Russian Tech Substitution Retracts as R&D Liquidations Surge 44%

Russia has experienced a sharp increase in the closure of research and development (R&D) companies alongside a decline in new registrations during the first five months of 2026, The Moscow Times reported on June 23.

Between January and May, 1,037 R&D firms were liquidated, marking a 44 percent increase compared to the same period last year, according to calculations by the Russian state media, based on SPARK  and Rosstat  data. Simultaneously, new venture registrations dropped by 16 percent to 478 companies.

Data from the corporate verification service Rusprofile, cited by The Moscow Times, mirrored this contraction, noting a 28 percent year-on-year surge in closures through April, leaving the country with 29,143 active R&D entities by mid-May, the majority of which specialize in natural and technical sciences.

This highlights an operational imbalance within the sector, where state funding remains heavily concentrated in the public sector and defense industries. Vyacheslav Shirikov, technical director at Lartech, stated that independent small and medium-sized enterprises are struggling under the dual pressures of a high central bank key interest rate and a recent increase in value-added tax (VAT) to 22 percent, The Moscow Times wrote.

Consequently, the share of R&D spending within Russia’s gross domestic product (GDP) has declined from 1.1 percent to 0.9 percent.

The sector is also experiencing a regression in its import-substitution initiatives, as startups established between 2022 and 2024 to replace departed Western technologies face liquidation upon completing their initial projects. Valeria Popova, a senior analyst at investment firm Ricom-Trust, cited by The Moscow Times, observed that these companies face increasing difficulties securing new state contracts, which are increasingly awarded to larger, established corporate entities.

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How War, Sanctions, and Ukrainian Drone Strikes Are Fueling Growing Economic Gloom Inside Russia

Jun 01, 2026 15:13

Wider macroeconomic challenges, including international sanctions, isolation and an acute personnel crisis driven by the brain drain of young scientists, continue to constrain Russia’s domestic innovation. Vitaly Bagan, vice-rector for research at the Moscow Institute of Physics and Technology (MIPT), concluded that the ongoing contraction makes the Kremlin’s targeted goal of increasing national R&D expenditures to 2 percent of GDP by 2030 highly improbable, The Moscow Times noted.

This downturn within the research sector aligns with Russia’s severe macroeconomic difficulties, as Russia experienced a 14.3 percent year-on-year collapse in fixed capital investment during the first quarter of 2026—the most severe decline in 16 years.

Financial analysts have previously attributed this widespread investment freeze to a combination of prolonged strict monetary policy, narrowing corporate revenues, and escalating debt-servicing costs that have forced domestic enterprises to pause long-term strategic planning and shelve active development projects.

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