

Regional air transport within Russia or its support on the part of the government leads to the growth of domestic air transport volumes and thus to a greater amount of aircraft technology in use than would be the case under normal commercial conditions. We see potential primarily in regional civil aviation, as a large part of other aviation is somehow affected by EU sanctions.

Thanks to the long-term supply of L 410 aircraft, the Czech Republic has an excellent name that could also be used by subcontractors of aircraft parts (engines, propellers, hydraulic systems, APUs).

Transport industry and infrastructure

A large number of trams in Russian cities are of Czechoslovak manufacture and, like trolleybuses and other means of urban public transport, need general repairs or a complete replacement. In addition to Moscow and St. Petersburg, the ten largest Russian cities are to undergo a complete renewal of their tram and trolleybus fleets, with plans to purchase over 6,000. by tram and 5 thousand trolleybuses.

Large investors who would take over the long-term operation of public transport in these cities can also join the program. The pandemic and changing budget priorities may slow down these plans by several years, but the need for investment will remain.

Rail freight cars that will be overhauled should be fitted with cartridge bearings instead of the existing ball bearings. The country’s existing manufacturers will have a capacity problem to meet the government-mandated change, as the new type of bearings so far only has less than ten percent of the more than 1.15 million rail cars in Russia.

There are not even enough service centers in Russia that could carry out these exchanges, which according to estimates can represent investment costs of around CZK 100 billion. There may also be an opportunity for steel producers, because the steel produced in Russia does not yet meet all the parameters for the new type of bearings. Rail freight transport operator FGK wants to be the first to start the exchange.

Energy industry

The energy sector is the main strategic sector of the Russian economy. The focus of its importance is primarily in the oil and gas industry, however, from the Czech point of view, the segment of heat and electricity production offers the greatest export opportunities. A prospective area is the modernization of classic thermal power plants and heat production plants, where it is possible to gain ground especially in the supply of individual components, such as compressors, pumps or boilers.

Possibilities also exist in the area of ​​supplying new energy units, such as smaller power plants and diesel, cogeneration and steam-gas units, where, however, it is necessary to take into account the frequent requirement to secure export financing. As part of smaller projects at the regional level, there is also interest in the supply of technologies from the field of renewable energy sources. Czech companies benefit from the good name they still have on the market.

Chemical industry

In Russia, only 4% of natural gas and 5% of oil are processed and used for the production of chemical products, the vast majority of extracted raw materials are consumed in the country or sold abroad in raw form. In addition, the monopoly on the export of gas and oil forces miners to accept prices from Gazprom and Trasnneft, therefore they are looking for a way to grow the production of chemical products using their own oil and gas production.

In addition to traditional chemical companies, plans for the production of simpler (ethylene, propylene) as well as more complex polymers have and are being implemented more and more often by gas and oil companies. Investments are being built or planned in several plants with a capacity of 0.5-1 million tons and more per year; by 2025, 1 million tons of these materials should be produced in Russia.

Technology for the production of chemicals and the associated supplies of materials, control systems and production equipment are needed above all. The proportion of processed natural gas should therefore double by 2030, and the proportion of processed oil should increase by 30%.

Engineering industry

Russian companies are often equipped with Czech-made machine tools that have reached the end of their service life and need a generation change. The engineering and metallurgy sectors are probably the most affected by the sanctions and the Russian demand for localization of production, but Russian needs must be solved in a short time and it is often preferable to buy a ready-made solution over a long-term process of own development and production.

Opportunities are also given by Russia’s striving for independence in the production of most products, for which modern machining technologies are needed, which Russia does not yet produce. The modernization and development of the Far East and its industrial production, heavily supported by the government, also allow for new opportunities that have not appeared before.

Water management and waste industry

In Russia, climate change is occurring times faster than the world average, of the target of 87%, only less than 80% of the population has access to high-quality drinking water and 89% of the used water is discharged into rivers without treatment. In a situation where, in addition, people and companies generate 55-60 million tons of unsorted hard waste per year, the national projects “Clean Water” and “Solid Waste Management” are an opportunity to take advantage of Russia’s needs in these areas.

Regions were given the right to plan the construction of their own solid waste incinerators, according to estimates, 25-30 of them could be built in Russia. The government wants businesses and residents to start recycling waste, with a goal of recycling 36% of all solid waste. In Russia, there are only a few companies capable of designing and building a waste sorting plant, Czech companies that can implement these services have a chance.

It is planned to launch the “Extended producer responsibility” program, which will transfer the responsibility for the secondary use of the product and its packaging to the producer. The vast majority of industrial companies do not have experience in this area and may request consulting and assistance services when starting their own waste management capacities.

The government plans to stimulate the sorting of household waste, which will require large containers for collecting plastics and colored glass. Although in some regions such as Moscow or Komi Republic 60-100% of household waste is sorted, in some parts of Russia this possibility does not exist at all.

The goal is for the proportion of sorted waste to increase from today’s 26 to 42% by 2024. The change is to occur thanks to the purchase of more than 300,000 containers so that their number across Russia will increase from today’s 92 to 420,000. Purchases are made by individual regions, which receive financial subsidies for them from the Russian Ecological Center.

Climate changes in the Arctic have impacts on global ecology and economy, Russia should implement water management and ecological projects in that area.

Healthcare and pharmaceutical industry

Even before the covid-19 pandemic, Russia launched two national programs, Healthcare and Demography, which are among the thirteen priorities of the Russian government until 2024. Their goal is to improve the level of healthcare and significantly increase life expectancy in Russia.

By his decree, the President also had about USD 9 billion added to the Health program beyond the planned expenditures, mainly for the restoration of the so-called first line, i.e. the network of polyclinics, first aid and regional medical centers, which are in poor condition and to which patients first turn symptoms of health problems.

In addition to the medical, mainly diagnostic equipment of these objects, construction and installation work will be needed, supplemented by the subsequent maintenance of the installed non-operative devices, and the training of medical personnel. Russian hospitals are in demand for oxygen devices and shut-off valves for medical gas cylinders.

Demand for vitamins and food supplements is growing. Russia’s healthcare system provides few state-funded services, so people invest in over-the-counter drugs and vitamins to boost their immunity. Russia is also among the countries that put the most pressure on foreign manufacturers to provide their patented medicines at low prices. Many of them therefore preferred to leave the Russian market. This is also the reason why in Russia it is more profitable to supply drugs without a prescription than to supply patented drugs with a prescription.

Atraumatic surgical needles, which replaced the classic older ones, into which a thread is inserted, have to be imported to Russia, because domestic producers do not produce these needles of sufficient quality. Sewing thread must also be imported as a raw material, which will be mechanically combined with an atraumatic needle into the final product in Russia.

Czech spas and sanatoriums can offer recuperative stays in the Czech Republic to post-covid patients with breathing difficulties and consequences, some large Russian companies pay for or contribute to these stays.

Agricultural and food industry

Since 2014, Russia has been trying to be as self-sufficient as possible in domestic agricultural production and food industry. Restrictions related to the pandemic, which caused partial outages in the supply of some foods (eg vegetables from China to the Far East), reinforced the need for self-sufficiency even more.

Thus, more than ready-made food, Russia demands all goods necessary for domestic agriculture and the processing industry: breeding animals, genetic material, seeds, seedlings, veterinary preparations, fodder, agrochemicals. The import of agricultural and food technologies is still promising. At the same time, training of specialists and transfer of know-how is necessary in all the fields mentioned.

In the case of food, there is still demand for traditional Czech food and drinks, such as beer (in connection with the restriction of restaurants primarily in cans), mineral waters, poppy seeds, confectionery and others.

In connection with the pandemic, many residents, especially the wealthier ones and those in big cities, are trying to live a healthy lifestyle, which is related to the increased demand for healthy food. E.g. plant-based milks and products, nut pastes, flours, cereals, bars, etc. are increasingly popular. Demand for vitamins and food supplements is growing.

Due to the cold climate, some vegetables and berries must be grown in large-capacity greenhouses. In recent years, two to three hundred greenhouses have been commissioned annually, and according to Russian farmers, this is one of the most profitable investments in today’s agriculture.

Last year, Russia grew 1.25 million tons of crops in greenhouses on 2,800 covered hectares, the most since the collapse of the Soviet Union. This gives the opportunity not only to suppliers of technologies and materials for the construction of greenhouses, but also to producers of seeds and treatment preparations for plants and growth regulators.

There is also a growing demand for the education of specialists to manage processes in large greenhouses, as there is a lack of knowledge about modern greenhouse crop cultivation. The government also supports investments in greenhouses financially, although the level of support varies from region to region. Territorially, most greenhouses are built in the southern parts of Russia: Kuban, Krasnodar region, Stavropol region, Chelyabinsk, Lipetsk and Moscow regions and the Republic of Bashkortostan.

Russia Market Opportunities