The investment programme for petrochemicals may come under pressure from the sanctions imposed on Russia following its role in the east Ukraine conflict, although the Russian government is dismissive of the measures and restrictions.  

One side-effect of sanctions is a stimulated drive towards producing its own higher added value chemicals and technologies, but this sets extremely difficult challenges which hitherto have been largely given too little emphasis.  The fact that the discussion of widespread chemical product substitution is even necessary indicates the lack of product development and diversification achieved over the past two decades. 

Despite the multitude of projects announced in the past decade, the chemical industry has mostly only progressed in the commodity areas where it was already present.  Ethylene production for example has increased from 2.096 million tons in 2003 to 2.697 million tons in 2013, which is only 18 kg per capita against the European average of 45 kg per capita. 

In the fallout of relations with the developed world Russia has been seeking alternative partners such as China, India, Cuba, etc, which are unlikely to fill the gap of West Europe and US. In the past few years Iranian companies have been forced to buy Chinese equipment due to sanctions on the petrochemical sector, but these sanctions could be eased allowing companies from Europe and Japan to compete in the Iranian market.  A lack of quality has been the primary issue for Iranian companies purchasing plant technology from China, and there may be little hesitation in looking elsewhere.

The obvious challenge that Russia faces is the need to upgrade and to improve its petrochemical industry with modern new equipment, not to replace old equipment with new forms of poor equipment.   Although safety improvements have been made in recent years, and some plants can show excellent records of management, accidents still recur with too much frequency threatening the life of employees and production.  

Current Russian foreign policy appears to have lost economic rationale, and only serves to help Kremlin to maintain power inside Russia.  Putin may have wasted a great opportunity to modernise Russia over the past deade, something that could followed the pattern of West Germany’s post war economic miracle.  Instead he will probably be remembered for other reasons.

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