Russia’s largest private airline has had to scrap plans to build a new engine plant, as the aviation industry struggles to cope with Western sanctions. The aviation sector has been one of the hardest hit by sanctions, introduced following Vladimir Putin’s 2022 full-scale invasion of Ukraine.

The export bans have cut off both the supply of planes and more importantly spare parts to Russia. US-made Boeings and EU-made Airbus planes account for two-thirds of Russia’s commercial fleet, carrying about 90% of passengers. Like all planes, they are in need of regular maintenance, which involves a constant need to replace worn out parts.

The Kremlin has tried to revive domestic aviation production to soften the blow of sanctions.

Known as import substitution, the idea is to manufacture Russian passenger planes, along with all the relevant spare parts.

However, these plans appear to have hit the buffers, as companies fail to meet Kremlin-ordered production timelines.

In the latest blow, the Russian airline S7 has been forced to scrap its £65 million gas turbine engine plant in Saint Petersburg.

Approved in 2024, the project was meant to replace Western jet parts lost to sanctions.

This is part of a trend which has seen Kremlin plans for the production of domestic planes to replace those of Boeing and Airbus cut by 1.5 times due to problems with aircraft factories.

According to initial plans, the Kremlin aimed to have Russian-produced planes make up at least 80% of airline fleets by 2030.

At the beginning of 2025, however, that target was scaled back to just 50% and follows on from a decision last year to delay the launch of large-scale aircraft production until 2027-28.

Commenting on the latest development, Kyrylo Shevchenko – the former head of Ukraine’s National Bank – wrote on his X social media page: “The Kremlin’s ‘import substitution’ drive is unraveling — a long with aviation execs caught in the fallout. “

It comes as new data shows that Russia’s oil tax revenue has fallen by around 37% since the start of the full-scale war in 2022.

Oil and gas revenues are a vital source of income for the Kremlin’s war in Ukraine and contribute between 30% to 50% to the Russian federal budget.

Oil tax revenues peaked in February 2022 before the invasion, reaching just over $16 billion. They subsequently collapsed in December 2022 before making a slight recovery, reaching $10 billion in February.