Russian Military Industry May Remain A Strong Source Of Support For Putin

Exactly one year ago, I argued in MEMRI that "the war will con­tinue through all of 2023," since the most crucial thing for Russian President Vladimir Putin is not to terminate the hostilities by the time of his "re-election," which will take place in March 2024, as he needs to keep on claiming that Russia is under foreign attack and that he is the only one who can counter it. I then added: "I would also expect the consolidation in the Russian power elite in the coming months, with a significant decrease in the influence of all 'non-conventional' forms of warfare, including the use of 'private armies,' convicted criminals and ethnic battalions, and the strengthening of the Russian defense of the occupied territories. We are now in a war of attrition, and significant changes may occur only after mid-2024."[1]

This forecast appears to have been mostly correct. However, this time, I would like to address another factor, which is that Russia's military-industrial complex that in 2023 performed much better than expected with high certainty will continue to do so in 2024.

(Source: Pravda.com.ua)

Official Sources Want To Convince Bystanders That The Russian Military Production Increased By 80 To 100 Percent Overall In Two Years

During most of 2022, Russian and foreign experts insisted that Russia was unable to compensate for the losses of armor and the use of ammunition,[2] which we­re perceived as enormous (I would agree that they actually were huge, as the Russian command decided to use in the battlefield outdated tanks like the T-64 manufactured in the 1970s and even the T-54, whose production started in 1946).[3] So­me of these experts even argued that the Russian army will run out of shells by autumn, and are talking about the catastrophic stance of the mi­litary supply.

In contrast, official sources seem to be too optimistic in trying to convince the bystan­ders the Russian military production has increased overall by 80-100 percent in two years,[4] adding that "communications technology, missiles, electronic warfare, and reconnaissance means grew more than fivefold; armored weapons grew threefold, aviation equipment and drones grew twofold."[5] Some of my so­urces confirm these data, adding that the number of tanks produced and mo­dernized monthly last autumn was up to five times higher than pri­or to the war, rea­ching 35 to 40 units a month (while the most common Western esti­mates put it at aro­und 200 units per year).[6] This may well happen because – even it sounds ridiculous – the mi­litary industry in 2024 still represents a rather small fraction of the Russian economy.

In 2021, it was widely acknowledged that about two million people, or three percent of the over­all workforce, were employed in the military-industrial complex; if one assumes that their productivity was around the average for processing industries, the sector generated from 2.5 to four percent of the country's GDP. In 2023, defense spen­ding increased drastically with 5.6 trillion rubles allocated in the first half of the year, corresponding to 37-38 percent of all budget outlays.[7] For 2024, the number shot up to 10.8 trillion rubles,[8] and, as in 2023, it might seriously increase du­ring the coming 12 months. The overall consensus is that around 40 percent of Russia's GDP growth, which is estimated at 3.5 percent, originates from the mili­tary-industrial complex that corresponds to its 60-70 percent growth rate.[9]

Moreover, I would point out that in the first ten months of 2023 the exports of ferrous metals from Russia declined by eight percent while the domestic shipments increased by more than 11 percent, or by roughly 500,000 tons a month, with 50 tons of steel needed to produce a modern tank and around 40 kilograms to make a 152mm shell.[10] This happened while the domestic passenger car production plummeted by around a million vehicles per year compared to 2021.[11] Of course, no one knows exactly how big the shipments of armored vehicles, canons, or ammunition to the front are, but it might be said that in 2023 the Russian military industry in general overcame the problems evident in 2022 – even it still represents not more that six percent of Russia's GDP with the figure can hardly grow to eight percent, which some experts predict for 2024.[12]

Ukrainian Troops, Not Russian Ones, Had Rocket Shortages

I would also say that Moscow appeared not only to secure additional supplies of ammunition (different sources estimate that the number of 152mm shells imported from North Korea alone is between 1 and 1.5m,[13] and both the Iranian drones[14] and the North Korean ballistic missiles[15] are widely used at the frontline), but to develop their production in Russia as well. In 2024 the brand-new production facility in Tatarstan, using Iranian techni­ques, is expected to produce several thousand combat drones.[16] Overall, in 2022-2023, the number of factories and enterprises that belong to the military industry grew in Russia by 360 units or by around one fourth of their pre-war quantity, while at least 520,000 new employees got jobs in the sector.[17] Of course, most of the newly established facilities are smaller than the Soviet-era enterprises, but they are much more flexible and market-oriented, thus being able to provide a lot of high-quality products.

The only problem that the Russian mi­litary industry faced at the initial stage of the war – the acute shortage of semicon­ductors and chips – was mostly avoided as their "informal" imports skyrocketed starting from late 2022 and now exceed pre-war levels.[18] The gap between the experts' estimates and real trends might be illustrated by the fact that the Ukrainian offici­als insisted that Russia has been depleting its mid-range and ballistic missiles since last autumn (it was said that Russians have five times fewer missiles of all types than they had at the beginning of the war),[19] but intensive attacks that the Russian army ini­tiated in last days of 2023[20] and in early January 2024[21] prove these estimates wrong. Now it is thought that Russia has increased its missiles production by at least 2.5 times since the start of the war.[22] Such underestimations, made many times during this war, contributed significantly to the drafting of wrong decisions that appear to have been extremely costly for Ukraine's defenders.

In Russia, The Military Industry Is Perfectly Incorporated Into Its Market Economy

Starting from autumn of 2023, Western sources began arguing that Russia outpaces both the European Union and the United States in ammunition produc­tion, with some officials insisting the produces ammunition seven times faster.[23] I cannot be sure about the last estimate, but it seems that the overall conclusion is true: In recent months there have been Ukrainian, not Russian, troops who have experienced shortages in shells and rockets, as the EU is bitterly failing in fulfilling its promise to supply Kyiv with one million artillery shells by March 2024.[24] What should be also mentioned here is the profound inability of the Ukrainian industry to fill the gap – up to 80 percent of all military equipment and ammunition currently used by the Ukrainian army is im­ported – and, for example, a factory that was set up to produce Bayraktar drones under a license granted by Turkey, is still under construction with the first product expected to be delivered in 2025.[25] All the projects of manufacturing NATO-produced equ­i­pment remain dreams, as it is now debated whether the Western tanks used by Ukrainian forces will be repaired in Poland or in Germany.[26]

If one looks further into 2024, it is possible to anticipate the continuation of the trend that I had described, but maybe not in such a surprising way. Of course, Russia is not expected to reach Soviet levels of military production: in 1984, the famous Uralvagonzavod industrial complex produced more than 1,550 tanks in a single year,[27] and it was not the only one of such kind in the USSR. The Soviet military-industrial complex accounted for around 20 percent of the country's GDP,[28] while the proposed military expendi­tures for 2024 do not exceed 6.5 percent of GDP.[29] However, what one should admit is that in Russia the military industry is perfectly incorporated into its market economy, so every additional ruble channeled into it causes the increase in wages and an additional demand for energy, spare parts, and raw materials, which encoura­ges gro­wth in many other economic sectors. I would insist that, unlike in the So­viet Union, where the excessive military spending caused growing shortages in ma­ny industries, in Russia the additional government orders promote growth that can intensify the demand in other sectors that otherwise would remaining sluggish. To realize the effect, one should remember that the military spending re­ached around six percent of the GDP in the U.S. in the mid-1980s,[30] which cannot be considered years of crisis.

Russia Managed To Reduce Its Losses Of Tanks And Armored Vehicles

Two more points should also be mentioned when addressing the current situ­ation in the Russian military industry.

On the one hand, it seems that 2024 will bring the continuation of the war of attrition, but it is going to be waged at relatively low intensity. It seems that Russia has used up to 3,000 missiles and guided bombs since the start of its war with Uk­raine.[31] It is worth noting that the U.S. and the members of the Coalition of the Willing hit Iraq with around 30,000 devices of these sorts in just two months in 2003.[32] The usage of artillery shells has also decreased from its peak of 30,000 to 40,000 per day in March 2022.[33] Russia managed to reduce its losses of tanks and armored vehicles quite signifi­cantly since its forces were painfully defeated in late summer of 2022 in Eastern Ukraine and withdrew from Kherson. Therefore, I insist that the Russian military industry can supply the army with all the ne­­eded armaments and ammuniti­on, which never would be a state-of-the-art produt but may allow the Russian army to contain the Ukrainian offensive and even to counterattack on different sections of the front. During this year, the Russians may well increase their military output by another 20 to 50 percent compared to 2023 and ease their remaining dependence on their allies in military supplies.

On the other hand, the Russian military industry became a kind of a trendsetter in 2023 and is expected to remain so in 2024. It attracts hundreds of thousands new employees while continuing to pay significantly higher wages than the country's average. Even while many experts (including myself) were extremely skep­tical about the prospect of introducing of a two-shift, much less the three-shift, or round-the-clock, production process that President Putin requested back in 2022,[34] this task was fulfilled by many enterprises last year.[35] Today, the military production facilities are re-creating traditional centers of industrial activity and facilitate the development of rather huge regions in the Urals, Volga valley, and Siberia.[36] I would add that the existing trend might become a long-term one. Even though the war with Ukraine is somewhat termina­ted, it will take from three to six years to compensate for the losses it has caused, so no one should be thinking of Perestroika-like "conversion" that eventually killed Soviet military production in the late 1980s. Nowadays, the Russian military-industrial complex looks secure from similar financial troubles and may remain a strong source of support for President Putin and his militaristic policies in the years to come.

Conclusion

To conclude, I would argue that Western strategists made a grave mistake in both 2022 and 2023, as they believed that the Russian industry can be undermined by sanctions, which were either aimed on banning the imports of vitally needed spare parts or components or at limiting Moscow's financial resources through cutting crude and processed oil exports.

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The sanctions aimed at banning the imports of needed spare parts or components were successfully bypassed, while those directed on limiting Moscow's financial resources had little effect, since the Russian go­vernment pays its military orders in rubles, not dollars, as there is an oversupply of all needed materials on the domestic market. The sanctions strategy might have been effective only in case the Russian leadership believed it needs the most advanced weapons allowing it to hit a limited number of targets in Ukraine and to limit the losses of its own servicemen. However, as Ukrainian Commander-in-chief Valery Zaluzhny said, Russians do not care so much about casualties.[37] This is a war for which the Russian military industry is perfectly fit, so, as President Putin had told his friend, China's paramount leader Xi Jinping, not so long ago, Russia may well wage the war with Ukraine for years.[38]

*Dr. Vladislav Inozemtsev is the MEMRI Russian Media Studies Project Special Advisor, and Founder and Director of the Moscow-based Center for Post-Industrial Studies.