Eugene Gerden reports from Moscow

Russia’s nonwovens and technical textiles industries may be on the verge of a serious crisis, due to a recent decision by the Russian government to impose a ban on the import of industrial equipment from Western countries.

The decision was the Russian government’s response to recent sanctions, imposed on the country by the European Union and the United States, which has resulted in the ban on the import of a range of goods and products for various segments of Russian industrial production.

According to the press service of the Russian government, the ban on the supply of foreign equipment for Russia’s nonwovens and technical textiles industry will be signed by Russian Prime-Minister Dmitry Medvedev within the next two to three weeks.

According to Arkady Dvorkovich, Russia’s Deputy Prime Minister, the imposition of a ban is an acute need as it will provide impetus for the development of the national machine building industry and will provide new orders to it. 

Dvorkovich also said that this would also encourage foreign manufacturers of industry equipment to localize their production within the country. In the meantime, the ban has already been supported by Russia’s leading political parties.

Vladimir Zhirinovsky, head of the Liberal Democratic Party, one of the largest political parties in the Russian Parliament, commented: “Many countries in the world use the policy of protectionism in case of their producers. In the case of industry equipment for domestic industry of technical textiles and nonwovens, we have been purchasing its abroad since the beginning of 1990s, however have decided to give a chance to domestic producers. We will support local producers, despite the fact that the quality of their production is often lower, compared with imports. Of course, we need to establish our own production, which will allow to reduce dependence on imports.”

The imposition of the ban will take place in accordance with a recent order of Russian President Vladimir Putin, which involved the reduction of imports of equipment in numerous segments of Russian industrial production in the coming years.  

Instead of imports, the Russian government plans to increase support of domestic producers, which is expected to take place through the provision of numerous benefits and incentives to them.

In the meantime, despite optimism of the state, some local analysts in the field of nonwovens and textiles have already criticized these state plans, believing that the imposition of ban will result in a shortage of quality industry equipment in the market and may lead to failure of plans of many local nonwovens to complete modernization of their production facilities.

A similar opinion is shared by some analysts at the Russian Ministry of Industry and Trade, who asked not to be mentioned due to fears of dismissal. Sergey Belyakov, Russsia's former deputy minister of economic development was recently fired because of his public criticism of the latest Russian government decisions.

According to the analysts the ban on the import of industrial equipment will have extremely negative consequences on the Russian nonwovens and technical textiles industries, due to the inability of local manufacturers to replace imported machinery at the present. Up to 90% of modern equipment for industry is currently imported from abroad, while local producers are still unable to compete with importers, analysts say.

They also add that the ban may result in the appearance of a monopoly on the Russian machinery market, as there are only two domestic producers, whose production could theoretically replace imports from abroad.

Finally, analysts believe that the imposition of a ban may result in a significant increase in equipment prices in the Russian market, which could be too high for many domestic textile and nonwovens producers who are considering modernization of their production assets.

In the case of importers, it is planned that the ban will mainly affect some EU machine building from Germany and Belgium (which, so far, have been the largest suppliers of equipment for the Russian nonwovens and technical textile industry) and some other countries.

At the same time leading Russian nonwovens producers have also criticized this state decision. Alexei Semenov, Deputy CEO of Parchovy Ryad, one of the largest Russian manufacturers of textiles and technical textile products, comments:

“The current level of technical equipment of the majority of domestic producers of nonwovens and technical textiles do not meet international standards. Certainly, there are several enterprises in the industry, which have invested in their technical modernization in recent years, however their number remains insignificant. The imposition of a ban on the imports of industry equipment will shoot down the plans of many industry players to complete modernization of their production assets in the coming years. It is planned that, instead of the EU equipment Russia will have to refocus on the purchase of Chinese or Korean technology, the quality of which, however, are often lower the quality of equipment, supplied from the EU countries.”

Meanwhile, the Russian government has already announced its plans for the provision of support to domestic producers. According to Denis Manturov, Russia’s Minister of Industry and Trade, as part of these plans the government has not ruled out the possibility of the establishment of a special fund, which will provide cheap loans to domestic producers of industry equipment for expansion of their production facilities. At present interest rates on loans provided by Russian banks exceed 11.5%, compared to 3-4% in the EU. However, according to Manturov, there is a possibility that such a situation will change in the coming months.