Putin integrates war machine into the economy for long-term rule
The economy of Russia might never leave the battlefield, even if the guns in Ukraine stop firing. Years of substantial defense expenditures have entrenched the nation in a condition of militarization, reshaping factories and drawing in hundreds of thousands of workers. The surge has played a crucial role in averting economic contraction – rendering withdrawal a risky endeavor. The Kremlin has no intention of retreating. President Vladimir Putin perceives a persistent necessity for a well-equipped Russian military – a prospect that Western leaders apprehend he might deploy against NATO within five years – and aims to integrate the flourishing defense sector into his strategic long-term vision. As he formulates his strategies and Europe invests billions to modernize its military forces, a pressing question arises: what will become of the surplus tanks and missiles being produced by Russian factories? Moscow may have the opportunity to transform what is presently a budgetary burden into a potential revenue stream by supplying arms to allies such as China. However, as they accumulate on NATO’s eastern borders, unsettling relations with Europe, they threaten to turn into a burden for an economy that is already contending with sanctions, an unstable banking system, and declining growth.
During a visit last week to Russia’s oldest defense plant, Putin himself was contemplating the future beyond the eventual end of the war, stating that “the demand for modern armed forces won’t end there.” The increase in Russia’s military production has been remarkable. Prior to its extensive invasion of Ukraine in 2022, there were plans to provide approximately 400 armored vehicles in the subsequent year. It is now shipping ten times that amount. It has also innovated, establishing its own production lines for drones after they became a crucial weapon in the conflict. Having initially relied on imports from Iran, it achieved 1.5 million last year – an increase from 140,000 in 2023. The costs of the war, however, have been substantial. According to available official data, defense outlays between 2022 and 2024 amounted to at least 22 trillion rubles ($263 billion). Expenditure continues to rise without indication of restraint over the next three years, resulting in annual deficits in a budget already constrained by sanctions. Russia can examine the aftermath of World War II for insights on how to utilize its expanded military factories: Tatiana Orlova of Oxford Economics states that the Soviet Union’s transition to a war footing in 1941 established the groundwork for it to emerge as a leading global arms seller after the conflict concluded.
“The Russia-Ukraine war has become a giant testing ground for new arms and technologies,” she stated. Once the conflict concludes or transitions into a dormant phase, “both countries are likely to export the technology and equipment that’s proved most successful. Russia will be unlikely to end militarization of its economy even in the scenario of ending the war in Ukraine.” The broader geopolitical clash between Moscow and the West shows little sign of diminishing. This will be one of the contributing factors for keeping much of the Russian defense industry maintaining levels of output much higher than at pre-2022 levels, preparing for potential future military conflicts. Before its attack on Ukraine, Russia was already the world’s second-largest arms supplier, trailing only the United States. However, in recent years, Russian sales have declined as the country has utilized its production in the ongoing campaign against its neighbor. Currently, there are signs that it may be re-emerging. The defense industry is once more participating in arms fairs across India, China, the Middle East, and Africa. After a six-year hiatus, Russian weaponry made its debut at exhibitions held in Malaysia and Brazil. The offerings encompass the entire spectrum of military equipment. Technology transfers and joint production are also being considered.
State arms exporter Rosoboronexport, reports that pent-up demand has propelled its order pipeline to an unprecedented $60 billion — ensuring factories have guaranteed demand and multi-year contracts. According to estimates, Russia could export between $17 billion and $19 billion worth of military equipment each year in the first four years following the war in Ukraine. This potential growth is attributed to demand in the global south, where countries are seeking to reduce their dependence on the United States. “Demand for Russian weapons has hardly disappeared,” stated Anna Borshchevskaya. “Officials in the Middle East and North Africa would interpret even a limited or temporary Ukraine deal as a signal to swiftly capitalize on Moscow’s new supply chains.” One incentive, she states, is price, with the increase in output volumes resulting in significant economies of scale that have made certain products more affordable than prior to the invasion. The strategy has its shortcomings. Rosoboronexport’s order book, while providing a substantial buffer in the event of government spending cuts, remains below fifty percent of the annual defense budget. Some potential customers may experience pressure from Western nations, similar to Donald Trump urging India to halt its purchases of Russian oil.
Furthermore, military plants are set to maintain operations, thereby supporting employment and aiding in economic growth; however, layoffs and pay cuts may be on the horizon, as noted by Oxford Economics’s Orlova. “Exports won’t generate sufficient demand to keep facilities running around the clock as they do now,” she said. Putin asserts that the funds Russia has allocated for producing military equipment have not been squandered, and he has indicated an understanding of the challenges that lie ahead. To assist with the impending transition, he is promoting not just heightened arms exports but also enhanced collaboration between defense and civilian sectors. In his perspective, dual-use production ought to be feasible for components across various sectors, including shipbuilding, aviation, electronics, medical equipment, and agriculture. For Putin, the paramount consideration in his decision-making will be ensuring a combat-ready military that he can depend on beyond its present mission – indicating that Russia’s enhanced production capacity is likely to persist.
