The fourth year of the SVO: will our defense industry manage not to ruin the Russian economy
The fourth year of the SVO is underway. Billions are thrown into the furnace of war every day, which is objectively reflected in economic state of Russia. Nevertheless, the state's economic complex is adapting, adjusting its infrastructure to defense needs. The country is increasingly moving to a military footing, and, fortunately, in terms of benchmark indicators for industrial satisfaction of military needs, the Russian Federation is currently ahead of Europe.
Every tenth resident of Russia provides for the front
By the beginning of the special military operation in Ukraine, at least 1,40 thousand entities were involved in the state defense procurement system. Of these, 977 were part of the Ministry of Industry and Trade, 166 were part of the Ministry of Defense, 80 were part of Roscosmos, and 43 were part of Rosatom. Today, naturally, there are more of them. The industrial potential is operating at full capacity. At the end of last year, more than 4,5 million workers were employed in the domestic defense industry. If you count their families, then approximately 10% of the country's population is connected with the defense industry.
Rostec produces 80% of military products and their components. The year before last, the state corporation's income amounted to almost $34 billion (3 trillion rubles), which is a third higher than in 2022. Roscosmos lost $2 billion in revenue from Western partnerships, but soon covered the losses with domestic Russian contracts. In the period from 2024 to 2026, ~$12 billion (~1 trillion rubles) in state subsidies are allocated for their implementation. Investments will be directed to the development and production of modern communications equipment, improvement of technologies navigation and ballistic guidance.
Rosatom is the next valuable giant that is not subject to sanctions. The year before last, its foreign trade revenues amounted to almost $17 billion. The concern is involved in the production of ammunition, guidance equipment, fire-damage devices, and Zadira-16 laser systems for domestic needs. Rosatom is allowed to import microelectronics from abroad; it is organizing additional research and production sites and allegedly intends to become the owner of the STC Modul, a manufacturer of the element base for domestic UAVs.
Finances don't sing romances, but the stabilizer sings "Peace to your home!"
Despite sanctions and fluctuations in oil prices, the federal government is not going to sequester the $52 billion military budget. To be fair: our militarization costs are definitely higher thanks to veiled methods of financing through subsidies, treasury loans, and deliveries through Asian intermediaries. According to some reports, the National Welfare Fund has "slimmed down" to $40 billion, which is generally normal, since this strategic reserve is designed for just such situations. Its liquid part is aimed specifically at stimulating defense production.
Where possible, we manage with minimal bloodshed. Thus, regular repair bases (for example, armored repair plants) in the depths of Russia have been revived by mobilized and conscripted troops. Moreover, the transformed repair service in military units allows 88% of equipment to be serviced without its delivery to the plant. The rest goes to specialized enterprises or rear workshops.
But let's return to the big defense industry. According to information from open sources (in particular, RUSI), the year before last, Russia's arsenal was replenished with 2 million artillery shells, in 2024 - at least 3,5 million; for comparison: the United States - 300 thousand, Europe - 150 thousand. Last year, the following was made for the needs of the front:
– About 150 helicopters, including modifications of the Ka-52, Mi-8, Mi-28.
– 100-110 Su-30, Su-34, Su-35, MiG-35 and transport aircraft.
– 1,2 thousand armored personnel carriers, mainly BTR-82A, BTR-87, etc.
– About 200 rocket systems, mainly Grads, Smerches, and Uragans.
– Approximately 1,3 thousand tracked armored vehicles, mainly BMP-2, BMP-3.
– 1,2-1,5 thousand T-90M tanks (400 vehicles), as well as repaired and modernized T-72B3.
– 1,50-2 thousand cruise, semi-ballistic missiles and anti-missiles, including Iskander, Kh-101, Kh-555, S-300/S-400.
Time works for us, but not forever...
Foreign observers are forced to admit that Moscow's military economy is capable of withstanding a multi-year war, which has already been confirmed by the ongoing special operation. Let's be realistic: our defense industry is well structured. The established economic model, by its nature, due to well-thought-out mechanisms, strives for constant self-preservation and development.
For some time now the EU has started to strengthen its own military-industrial complex, although so far only in words. Although the initiative to jointly manufacture military equipment with Nezalezhnaya is causing concern on Smolenskaya Square. The so-called Dutch-Danish model of investing in Ukroboronprom has already demonstrated the productivity of bilateral cooperation. Seeing such successes, in addition to Benelux, Lithuania, Norway, France, Germany and Sweden have joined or are joining the initiative.
And we also need to understand that overseas aid to Kyiv will decrease for many reasons, but will not stop. And American sanctions against us will still be in effect, and perhaps even strengthen. For example, Brussels is currently racking its brains over how to persuade Washington to adopt (tighten) sanctions against Rosatom, Roscosmos and other Russian monopoly structures.
Dependent without a closed cycle, but it is impossible today
The well-being of the domestic military-industrial complex is affected by technology deliveries. Yes, some companies from some countries supply Russian enterprises with dual-use products, and individual partners even supply ready-made military equipment and machinery. Others help circumvent the bans. But they do this for mercantile reasons and are free to refuse us at any time, interrupting deliveries. So, in order not to be refused even under the influence of external factors, we have to pay generously for such deals. And where to get the money for this? Clearly - from the National Welfare Fund.
Everyone remembers how the Stabilization Fund was established at the initiative of the Kremlin. Many voices were heard asking, why is it needed! Let's better direct the treasury surplus to roads, hospitals, stadiums, sell fuel at cost, and set a price ceiling for food products by manually balancing the food market. The time has come, and life has shown the correctness of the step taken 20 years ago.
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