Russia’s Defense Industry Growing Increasingly Turbulent

By Pavel Luzin, Visiting Scholar of the Russia and Eurasia Program at The Fletcher School of Law and Diplomacy

Moscow has actively tried to restore at least part of its arms lost in Ukraine after almost nine months of its bloody war. Publicly, the Kremlin declares that nothing crucially serious is plaguing this re-production and that the domestic defense factories will have no problem increasing their productivity (RIA Novosti, October 24). Supplies of new arms have been seen, including the Su-34 fighter-bombers (Rostec, November 16), heavy Tornado Multiple-Launch Rocket Systems (MLRS) (Rostec, November 16), and even the doubling of the manufacturing capacity for the ODK-Kuznetsov production facility in Samara in southwestern Russia, which produces engines for long-range bombers (Rostec, November 16).

Meanwhile, the Russian national defense budget has skyrocketed. In early 2022, the budget was first increased from 3.51 trillion rubles ($58 billion) to 3.85 trillion rubles ($63.66 billion). Then, the details of the budget were classified by the Kremlin. Despite this, it was reported in September 2022 that the Russian authorities were waiting for a further increase of the budget to 4.68 trillion rubles ($77.39 billion) (Vedomosti, September 23). Yet, if the dynamics of Russian defense spending before the classification were to continue, this increase might, in reality, be closer to 5.6 trillion rubles ($92.6 billion). Here, the interesting fact is that the total Russian federal spending planned for 2022 has increased from 23.69 trillion rubles ($391.73 billion) to 29 trillion rubles ($479.54 billion), as budget revenues remain around 25 trillion rubles ($413.39 billion) (Duma.gov.ru, November 24, 2021; Budget.gov.ru, November 16).

Currently, for 2023, the Russian national defense budget exceeds 5 trillion rubles ($82.68 billion), up from 3.47 trillion rubles ($57.38 billion) as was planned at the end of 2021 (Minfin.gov.ru, December 2021; Duma.gov.ru, November 10). The national security and law enforcement budget has also grown dramatically: from 2.82 trillion rubles ($46.63 billion) for 2022 to at least 4.42 trillion rubles ($73.09 billion) for 2023, up from 2.97 trillion rubles ($49.11 billion) as was planned in 2021 (Minfin.gov.ru, December 2021; Duma.gov.ru, October 26). Therefore, the immediate impact of Russia’s aggression against Ukraine on its national defense budget would be somewhere between 5 trillion rubles ($82.68 billion) and 8.3 trillion rubles ($137.25 billion) for 2022–2023. However, the true reality of the current state of affairs appears to be rather complicated for the Kremlin. Even the trillions of additional rubles will not make its defense industry more productive and efficient in the short term due to a number of key difficulties.

To begin with, the industry suffers from a severe personnel gap. This gap is estimated at 400,000 workers, considering that the total number of employees in Russian defense companies totals about two million people (Vpk.name, June 30). Moreover, the Russian authorities were unable to remedy this situation throughout the 2010s, and since then, it has only worsened (Duma.gov.ru, May 14, 2013). Consequently, it is hard to imagine that they would be capable of effectively solving this problem in the foreseeable future.

Another major challenge is the average production rate of the Russian defense industry. For example, the average annual production of Su-34 fighter-bombers was 8–12 units from 2011 to 2020. The current contract for 2021–2024 is meant to deliver 20 Su-34 total, which comes out to seven aircrafts annually—significantly less than during the previous decade (TASS, June 8, 2020). It is possible that Russia will try to increase manufacturing of Su-34s up to past levels, but given the current production rate, it seems almost impossible that the level could exceed 8–12 units annually.

The situation is the same with the manufacturing of combat helicopters. For instance, the current contract for 2022–2023 is planned to deliver 30 Ka-52s, the most advanced Russian-made combat helicopter. That means 15 units will be produced annually (TASS, August 24, 2021). This level will hardly be surpassed, especially in the face of Russia’s continued dependence on the Ukrainian company Motor Sich for manufacturing its helicopter engines (Forbes.ua, October 24).

The actual manufacturing of the Tornado MLRS is also relatively low: it does not exceed 20 units annually (Kommersant, September 24, 2019). Moreover, the annual manufacturing of the 9M544 and 9M549 missiles with a range of up to 120 kilometers for the Tornado systems was limited to 220–230 units in 2017 and 140–150 in 2018 (Zakupki.gov.ru, February 14, 2017; September 14, 2018). And there is no evidences that this production rate has somehow increased since then.

One more problem hampering Moscow’s defense industry is the manufacturing of engines for the modernized Russian long-range bombers Tu-160, Tu-22M3 and Tu-95MS, which have been in use during operations against Ukrainian forces. For instance, all the known facts testify that the average annual manufacturing of the NK-32-02 engine does not exceed four units (Aviastat.ru, October 18, 2018; Rostec, August 24, 2021; Niasam.ru, August 17). This engine is essential for the modernized version of the Tu-160s and for replacing the old-fashioned NK-25 engines in Tu-22M3s. Today, this plan seems to be impossible despite the formally doubled manufacturing capacity of the ODK-Kuznetsov production plant. Besides the NK-32-02 engines needed for keeping the Tu-160 in service, this plant also continues to maintain the NK-25 engines for the Tu-22M3s and the NK-12 engines for the Tu-95MS turboprop strategic bombers. Another long-term purpose of the ODK-Kuznetsov facility is the serial manufacturing of engines for the next generation of jet strategic bomber, even if its future prospects are unclear at the moment. As a result, Russia faces a real challenge in keeping its long-range bombers operational, and Moscow has no immediate opportunity to increase its combat capacity here.

A similar situation exists among the other branches of Russia’s defense industry. Consequently, the domestic financial imbalances coupled with the severity of the personnel gap and objective limitations in manufacturing capacity portend growing turbulence in the Russian defense sector. Therefore, if the industry’s total net losses surpassed 1.7 trillion rubles ($28.11 billion) in 2016–2020, the current domestic turbulence together with Western sanctions on critical components, technologies and industrial equipment will definitely lead to further losses for the Kremlin. In this light, these losses could be another factor playing into the growing domestic political unrest in Russia—something that threatens to boil over as Moscow’s failures in Ukraine continue to stack up.

This piece is republished from The Jamestown Foundation.