Steel Without Silicon: Can Russia’s Defense Industry Survive Modern War?
Russia’s defense industry crumbled after the USSR’s collapse, but the 2000s marked a turning point as the Kremlin launched efforts to rebuild it. Today, as Moscow strives to sustain its war machine, a critical question remains: can Russia continue supplying its armed forces amid Western sanctions, technological isolation, and dwindling reserves?
The collapse of the Soviet Union led to the degradation of the Russian defense industry. Once a gigantic system with thousands of factories and millions of workers, it began to decline rapidly. In the 1990s, the state sharply reduced funding for the defense industry – from over $250 billion in 1990 to just $15.7 billion in 1998 in constant prices.
Weapons development programs were frozen, research institutes were disbanded, and tens of thousands of specialists lost their jobs. Attempts to convert production to civilian needs proved largely ineffective – the defense industry was unable to fully adapt to market conditions. Many enterprises survived thanks to the inertia of the Soviet legacy and arms exports to China, India, the Middle East, and Africa.
At the same time, the ownership structure of defense industry assets changed dramatically. Factories that had once been under the control of the Soviet Ministry of Defense ended up in the hands of commercial entities, often linked to the new political elites or special services. The Kremlin tried to preserve the industry, recognizing its strategic importance, but lacked sufficient resources for a full-fledged recovery. Technological chains were broken, especially after the loss of production capacities located in other former Soviet republics. For example, Russia lost access to Ukrainian defense enterprises such as the Kharkiv Tractor Plant and Pivdenmash.
Beginning in the 2000s, President Putin initiated the process of centralizing and revitalizing the defense industry. The state monopoly on arms exports was restored through Rosoboronexport, and by the early 2010s, powerful state-owned holding companies, primarily Rostec, had been established, consolidating key enterprises into vertically integrated corporations. This process was accompanied by the return of strong state influence in defense planning and the formation of an “administrative market,” in which contracts were distributed not through open competition but via state bureaucracy and backroom deals. Thus, a complex network of personal interests emerged around the defense sector, involving the government, the Ministry of Defense, law enforcement agencies, regional administrations, and the heads of defense corporations.
In the 2010s, a large-scale rearmament program was launched, financed by oil and gas superprofits. It enabled the resumption of serial production of T-72/90 tanks, air defense systems, operational-tactical missiles, and cruise missiles. A key turning point for the Russian defense industry came in 2014. Following the annexation of Crimea, the US and the EU imposed sanctions that restricted Russia’s access to technology, components, and financing. The Russian defense industry had been heavily reliant on Western components and technology. In response, the Kremlin officially embarked on a course of import substitution and prioritizing state orders over exports.
What Has Changed in Three Years of War?
The defense sector is also growing rapidly in financial terms. In 2023, defense spending exceeded 6% of GDP, and in 2025, it is projected to reach nearly 8%, or $172 billion. For comparison, this is twice as much as Russia spent on defense in 2019. At the same time, the structure of the industry itself has also changed.
After the start of the full-scale invasion of Ukraine in February 2022, Russia’s defense-industrial complex entered a state of de facto mobilization. Within the first months of the war, the Kremlin began to radically shift the economy to a military footing: laws were passed obliging enterprises to fulfill state orders under threat of criminal punishment, tender procedures were abolished, and a 24/7 system of operation with three shifts and a six-day working week was introduced for at defense enterprises. According to the RUSI, by 2025 up to 4.5 million people will be employed in the Russian defense industry, which is a significant share of the country’s working-age population.
China’s role in supporting the Russian defense industry has also grown. According to Carnegie Politics, China exports more than $300 million worth of dual-use goods to Russia every month. While monthly transactions have decreased from a peak of over $600 million in December 2023, China remains the largest supplier of these controlled items to Russia. These include products essential for weapons production, such as missiles, drones, and tanks. Many of them are products that Russia is unable to produce domestically, such as microelectronics, machine tools, telecommunications equipment, radars, optical devices, and sensors.
Priorities have also shifted. In the 2010s the Russian army focused on preparing for short local conflicts using high-tech weapons. Since 2022, however, the emphasis has moved toward mass production, maintainability, and modernization. Producing large quantities of equipment quickly and cheaply has become the cornerstone of Russia’s military economy. For example, instead of investing in the expensive and problematic T-14 Armata tank, Russia is focusing on modernizing the old but simple and proven models like the T-72, T-80, and T-90. The emergence of inexpensive kamikaze drones like the Shahed-136 and Lancet reflects this shift toward mass, cost-effective production.
One of the most significant developments has been the rapid growth of drone production. While the Russian drone manufacturing industry was underdeveloped until 2022, new enterprises have emerged in Russia under the pressure of the war. These include both private companies, such as Zala and Supercam, and state-owned facilities like the Yelabuga plant, which has localized the mass production of Shahed-136 kamikaze drones from Iran. As a result, Russia now fields a wide array of small reconnaissance and strike drones for tactical use and employs UAVs strategically to target Ukraine’s critical infrastructure in the rear.
How Many Weapons Is Russia Producing Now?
One of the main achievements of the Russian military economy in recent years has been a significant increase in the scale of arms production. Despite sanctions, technical restrictions, and a shortage of skilled personnel, the Russian defense-industrial complex provides the army with a wide range of products – from tanks and artillery systems to drones and high-precision weapons.
It is difficult to estimate the exact volume of production – the Russian authorities systematically conceal key indicators, and official statistics are either classified or presented in a fragmented manner. However, the available data and analytics from Western intelligence agencies and think tanks allow us to understand the scale in general terms. In 2024, Russia produced about 4.5 million artillery shells — ten times more than in 2021.
Armored vehicles production is another area where Russia has achieved stable supply. According to the ISW, between 2022 and 2024, the Russian army received more than 1,500 new or refurbished tanks and at least 2,800 armored combat vehicles.
Unmanned aerial vehicles (UAVs) deserve a separate mention. From a niche component of the industry in 2021, the Russian drone industry has developed into a separate sector. The mass production of strike and reconnaissance UAVs, including Lancet, Orlan, Supercam, Shahed-136, and FPV types, has significantly enhanced Russia’s battlefield capabilities. At the same time, according to the IISS, drone production continues to grow, with approximately 6,000 Shahed-136 and Zala drones manufactured in 2024 alone.
However, projects involving hypersonic weapons, 5th generation fighters, in particular the Su-57, high-precision missiles, and AI systems are underfunded. Due to a shortage of microelectronics, an outflow of engineers, and rising costs of imported components, Russia has yet to demonstrate any breakthroughs in high-tech weaponry.
Is This Sufficient for the Russian Armed Forces?
Russia’s ability to sustain high-intensity combat operations for three years is a result of mobilising its defense potential and drawing on Soviet-era reserves. However, the key question is not only how much weaponry Russia is capable of producing, but whether these production capabilities match the actual rate of consumption at the front. It is in this comparison that an alarming imbalance becomes apparent, raising doubts about the long-term capacity of the Russian military-industrial complex to meet the army’s needs.
In 2022, Russia reportedly used approximately 10 million artillery shells on the front lines. Even taking into account the mobilization of enterprises, Russia was able to provide 2–2.5 million in 2023, and, at most, 4.5 million in 2024 (including refurbished ammunition). This means that even at peak output, Russia cannot fully compensate for the annual rate of ammunition consumption, especially if large-scale offensive operations resume.
A similar situation exists with armored vehicles. Russia is estimated to have lost approximately 4,000 tanks. At the same time, the annual production of new or modernized tanks in the Russian Federation, according to optimistic estimates, is 200–300 units. If we include the restoration of equipment from warehouses, the total number could reach 1,000–1,500 tanks per year. Yet even this is insufficient to compensate for battlefield losses. The situation is even more critical for infantry fighting vehicles and armored personnel carriers, where losses amount to approximately 8,000 units, and production lags even further behind that of tanks.
It is important to note that Russia is actively using Soviet-era armored vehicle reserves to make up for these losses. Satellite imagery shows that over the past three years, Russia has nearly exhausted the stocks of Soviet-era equipment that were suitable for restoration. By the end of 2024, approximately half of Russia’s pre-war tank reserves will remain in storage. According to the RUSI, Russia will run out of armored vehicle reserves by 2026.
An even more striking imbalance is seen in the production of high-precision weapons. With intensive shelling, Russia expands hundreds of missiles every month, yet its domestic production only supplies dozens. Moreover, these weapons depend on imported microelectronics – components Russia cannot produce at the required scale and supplies in circumvention of sanctions, making production rates and costs unstable.
Against this backdrop, the increase in military spending appears to be an attempt to bridge the gap not through efficiency, but through volume. Approximately half of Russia’s military budget is allocated to personnel costs (salaries, compensation to relatives, mobilization), while the other half is spent on the purchase of equipment and maintenance of production. Yet even these considerable amounts do not always cover real needs. For example, while defense enterprises have seen revenue growth, their production costs have surged even more rapidly. At the Kurgan Machine-Building Plant alone, production costs in 2023 increased by 45%, while revenue increased by only 41%.
This budget asymmetry is already generating structural risks: military equipment is becoming more expensive, losses and costs are rising, and production volumes remain limited. In a war of attrition, the Russian army is consuming more than its defense industry can supply – and this gap is only widening.
Thus, Russia is still capable of waging war, but at the cost of constant use of reserves, simplification of weapons, technical degradation, and growing economic exhaustion.
Bohdan Popov, Head of Digital at the United Ukraine Think Tank, communications specialist and public figure