How New Sanctions Will Affect R&D in the Petrochemical Industry

An expert article featuring Natalia Ivanova, Director of the petrochemical company NAPOR JSC, has been published on MK.RU; it focuses on the impact of sanctions-related pressure on research and development (R&D) within the petrochemical industry. The article examines how restrictions on technology and equipment have altered approaches to developing reagents and materials, the systemic challenges companies face, and the mechanisms enabling the continued advancement of R&D under these new economic conditions.

One might have expected that four years of sanctions pressure on the Russian economy would have destroyed research and development (R&D) in Russia’s petrochemical industry. Yet, the reality turned out differently. Natalia Ivanova, Director of the petrochemical company Napor, explains why sanctions provided a new impetus for R&D development and discusses the challenges the sector faces today.

In early 2025, the U.S. Department of the Treasury imposed another round of sanctions targeting major Russian oil producers (Gazprom Neft and Surgutneftegas) and over 180 tankers in the "shadow fleet," making yet another attempt to restrict Russia's access to international oil infrastructure. Additionally, a general license that had previously exempted Russian banks from restrictions regarding energy-related payments was revoked.

In late October 2025, Rosneft and Lukoil were targeted by the 19th sanctions package. Furthermore, EU and U.S. authorities banned the import of Russian liquefied natural gas (LNG) into the European Union and expanded export restrictions affecting Russian oil companies. The price cap on Russian oil was lowered to $47.60 per barrel, and transactions involving Rosneft and Gazprom Neft were completely prohibited.

The 20th sanctions package, announced for early 2026, is expected to focus on further countering the re-export of Russian oil via third countries and shrinking the shadow tanker fleet.

Sanctions pressure creates difficulties not only for energy exports but also for access to key technologies and equipment, as well as for scientific and technological cooperation. This has dealt a significant blow to the petrochemical and refining sectors—where Western technologies played a crucial role—since import substitution in these areas requires time and resources.

One of the key constraints facing the Russian petrochemical and energy sectors has been the loss of access to foreign engineering solutions for petrochemical plants, processing equipment, catalytic systems, and complex chemical reagents.

According to our data, prior to 2022, the Russian petrochemical industry lagged behind that of the US by at least 15 years. Its share of the global market was less than 2%, whereas the US, China, and Saudi Arabia controlled a significant portion of global production. This situation stems from the mass exodus of personnel in the 1990s; following the collapse of the USSR, a large number of academics and specialists emigrated—primarily to the United States.

Sanctions disrupted supply chains, thereby spurring the development of domestic R&D. The fifth sanctions package alone banned the import of between 3,500 and 5,000 specialty chemical products used daily by oil extraction and refining companies. Import dependency stood at 80% for antifoaming agents, over 90% for corrosion inhibitors and demulsifiers, and more than 95% for neutralizers. While sanctions prompted Russian companies and the state to pursue technological independence more vigorously, they encountered a number of obstacles along the way.

In February 2025, a US ban came into effect prohibiting the provision of oilfield services to any persons located in Russia—services covering not only extraction but also scientific and technical support. Developing proprietary technologies will require significant time, investment, and the accumulation of experience.

The oil sector, which accounts for a significant share of federal revenue, has lost some of its export markets. Sanctions are driving down profits and placing the industry under pressure. Market players are being forced to curtail R&D investment, causing the pace of innovation to slow.

Many companies focus on maintaining production levels rather than on innovation. A portion of the resources that could be allocated to R&D is instead directed toward operational activities and funding essential needs. For instance, major oil companies are prioritizing domestic processing of raw materials to cut costs and reduce their reliance on raw material exports.

Companies that built up strategic stockpiles of Western reagents and chemicals when sanctions were first imposed are gradually depleting them. Experts estimate that, when planning for the next three years, companies are already factoring in a need for domestically produced chemicals for the oil industry. However, the market is not yet able to meet this demand with sufficient supply.

Despite financial challenges, Russian companies have increased investment over the past three years in the development of new chemical reagents, corrosion inhibitors, catalysts, and other materials previously sourced from abroad.

R&D companies are conducting laboratory tests of new products at the facilities of their clients—major oil companies. Scientific and technical centers are allocating budgets for R&D, while large oil and gas companies are establishing their own research centers.

Regional technology parks are actively engaged in development work for the oil and gas sector. For instance, the Tyumen Oil and Gas Cluster focuses on research, construction, and related areas.

The emergence of oil and gas clusters, the Skolkovo program, and the Foundation for Assistance to Small Innovative Enterprises (FASIE) has created a grant system enabling participating companies to receive state subsidies for R&D. Such support helps offset shortages in funding and technological partners. For instance, Skolkovo residents can apply for grants:

• up to 10 million rubles for product development;
• up to 50 million rubles for R&D activities for promising technology leaders (in partnership with the Ministry of Industry and Trade);
• between 20 million and 700 million rubles for strategically important import substitution projects..

Obtaining Skolkovo resident status or participating in programs for small technology companies offers significant advantages:

• a 0% corporate profit tax rate instead of the standard 20%;
• VAT exemption for the entire duration of program participation;
• reduced insurance contributions: 15% instead of the standard 30%;
• customs benefits for importing R&D equipment.

Given that the VAT rate is set to rise to 22% starting in 2026 and the annual revenue threshold will be gradually lowered from 60 million to 10 million, these measures are crucial for the industry.

Sanctions pressure has forced Russian enterprises to seek alternative sources of supply. China is a key partner for the Russian petrochemical industry, producing large quantities of chemical components for synthesis and manufacturing. Russia imports organic petrochemical products, industrial reagents and catalysts, and other essential substances from China. However, shifting to Chinese suppliers entails certain risks:

• Geopolitical instability: Chinese support could be curtailed due to pressure from the US;
• Product quality: Chinese alternatives often fall short of European products in terms of quality;
• Pricing: Chinese suppliers factor in a premium to cover risks associated with sanctions.

Oil and gas companies are turning to research centers with requests to revive reagent compositions and formulations originally developed during the Soviet era. At that time, the oil industry was capable of handling all processes domestically. However, this strategy has its limitations: Soviet technologies are obsolete and lag behind Western counterparts in terms of efficiency and environmental performance.

State support for R&D will continue in the coming years. This is because energy resources account for the bulk of the country's GDP, ensuring the sector remains a focus of close attention. The grant system is set to expand, and major oil and gas companies will continue to increase their R&D budgets. Companies developing projects of strategic importance to the petrochemical industry will benefit from tax and customs concessions.

However, despite these positive developments, the industry's future should be viewed with cautious optimism. New sanctions will exert further pressure on the sector, and securing R&D funding will remain challenging. Furthermore, the outflow of skilled professionals abroad persists, while training new personnel takes time.

We believe that achieving full import substitution within the next decade will be difficult. In certain areas where Soviet-era scientific expertise and technical documentation remain available, replicating technologies is feasible. However, the launch of major projects capable of fully replacing imported technologies is unlikely in the short term.

Over the next 15 years, the Russian petrochemical industry will grow, albeit at a modest pace—approximately 3–5% annually. Industry players will be compelled to focus primarily on the domestic market rather than on exports.

R&D in the oil industry is currently experiencing a period of turbulence. Nevertheless, sanctions have spurred the development of domestic research and innovation. The volume of such activities has grown, state support has intensified, and companies have begun investing in their own research centers.

However, the path to technological sovereignty will not be swift. Market players should prepare for 10–15 years of systematic effort to achieve full import substitution and reach a level comparable to Western standards, particularly in certain high-tech areas.

In the long term, with active state support and the involvement of oil and gas companies, the Russian petrochemical sector has the potential to strengthen its scientific and technological standing.