Russian companies revealed how they replaced Western equipment

Most Russian companies have replaced imported spare parts and equipment from unfriendly countries with Chinese ones, a survey of enterprises showed.But in the category of replacement of components, domestic analogues are among the leaders

Chinese suppliers have become the most popular channel for replacing the products of Western manufacturers and sanctioned goods that have left the Russian market. More than half of Russian companies in 2022 purchased replacement equipment and spare parts from them. But Russian manufacturers managed to get ahead of the Chinese, albeit not by much, in sales of components - here domestic import substitution is more efficient. Such results were shown by the January survey of enterprises conducted by the laboratory of market surveys of the Institute for Economic Policy. Gaidar, with whom RBC got acquainted. About 1,000 enterprises participate in the laboratory's surveys.

In addition to purchases from Chinese and domestic manufacturers (these are the two leading import substitution channels), enterprises also named other ways to replace lost goods. Someone managed to secure supplies from other friendly countries - from Turkey to North Korea, someone completely refused to use the disappeared goods in their production, and someone admitted that they continued to receive sanctioned imports.

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Replacement for "unfriendly" imports

Survey participants were asked to describe what they used to replace sanctioned imports in three categories of goods - equipment, spare parts and components. According to the first two of them, Chinese manufacturers have become a new source of supplies for most Russian companies.

67% of enterprises announced the transition to equipment from CHINA. Domestic manufacturers are in second place among import substitution channels, but by a wide margin: 39% of respondents began to use their products (there are several possible answers to this question from one respondent. - ).

In third place with a score of 23% is the option "analogues from other countries". This does not include countries for which separate answer options are provided: in particular, 21% of respondents found analogues with partners in the EAEU (Armenia, Belarus, Kazakhstan, Kyrgyzstan), and 17% - with Turkey.

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15% of Russian enterprises reported that they continue to receive sanctioned machine tools and machines. Also among the supply chains is the option of purchasing from India, Iran, Vietnam, Egypt, North Korea (12%).

In the spare parts market , Chinese manufacturers also occupy leading positions (63% of Russian companies turned to them), while the gap between China and domestic enterprises is smaller here - 46% of respondents decided to use Russian products.

24% of Russian companies switched to “analogues from other countries”, and 22% said they continued to receive sanctioned imports.

Import substitution in the sense of replacing imported analogues with domestic ones really worked in the category of components (to which the laboratory of the Gaidar Institute classifies raw materials, semi-finished products). Here, 54% of companies reported that they had replaced the departed imports with Russian counterparts. Chinese suppliers were only 2 p.p. behind.

23% of Russian enterprises continue to receive "forbidden" components, according to the materials for the survey.

The fact that Russian companies continue to receive "sanctioned" equipment and components does not mean that Western sanctions regimes are bypassed. Thus, EU sanctions provide for transitional periods during which deliveries are possible under existing contracts. In addition, the EU has introduced exemptions for the continuation of supplies, for example for medical or humanitarian purposes. Also, any EU country may, as an exception, issue a permit for the supply of sanctioned goods to RUSSIA. Russian subsidiaries of foreign companies may continue to receive such goods. The mechanism of "parallel import" works.

As Sergei Tsukhlo, HEAD of the Market Research Laboratory, points out, it is in terms of components that Russian companies demonstrate the highest independence from "sanctioned" products compared to equipment and spare parts. Foreign components have not been used by 20% of Russian enterprises before, and in the case of equipment and spare parts, only 11% of enterprises managed without now “toxic” imports.

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The effectiveness of import substitution

Despite the fact that domestic analogues are not the main channel for replacing the dropped imports of equipment and spare parts, the results of a survey of enterprises can be considered positive, Vladimir Salnikov, deputy DIRECTOR general of the Center for Macroeconomic Analysis and Short-Term Forecasting (CMASF), told RBC. “These polls show that import substitution is working. This is a very high figure,” he said, adding that he expected a stronger dominance of Chinese counterparts.

According to Salnikov, the share of domestic equipment in Russian industry has always been very small. For example, in a sector such as the production of machinery and equipment, as of 2021, imports accounted for five sixths, and domestic value added only one sixth of the total value added, the expert noted.

Salnikov drew attention to the fact that it is often difficult to determine the real country of origin of equipment or spare parts in the course of such market surveys. The share of Russian equipment here may be overestimated, he suggested, explaining that questionnaires are often answered by chief accountants who do not always know exactly whose equipment was purchased. “The chief accountant sees to whom the money goes. It may be a Russian reseller of Chinese spare parts. I think this factor could affect the results of the survey,” he said.

Earlier, RBC wrote that Eurostat data showed a strong increase in imports from the European Union to countries neighboring Russia, and Vaidotas Zemlis-Balevichus, head of data research at Euromonitor International, suggested that a significant part of this EXPORT is redirected to Russia. Turkey was also called a transit hub for the delivery of Western goods to Russia.

According to the Turkish Institute of Statistics, in 2022, the export of goods from Turkey to Russia reached $9.34 billion, which is 62% higher than in 2021 ($5.77 billion). In particular, the export from Turkey to Russia of equipment and mechanical devices (group 84 of the trade nomenclature), such as boilers, generators, turbines, internal combustion engines, pumps, lifting mechanisms, etc., electrical equipment (group 85) and automobile / auto parts (Group of 87) amounted to almost $2.7 billion last year, including a yearly high of $449 million in December against $1.6 billion in 2021.

China's exports of goods to Russia grew by 12.8% in 2022, to $76.1 billion. In 2022, China, in particular, increased deliveries to Russia of trucks, excavators and loaders, rubber tires, pumps and compressors (including turbochargers for automobile engines), taps, gate valves, valves and gates.