Sanctions have spurred innovation from Russian cheese to turbines in the last few years. Now it’s the turn of precision machining in a key development for the economy.

Russia’s domestic machine tool industry is expanding rapidly, as state-backed import substitution policies and wartime industrial demand drive a sharp increase in local production. High precision tools have been forced to catch up that were almost entirely dependent on imports of high quality foreign made machinery for almost all of the last three decades since the fall of the Soviet Union.

The collapse of the USSR in 1991 and the subsequent decade of chaos during the Yeltsin-era came at the worst possible time for machine tools which went through at least two revolutions in that period after computers were married to machine engineering. The upshot was that technologically, Russia was left hopelessly behind with little chance to catch up. As a result for most of the last three decades by far the largest import item has been “machines.”

The government has launched numerous drives to try and close the gap, but the economics of the situation has worked against them. There is little point investing millions of dollars in R&D to improve the indigenous technology when at the end of the process there is still better foreign-made technology available at lower prices. It took sanctions to give the sector the jolt it needed.

Nowhere is this problem clearer than in the cheese production sector. The Soviets didn’t excel at cheese production (although things like the fermented Kefir yoghurt drink and the ubiquitous smetana sour cream are found on every kitchen table in Russia). As soon as the wall came down the market was immediately flooded with camembert, Gruyère and Emmental cheeses. The local producers didn’t even bother to try and compete with the French, Swiss and Dutch brands and concentrated on those few popular Soviet varieties, particularly hard cheese and the salty string cheese from Georgia.

All that changed in 2014 after the annexation of the Crimea. In tit-for-tat sanctions, Russian President Vladimir Putin banned all European agricultural imports, including cheese. The foreign brands disappeared from the shelves and smuggling premium cheese quickly became a multimillion-dollar business.

It took about two years for local producers to step into the breach and developed Russian analogues for the most famous varieties, including the famous “Siberian camembert” developed by a couple living in a village in the Altai region.

A similar process has been playing out since the extreme sanctions regime was imposed following the invasion of Ukraine in 2022 and sector after sector has been forced to innovate access to western products after product was cut off.

Siemens came to virtually monopolise the high efficiency gas turbine business in Russia, which were almost exclusively installed in all new Russian powerplants as the Russian precision machine sector was incapable of matching its quality. But as IntelliNews reported, last year a Russian company produced the first indigenous turbine that meets most of the German specs for the first time.

Precision tools

After the 2022 sanctions regime was imposed, CBR governor Elvia Nabiullina gave a speech warning Russian businessmen they would have to go back “at least two generations” or more and retool their factories as a result of the bans.

Widespread shortages of the most basic imports were reported. At one point the Russian burger clone that took over McDonalds had to produce white packaging for its copycat Big Macs as it had run out of ink for the printers and couldn’t get any more.

Today domestic manufacturers now account for 34% of the Russian machine tools market, up from just 12–15% five years ago, according to industry estimates. The shift is a structural rebalancing of a sector that had long been heavily dependent on foreign suppliers.

The pace of change has been startling. “That means 30–40% growth per year,” one industry participant said, pointing to sustained double-digit expansion as domestic producers scale up capacity and replace imports curtailed by sanctions.

Machine tools — critical for precision manufacturing in sectors ranging from defence to automotive and aerospace — were among the most affected categories.

Moscow has responded by prioritising the sector within its broader industrial policy framework. Subsidised financing, localisation incentives and state procurement programmes have all been deployed to accelerate domestic output. Defence orders linked to the war in Ukraine have also provided a steady pipeline of demand, supporting capacity expansion.

Despite the progress, industry players caution that Russia still faces significant technological gaps. High-end CNC (computer numerical control) systems and ultra-precision machinery remain heavily reliant on imported components or parallel import channels.

There is still a long way to go, but Russia is slowly getting there, reflecting a broadly held view that while volume growth is strong, quality and technological sophistication still lag behind global leaders.

The German and Japanese supply pre-sanctions have disappeared, but China remains among the main suppliers and is going through a similar process. While Chinese exports have partially filled the gap left by Western firms, logistical constraints and geopolitical risks still cause problems.

The trajectory of the sector will depend on sustained investment and access to critical components such as control systems, software and specialised alloys. Without these, the current growth spurt may prove difficult to maintain at higher levels of technological complexity. Nevertheless, the expansion marks one of the more tangible examples of Russia’s broader attempt to reindustrialise under sanctions pressure — a process that is reshaping supply chains and industrial priorities across the economy.