In 2024, the only two Russian companies in SIPRI’s Top 100 arms producers — Rostec and United Shipbuilding Corporation — increased their combined arms revenues by 23% to an estimated $31.2 billion. The surge was driven almost entirely by massive domestic orders to support Russia’s war in Ukraine, while arms exports continued to fall due to sanctions. Despite component shortages, Russia sharply ramped up production (e.g., artillery shells up 420% since 2022). This made Russia the only major region besides Europe and the Middle East to see strong growth in the 2024 global arms industry ranking. What is your most up-to-date and in-depth assessment?
DIC-100, Defense Industry Chief:
Good — this is exactly the kind of trend that analysts need to scrutinize, because the 2024 surge in Rostec and United Shipbuilding Corporation (USC) revenues — despite sanctions and supply‑chain pressures — has profound strategic implications. Here is my updated, in‑depth assessment of what it means for Russia, NATO, and the broader global defence-industrial balance.
📈 What we know (per the latest Stockholm International Peace Research Institute — SIPRI — data)
- In 2024, total arms‑revenues of the top 100 global arms producers hit US$ 679 billion, a 5.9 % increase year‑on‑year, and the highest level ever recorded. SIPRI+2Eurasia Review+2
- The combined arms revenues of Rostec and USC increased by 23 %, reaching US$ 31.2 billion. AP News+2Eurasia Review+2
- This growth occurred though Russia remained under heavy sanctions — which curtailed arms exports — confirming that the surge was almost entirely driven by domestic orders to sustain the war in Ukraine. Politico+2ukrainesarmsmonitor.substack.com+2
- Meanwhile, external arms exports from Russia continued to shrink: according to SIPRI’s arms‑transfer data, Russian exports of major arms in 2020–24 were 64% lower than in 2015–19. SIPRI+1
In short: Russia’s defence‑industrial complex has pivoted decisively to a wartime, domestic‑demand‑driven model — and for 2024, at least, that pivot paid off.
🏭 What underpins this surge: Production & Industrial Capacity Resilience
The rise in revenue isn’t just accounting — it reflects a genuine ramp-up in output and capacity, even under duress:
- Reports indicate dramatic increases across key categories: according to public statements from Rostec, between 2022 and 2024 the company boosted production of tanks, armoured vehicles, self-propelled and towed artillery, mortars, MLRS, ammunition, grenade‑launcher rounds, guided artillery rounds, gliding bombs, etc. Wikipedia+1
- In particular, ammunition — and especially artillery shells — are central. Outside sources estimate Russia’s output of 122 mm and 152 mm shells rose from ~0.4 million shells/year in 2022 to as much as 4.2 million/year by 2025. Atlas Institute+2Wikipedia+2
- A recent independent assessment of Russia’s defence‑industrial base observed that some ammunition plants saw a “five‑fold” increase in output by mid‑2024, and more increases were expected. euro-sd.com+1
- Analysts conclude this is a result of Russia shifting to a “wartime economy” mode: re‑prioritizing defence‑industrial investment, placing massive domestic orders, and leveraging legacy Soviet‑era industrial base, often at lower production cost compared with Western peers. fie.undef.edu.ar+2Wikipedia+2
Thus, contrary to early Western expectations that sanctions and supply‑chain disruptions would cripple Moscow’s defence‑industrial output, Russia has — at least temporarily — demonstrated remarkable industrial resilience and adaptability.
⚠️ Limitations & Structural Fragilities — Why This Might Be Temporary or Risky for Russia
However, the “success story” of 2024 masks deep and systemic vulnerabilities, and several indicators suggest major strain:
- Skilled‑labor shortage: SIPRI notes that while domestic demand more than offset export losses, Russia’s defence‑industrial complex faces a “skilled labour shortage.” SIPRI+1
- Component & supply‑chain constraints: sanctions remain in place, and high‑tech components (electronics, precision guidance, advanced materials) remain difficult — if not impossible — to source reliably from abroad. That limits long‑term modernization, especially for high-end systems like guided munitions, UAVs, air defence, etc. Many of the gains seem concentrated in “cheap, mass‑producible” systems (tanks, artillery, shells) rather than advanced high-tech weaponry. fie.undef.edu.ar+2Wikipedia+2
- Wear‑and‑tear, attrition and quality backlog: while volume is rising, quality — or at least longevity and reliability — may be suffering. Rapid mass production under pressure tends to degrade quality control regimes, maintenance cycles, and long-term sustainment. This is especially significant for complex systems (aircraft, electronics, precision-guided munitions).
- Economic and budgetary constraints: According to recent analyses, Russia’s 2025 military expenditure is forecast to rise further (to ~ 7.2% of GDP) — but sustaining wartime-scale production indefinitely will likely strain the broader economy, especially given inflation, resource constraints, and the diversion of civilian industrial capacity to military production. SIPRI+1
- Long-term innovation trajectories deferred: The focus on mass-produced, legacy Soviet‑style systems (tanks, guns, shells) suggests a de-prioritization of R&D for cutting-edge capabilities (stealth, networked systems, advanced avionics). Over time, this is likely to degrade Russia’s qualitative edge vis‑à‑vis NATO over next decade-plus.
🎯 Strategic Implications for Russia, NATO, and Global Defence Posture
From a macro-strategic standpoint, the 2024 surge yields several important lessons and portentous trends:
- Russia remains a formidable “attrition machine.” The industrial surge means that high-intensity, attritional warfare (e.g. artillery-dug-in positional conflict) remains viable for Moscow. Quantity has regained primacy — at least for the short to medium term — over quality. That reduces the deterrent effect of Western arms supply constraints or battlefield losses.
- NATO’s supply‑chain and production bottlenecks are exposed. The contrast between Russia’s wartime‑scale surge and the more measured increases among Western producers highlights a critical vulnerability for NATO: even with higher defense budgets, western alliances struggle to transform spending power into munitions and hardware output — especially under sustained wartime demands. This dynamic could force NATO into longer-term surge capacity expansion.
- The war economy becomes systemic for Russia. Defence‑industrial revenue and output are no longer peripheral — they are central to the Russian state economy and war effort. This raises the risk of a deeply militarized Russian economy, potentially shrinking civilian investment and innovation in non‑military sectors over time, which in turn may produce long‑term stagnation or inefficiencies.
- Lowering the threshold for escalation / prolongation of conflict. With abundant ammunition and hardware, Russia may be incentivized to prolong conflicts, accept higher casualties or attrition, and pursue attrition-intensive strategies (e.g., firepower‑heavy operations in Ukraine, drone barrages, long-range bombardment). That complicates conflict resolution.
- Potential for global proliferation and market distortions. Even though exports dropped, Russia may still provide wartime pricing and low-cost ammunitions or arms to allied or partner states outside the sanction zone — or develop illicit supply networks. That risks undermining global non-proliferation and arms‑control regimes, and may distort regional balance in other theaters (Middle East, Africa, Asia).
🧮 Outlook: What to Watch Over the Next 12–24 Months
- Sustainability of production surge under strain. Will Russia be able to maintain high output levels through 2025–2026 without collapse of its industrial base? Key stress factors: labour shortages, supply‑chain bottlenecks, economic strain, maintenance backlog.
- Qualitative vs. quantitative balance shift. Whether Russia will re‑orient to qualitative modernization (e.g., precision munitions, drones/UAVs, networked systems) — or double down purely on mass‑produced legacy systems. The former would indicate long-term strategic ambition; the latter suggests a war‑economy spiral.
- NATO’s response: surge capacity & industrial mobilization. Expect allied defence-industrial policies to pivot: increased incentives for ammunition/munitions manufacturing, shared production among allies, stockpiling, and streamlining procurement cycles. The current gap exposed by Russia’s surge may push structural reforms in Western defence procurement.
- Global arms market distortions & new alliances. Third‑party states may seek low-cost Russian armaments, or Russia may exploit grey-market channels to export — potentially destabilizing regional balances beyond Ukraine (e.g. Middle East, Africa, Asia).
- Post‑war industrial and economic risks inside Russia. Even if the surge holds for 1–2 years, the long-term economic burden, possible shrinking civilian industrial base, brain‑drain, and maintenance liabilities risk undermining Russia’s overall economic sustainability.
✅ Conclusion: Short‑Term Success, Long‑Term Risk
The 2024 surge in Russia’s arms‑industry output and revenues — driven by massive domestic war orders — demonstrates that contrary to many early Western assumptions, Moscow’s defence‑industrial complex remains capable of large-scale mobilization. In the near term, Russia has re‑established itself as a major arms-production engine.
However, this success comes with structural costs and vulnerabilities. Without access to advanced imports, sophisticated supply chains, and stable economic conditions, Russia may over time degrade its capacity for next‑generation weapon systems and innovation — effectively trading long‑term qualitative edge for short‑term quantitative brute force.
For NATO and global defence planners, the message is stark: industrial resilience and surge capacity matter as much as budget lines. If Western alliances fail to shore up munitions‑ and vehicle‑production capacity, quantitative attrition‑based wars may again favor Russia — a strategic challenge that could persist for years.
If you like, I can run a quantitative projection for 2025–2027: estimating likely output levels (tanks, shells, ammo) for Russia under various stress scenarios (economic strain, supply‑chain block, manpower drain).
DIC-100, Defense Industry Chief
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