Sanctions, war demands leave battered Russian defense industry struggling to catch up

The Soviet Union supplied Marxist revolutionaries and Third World dictatorships with military hardware for decades as part of its long struggle against the capitalist West. But, 10 months after it sent tanks across the border into Ukraine, the Kremlin is facing challenges — both technical and commercial — to its once all-powerful weapons industry that it hasn’t encountered since the Cold War.

Even after the fall of the USSR, arms sales remain a central element of Russia’s foreign policy. It is consistently ranked as the world’s second-largest arms exporter, behind only the United States. 

Moscow exports arms to more than 45 countries and has accounted for about 20% of global arms sales since 2016, according to the Congressional Research Service.

In addition to turning out arms for export, Russia’s defense industry also provides the country with military equipment for its own use. Since 2007, Moscow has consolidated most of it into various holding companies under the control of Rostec, a state-run conglomeration.

But then came Russian President Vladimir Putin’s all-out war of aggression against neighboring Ukraine, which commenced on February 24. The move has resulted in the U.S. and other Western countries slapping sanctions on the Kremlin’s defense industry and arms exports, denying Russian producers access to key high-tech parts and circuitry that are essential to modern military hardware.

“Russia did not expect for this war to go on this long,” said retired Lt. Col. Daniel Davis, a senior fellow with the Defense Priorities think tank. “It just passed the tenth month and the end is not in sight.”

The unexpectedly poor performance of Russian forces and weaponry in Ukraine so far has damaged the reputation of Russian arms, and analysts say the country’s technological and industrial base will now fare even worse. Maya Carlin, with the Center for Security Policy, said Moscow nearly depleted its stockpile of tactical ballistic missiles only one month into its invasion of Ukraine.

The Kremlin has been forced to go hat-in-hand to Tehran in order to secure a supply of critical Iranian drones, which they have become increasingly reliant on as their supply of home-built missiles has dwindled away. North Korea has reportedly been supplying Cold War-era shells from its missile arsenal to rebuild Russian stocks.

U.S. officials say the need to import weapons from rogue regimes is a sign of “desperation” by Russian President Vladimir Putin as he struggles to sustain his war.

“He was buying drones from Iran, now he’s going to buy artillery rounds from North Korea,” National Security Council spokesman John Kirby told reporters in September. “It’s an indication of how much his defense industrial establishment is suffering as a result of this war and the degree of desperation that he’s reaching out to countries like Iran and North Korea for assistance.”

Perhaps to cover the straits its military-industrial complex is facing, Russian officials are denying the multiple reports that their armies have had to rely on imports.

“For months, the Kremlin and the Iranian regime denied an exchange of drones took place, despite the litany of evidence proving otherwise,” Ms. Carlin wrote in November. “Earlier this month, Iran fessed up to providing drones to Russia to aid its war efforts in Ukraine.”

Russian arms sales have declined over the last five years as a percentage of the international market as new vendors, including South Korea, India, and Brazil, have joined the market, said John Parachini, an analyst with the RAND Corporation, an independent think tank.

“We’re also watching the nature of warfare change before our very eyes. Manned fighter aircraft are not as important as unmanned drones or short-range missiles,” Mr. Parachini said. 

The intensity of the conflict in Ukraine has led to shortages on both sides of munitions and the systems needed to keep them running. While Ukraine has been the beneficiary of a steady stream of NATO armaments, chiefly from the U.S., Russia has been forced to rely on its own industry and the few countries that are willing and able to defy international sanctions and send them weapons.

Pyongyang has supplied Moscow with artillery shells because both countries use the same caliber. 

“The quality of the North Korean shells is probably not clear. But, if you’re running out, you’ve got to get them somewhere,” Mr. Parachini said. “The Russian defense industry is struggling. It’s struggling under the weight of corruption.”

Russian defense exports, a critical source of foreign currency for the Kremlin, were already taking a hit before the Ukraine invasion, falling from 24% of the global market to 19% from 2017 to 20212, according to the Stockholm International Peace Research Institute.

Now longtime customers such as India and Vietnam are openly questioning not just the quality of Russian arms but Moscow’s reliability as a supplier as it faces massive demands in Ukraine and Western sanctions.

Short of chips

Sophisticated military hardware requires a large quantity of high-tech equipment, such as computer chips needed to send missiles from a rocket launcher to its target, potentially hundreds of miles away. Because of sanctions, Russia is being forced to scramble for components needed in their precision weapons like the 9K720 Iskander missile. In some cases, Russians have cannibalized household appliances like refrigerators for the necessary computer parts to keep the weapon training moving.

“It’s making people scrounge for them. But they’ll do whatever it takes to get it done,” Lt. Col. Davis said. “They’re years behind us, but it doesn’t have to be equivalent, it just has to be ‘good enough.’”

But the chip shortage has clearly hurt: The U.S. Commerce Department estimated this summer that Russian semiconductor imports fell 90% after Western sanctions were introduced.

‘“The Kremlin is frantically trying to establish semiconductor smuggling networks,” Agathe Demarais, global forecasting director at the Economist Intelligence Unit, wrote last week in Foreign “Sanctions are almost never watertight — but any leakage will probably not be enough for Russia to replenish its missile stocks, especially if the war continues unabated in the coming months.”

Even with the challenges, Russia is continuing to crank out military hardware. The country’s national defense budget has skyrocketed, from more than $57 billion at the end of 2021 to more than $82 billion projected for 2023, according to the Jamestown Foundation’s Eurasia Daily Monitor.

However, the reality of the current state of affairs in Russia continues 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 difficulties,” the Eurasia Daily Monitor reported.

Russia’s defense industry suffers from a serious personnel gap. The Jamestown Foundation says it is short about 400,000 workers, and analysts say the country is likely unable to solve that problem in the foreseeable future.

Russia also faces problems with the average production rate of its defense industry. From 2011 to 2020, the country’s factories could turn out 8 to 12 Su-34 fighter bombers every year. Russia now can produce just seven such aircraft annually — significantly less than during the previous decade, the Jamestown Foundation reported.
“The situation is the same with the manufacturing of combat helicopters,” according to the Eurasia Daily Monitor.

Russian officials deny that their military-industrial base is unstable. Dmitry Medvedev, deputy chairman of Russia’s Security Council, claimed the country was accelerating the supply of equipment to Russian troops during a late October visit to a tank factory in southwest Russia.

“The production of weapons and special equipment is increasing many times in all directions: from tanks and guns to high-precision missiles and drones,” Mr. Medvedev later wrote on his Telegram social messaging channel, according to Russia’s RIA Novosti news agency.

Russia often uses standoff weapons like drones and artillery to destroy targets in Ukraine, apparently in a desire not to risk its expensive air force. Iran, which once sought high-tech transfers from Moscow and other countries, is now a leader in the low-cost but effective drone market. Where they were once used primarily in surveillance missions, unmanned aerial vehicles (UAVs) are now increasingly employed as weapons themselves.

The Kremlin is believed to have employed hundreds of Iranian-made attack drones in Ukraine since the start of the war. The Shahed 136 drone is designed for a one-way kamikaze mission.

“For Russia, Iran’s drones represent affordable off-the-shelf weapons it can expend in Ukraine. Iran, meanwhile, gains by finding a new market for its systems and seeing them used in large numbers,” author and analyst Seth Frantzman wrote in an essay for the Atlantic Council. “No other country has used Iran’s drones in such quantity.”

Analysts fear the Russian-Iranian drone alliance could pose problems that extend even further than Moscow’s war against Ukraine. It is now providing much-needed cash for Tehran, which also remains under U.S. sanctions. Ukrainian air defenses are shooting them down in large numbers but those victories come at a cost.

“Iran will likely study how Western air defense responds to the drones and try to recalibrate them based on their failure rate,” Mr. Frantzman wrote. “Expertise gained in Ukraine poses a threat to the U.S., Israel, the Gulf and other partners forces in the Middle East.”

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