Market overview and trade data on one of Russia’s best prospect industry sectors.

After average annual growth of 12 percent from 2010 to 2014, the Russian construction industry experienced a decline of 7.4 percent in 2015 and 2.1 percent in 2016 in real terms. This was due to Western sanctions, a fall in the revenue generated from oil exports, and weak European market conditions. Together, these factors reduced the government’s ability to spend on infrastructure projects. However, the industry has started to recover since 2017, due to the government’s focus on developing the country’s manufacturing sector to diminish its reliance on oil exports. In 2017, the industry was supported by government plans to complete transportation infrastructure, energy and utilities projects, and residential buildings in anticipation of the 2018 FIFA World Cup. Robust and modern infrastructure is vital to economic growth and international competitiveness and therefore, the government is focusing on infrastructure development.

The Russian government is pursuing a 6.3-trillion ruble (USD100.47 billion), six-year modernization plan to revamp the country’s highways, airports, railways, ports, and other transportation infrastructure through 2024. This comprehensive plan is geared toward improving the connectivity of Russia’s regions and developing strategic road routes, including the Europe-Western China transportation corridor and the Northern Sea Route.

By 2030, the government is planning to install 11,000 km (kilometers) of fresh railroad tracks, linking the cities of Moscow, St. Petersburg, Samara, Krasnodar, and Novosibirsk. New railways mean that demand for new train depots, stations, and connecting roads is anticipated. High-speed rail is a significant component in Russia’s transportation upgrade plans. Russia’s rail network is currently seeing major construction work under the guidance of the rail monopoly RZD (Russian Railways). RZD is currently building 20,000 km of new lines, to be completed by 2030 at an estimated cost of USD61 billion.

Russia has apportioned hundreds of billions of dollars for new roadways – including major highways. For instance, there are plans to construct a new highway along the Black Sea coast between Dzhugba and Sochi. The 210-km, four-lane route has an estimated cost of USD19 billion and will become a key artery for trucks hauling goods from the European part of Russia into its Southern regions.

Another large project underway is a 2,000-km stretch of road called the Meridian Highway. This falls under China’s global One Belt One Road project, of which Russia is a member. The Meridian spans Russian territory from the border of Kazakhstan to the border of Belarus. According to government officials, this new route will be oriented to freight transportation. A high percentage of loads will be East-West cargoes from Europe to China and vice versa. A final section of the new Moscow-St. Petersburg highway is also due to be commissioned by 2020, improving links between Russia’s two major cities, both of which are major logistics hubs.

Residential construction is also reinvigorating Russia’s infrastructure sector. Moscow broke its apartment building record in the first quarter of 2016, with the number of units rising by four percent. The need to provide housing for middle- to low-income groups is ingrained in the government’s construction plans. Its “Housing for Russian Families” program is aiming to boost housing construction significantly from 2018 to 2020. Some 500,000 two-room apartments are to be built by the completion of this plan.

Large U.S. multinationals like Caterpillar, John Deere, Wirtgen, AECOM, GE, StanleyBlack&Decker, and Wabtec are quite active in segments of the Russian infrastructure market and are involved in large-scale construction projects in their respective areas of expertise.

There are excellent business opportunities for the U.S. construction sector (machinery, tools, technologies) in infrastructure and residential construction projects in Russia.