The Russian government has cut funding for the hi-tech industry fivefold due to budget problems.

Source: The Moscow Times, an independent Amsterdam-based news outlet

Quote: "Plans to revive the microelectronics industry have fallen victim to Russian budget cuts. The Ministry of Industry and Trade will reduce spending on the Federal Targeted Programme Development of the Electronic Component Base and Radio Electronics by five times. This programme was meant to increase the share of domestically produced goods in the electronics market to 40%."

Details:The data from the Russian Ministry of Industry and Trade shows that the programme’s budget will drop from RUB 26.5 billion (about US$339.7 million) in 2024 to RUB 4.9 billion (about US$62.8 million) in 2026.

The Moscow Times notes that the government is cutting budget spending in response to a sharp fall in oil and gas revenues, which has been triggered by sanctions and falling oil prices.

Quote: "As of late June, raw material revenues to the state treasury had dropped by a third year-on-year and the deficit had grown sixfold compared to last year – to RUB 3.7 trillion (about US$47 billion). By the end of the year, the Finance Ministry predicts that the budget gap will be the largest since the pandemic, while oil and gas income will fall RUB 2.6 trillion (about US$33 billion) short of the original forecast."

Details:A reduction of RUB 12 billion (about US$153.8 million) in support will be a major blow to Russian manufacturers. The funding cuts will hinder the development and production of new products and companies will be forced to revise their plans, The Moscow Times says.

Quote: "More than RUB 295 billion (about US$3 billion) were allocated to the microelectronics development programme between 2013 and 2024, but the results have only been partially achieved. The Accounting Chamber found that subsidy recipients failed to meet targets and stated that production volumes ‘cannot lead to technological independence for the country’."

Details:The Russian Association of Electronics Developers and Manufacturers stated that electronics production in Russia shrank by 15% last year and has already fallen by more than 10% this year. They attributed this to the "exhaustion of the counter-sanctions momentum".

Background:

• In June, the Russian manufacturing sector contracted at the sharpest rate in three years, with declines in production, new orders and employment. 
• The Kremlin plans to reduce defence spending, which has reached record levels not seen since the Soviet era.
• It was also reported that more than 130 new companies in China, Hong Kong and Singapore are openly advertising the supply of sanctioned components to Russia. 

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