Military Dominance

The shift towards a permanent war economy in Russia under President Vladimir Putin is unmistakable.

With weapon factories operating non-stop and churning out three times more artillery shells than the combined output of the European Union and the United States, the Russia’s militarisation is evident.

Yet, beneath this facade, analysts detect critical vulnerabilities in this strategy.

The unexpected appointment of economist Andrei Belousov as the head of the Russian Ministry of Defence is another sign that President Vladimir Putin is preparing for a ‘war of attrition’: a prolonged conflict that will be decided not only militarily but also economically.

With such a conflict in mind, Putin has been working for two years to make his country a high-performing war economy.

As a result, the Russian military industry has a significant advantage over the West, which has struggled to rapidly scale up its weapon production after decades of underinvestment.

Russia has effectively transformed into a war economy, marked by the expansion of supply chains, continuous operation of weapon factories, and a growing trend of nationalising companies.

The shift towards a permanent war economy in Russia

As a result, Russia’s annual output now surpasses that of the European Union and the United States combined, with a production of three times more artillery ammunition.

For example, the state-controlled Russian defense conglomerate Rostec claimed to have produced significantly more weapons in all sectors in 2023: seven times more tanks than in the first year of the war in Ukraine, 4.5 times more light armoured vehicles, and 2.5 times more artillery shells and missile launch platforms.

This led to the delivery of over 1,500 new tanks, 2,200 armored vehicles, 1,400 rockets and cannons, and 22,000 drones to the Russian army last year.

Additionally, the production of key components and technological parts used in missiles and tanks increased by 35 percent last year.

However, the impressive Russian figures should be taken with a grain of salt, according to the Center for Strategic and International Studies (CSIC), an American research institute.

A recent report on the Russian war industry from CSIC notes, “official data and statements coming from the Russian MOD are most likely exaggerated, and therefore should be taken with a grain of salt, they demonstrate the Kremlin has placed renewed emphasis on strengthening the domestic defence industrial sector.”

Nevertheless, even if the weapon production figures are inflated, they are sufficient to indicate the rapid pace at which Putin is building up the war economy.

This year alone, the Kremlin plans to invest a staggering 10.8 trillion rubles (about 110 billion euros) in defense, accounting for 6 percent of the Russian GDP.

This is three times more than what Putin plans for social spending and represents over a third of the total Russian budget.

It is now up to the new Minister of Defense, Belousov, to ensure that this enormous amount of government money reaches the right defence companies and does not fall into corrupt hands, such as those of the recently accused Deputy Minister of Defence, Timur Ivanov.

Belousov must ensure that the booming Russian defense industry can sustain its rapid growth pace long enough.

However, economic dangers abound beneath the surface, especially now that the situation on the front lines for Russia has eased.

The most acute economic problem is the lack of manpower to keep the Russian weapon factories running.

Due to a combination of factors – excess mortality during the pandemic, a brain drain among the younger generation, mobilisations by the military, and the many casualties on the Ukrainian front – an estimated 1.8 to 2.8 million people have disappeared from the labour market in Russia over the past three years.

To compensate for this gap, the Kremlin is trying to attract cheap labour migrants from friendly countries such as North Korea, Cuba, and Kenya, and Russian companies are increasingly employing teenagers and prisoners.

However, these efforts seem to be insufficient for now. There is a ‘war for talent’ ongoing between the important oil and gas industry in Russia – which currently faces a shortage of 40,000 workers and technicians – and the booming defense industry.

As a result, wages in both sectors are rising rapidly: last year, the defense conglomerate Rostec increased wages by 17.5 percent.

But corruption in the allocation of defense contracts and the growing risk of overheating the Russian economy undoubtedly worry Putin and the Kremlin.

As does the realisation that a significant shortage of high-quality Western spare parts is emerging in many Russian industries – from metalworking and robotics to electronics and aviation.

Russia and its defence industry are mainly trying to compensate for this shortage with “dual-use” goods from China – material that can be used for both civilian and military purposes – and by importing through hastily established shell companies in countries such as Hong Kong, India, Vietnam, and Turkey.

From there, non-military companies supply seemingly harmless products to Russia, many of which contain components that can be disassembled and reused for weapon production.

However, according to the latest estimates, this is far from sufficient to fill the growing gap in the Russian military supply chain.

In fact, according to CSIC calculations, Putin’s army on the Ukrainian front still uses more artillery shells – about 10,000 per day – than the booming Russian defense industry can produce.

To completely replace the used shells by themselves and no longer depend on deliveries from North Korea, Russian weapon factories would have to produce a staggering 3.6 million artillery shells per year.

This will undoubtedly be one of the objectives that the new minister will have to address.

Read also: 

Putin’s Cleanup: Defence Minister Shoigu Replaced by Economist Belousov

Click here for more News & Current Affairs at EU Today

_________________________________________________________________________________________________________