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Replacing chemical imports in Russia

Although import values of chemical industry products continue to rise, Russia has made considerable progress in certain product areas.  Domestic production of catalysts and additives in the past three years have reduced the dependency on imports quite significantly.  Across the spectrum of the industry, however, progress remains restricted to a number of factors of which the most important is finance.    The financial collapse of the project at Kazan company set up for a 40,000 tpa plant for methylchlorosilanes, which would have been the first of its kind in Russia, reflects the difficulties of implementing expensive plans and the difficulties in borrowing.  In the Kazan case, the dramatic rise in project costs following the significant fall in value in the rouble in 2014 caused the bankruptcy of KZSK-Silicon, taking the local bank Spurt with it. 

The weaker rouble since 2014, principally the result of Russia’s foreign adventures, was supposed to provide a stimulant to domestic chemical engineering, but there is little indication that this is happening.  In terms of financial backing the only source for Russian projects that could constitute a full-fledged competitor to the mechanism involving foreign finance is the National Welfare Fund.  However, the fund's resources are inaccessible to a wide range of projects and investors because of the specific conditions for their distribution.

Some of the challenges to increasing the diversification of chemical products are surmountable, such as overcoming problems with raw materials, quality, service and innovations, etc.  The key problem is the virtual impossibility to borrow in Russia for a large capital-intensive project.  Moreover the slow process of  implementation in Russia mean that original project cost estimations can rise sharply, thus rendering the project impractical.  Examples of such projects include the Novy Urengoy polyethylene plant, which seems destined never to start, and of current day plans the Ivanovo Polyester Complex which is facing delays and doubts.   

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