Russia is trying to keep its war machine in check by mobilizing the arms sector. However, at this point this has a negative impact on Russian export and the quality of the equipment – writes Mariusz Marszałkowski, editor at BiznesAlert.pl.
Military foundation of the Russian budget
Russian media have widely reported on the recent statement made by Manfred Weber, the chairman of the EPL faction in the European Parliament, who stated that Europe needed to switch to a kind of war economy due to the threat that Russia is posing. In his opinion, the intensity of military operations in the east of Ukraine proved that it was necessary to prepare the EU’s defense mechanisms for a long and exhausting war. Russian commentators read this statement as the official entry of western structures into the war with Russia. But do the Russian claims make sense? Given what’s going on in Russia, definitely not.
Before the full-scale invasion in February 2022, the Russian arms industry was the second largest arms supplier in the world after the United States, accounting for about 20 percent of the market. The Russians supplied equipment where Western manufacturers were unwilling or unable to do so. The products of the Russian armament industry were considered cheaper than the Western ones, much easier to use, less complicated and, above all, in most cases available immediately. The Russian equipment armed dictators, various authoritarian governments where democratic standards were non-existent, as well as the Kremlin’s close allies, including Belarus and Venezuela, which also meet the above criteria. The Russians also took advantage of the opportunity to subsidize military sales, e.g. by providing low-interest loans and long deferral periods.
The sale of arms products prior to the invasion of Ukraine was an important source of hard currency for Russia. Arms took third place after oil and gas on Russia’s export podium. The portfolio of orders of the Russian defense industry has fluctuated in recent years at the level of 50-60 billion dollars, while annual revenues from arms sales ranged from 15 to even 19 billion dollars. Annual orders exceeded 20 billion dollars. These figures, on the one hand, maintained hundreds of thousands of jobs in the defense industry itself, and on the other, provided Russia with stable budgetary revenues.
Bad advertising for Russian equipment
War is always an opportunity to present the capabilities of military products. The success of American or Israeli weapons technology was mainly due to it having been tested in real combat conditions and not only in training grounds and laboratories. The same could be the case with Russian state-of-the-art technology. Unfortunately for Russia, two things happened. The first was the incompetence and lack of proper skills to use the real capabilities of the weapons produced by the Russian armament industry. Thanks to this, virtually all of the latest models of Russian weapons were destroyed or seized by Ukrainian troops. Among them were modern aircraft such as Su-34 or Su-35, Ka-52 helicopters, T-90M tanks, artillery systems such as MSTA-MS2 or Krasucha electronic warfare systems.
The other issue is the duration of this conflict and the losses suffered by the Russian troops. For several months, Russian arms factories have been intensively trying to replenish the lost equipment, manufacturing new and repairing old. Thanks to this, Russia can still wage the war and replenish material losses, but this is happening at the expense of foreign customers. Instead of producing and delivering military equipment ordered years ago to their customers, Russian plants send everything that comes off the production line to Russian military units. In the future this will impact purchasing decisions of some clients of the Russian arms industry, e.g. Egypt, Iraq or Algeria – relatively rich states, which can afford to buy and maintain Western equipment, or Vietnam, which also acknowledges issues with timely delivery of the goods and maintenance services offered by Russian arms companies. It has also been reported that the export versions of T-90s owned by the Indian army, appeared in eastern Ukraine. Presumably, these machines went to Russia for planned repairs, but in the end they did not return to their original owner.
In an interview for RIA Novosti Sergei Chemezov, the CEO of the Russian concern Rostec, a conglomerate of the Russian arms industry, said himself that the production now only catered to internal needs. “Today, all our attention is focused on working for the defense of the state. I think this will remain a top priority in the coming months. Our main task remains unchanged – to fulfill 100 percent of the demands stipulated in the decree on the defense of Russia,” the CEO said.
Arms production at a loss
At the same time, Chemezov admitted that even though the number of orders from the Russian army was constantly growing, the companies either did not make a profit, or dropped below the profit margin. “Rostec has never been a very profitable company. For us, the number one goal is not to make a profit, but to ensure the defense capabilities of the state and the development of production. Because we function on the free market, we face the same problems and challenges as the construction, financial and trade sectors. Now in view of the need to meet the defence demands of the state due to the special operation in Ukraine (Russian term for the invasion of Ukraine – ed.) we try to avoid losses at best, but this happens anyway,” the head of the concern said.
In addition to financial problems, Russian arms companies are facing a shortage of employees. Due to the transition to a six-day working week and around the clock shifts, they lack qualified employees. The shortages are so bad that the tank plants in Ulyanovsk decided to use 400 prisoners from the surrounding penal colonies. Those who had experience and could work were drafted and sent to the front. The development of defense capabilities is also facing a shortage of components, for example, Sosna-U – the fire control system of the T-72B3 or T-80BMW or T-90M tanks has matrices produced by France’s Thales, which stopped supplying these elements to Russia. As a result, modern Russian vehicles are being equipped with much worse, Russian-made products designed for modernized T-62Ms. Externally, the vehicle is practically the same, but its ability to detect and combat enemy targets is significantly depleted.
Russia has been conducting a partial mobilization for several months. Reportedly 300 thousand people have been already drafted. According to unofficial reports, the draft is still happening, except that it’s not being reported on. Less popular in the media, but nevertheless important, is the transition of most armaments plants to the wartime mode of operation. These plants work around the clock, practically throughout the week. Companies fulfill orders of the Ministry of Defense for ammunition, explosives, gunpowder, tanks, armored vehicles, trucks, or other types of equipment. In addition, the production of various types of spare parts and service components has been significantly increased. Among the main types of restored equipment are tanks of the T-72, T-80, T-90 and T-62 family. The goal is to “modernize” at least 800 of these tanks in the coming three years. The Russians are also repairing and improving the old BWP-1 and BWP-2 and BRDM vehicles.
Vladimir Putin has repeatedly stressed in recent public speeches the importance of the growing capabilities of the Russian arms industry for the success of the invasion of Ukraine. However, even the Russians have problems. The intensity of the fighting, the scale of ammunition usage, the wear and tear of the equipment, e.g. barrels, means that some of the Russian it becomes useless after a short stint on the front lines. This state of affairs gives Ukraine, supported militarily by the West, a chance to acquire equipment that is in much better condition than the one that comes out as restored from Russian plants.
This is also an element that is worth emphasizing in the context of Russian declarations on the fight against NATO. The Russians like to make propaganda and boast that they are facing the entire NATO might that is supporting Ukraine, and yet they still have the initiative. However, the truth is that the world’s second army (as the Russians themselves define their armed forces) is facing a military that on paper had no chance in a clash with the Russian war machine. Despite this, it defended the capital, major cities, recaptured Kherson and a large part of the Kharkov region. And it did so with support from NATO reserves. What if the equipment supplied to Ukraine consisted mainly of the latest production slots (the most modern), and not equipment from the beginning of the 21st century? The West can still mobilize some of its defense plants. This is probably already happening in some countries.