ASSESSMENTS

Russia's Defense Industry Finds Itself in a Tailspin

Apr 29, 2019 | 05:00 GMT

A Russian military helicopter Mi-26T2V flies during an exhibition flight at the Mil Moscow Helicopter plant outside Moscow on April 3, 2019. Unable to find buyers for its products, Russia's defense industry is staring at a bleak future.

(YURI KADOBNOV/AFP/Getty Images)

Highlights

Domestic budget limits and decreasing arms exports are set to severely impact the viability of Russian arms manufacturers.
The Kremlin's efforts to promote import substitution policies are not succeeding and the defense sector is unlikely to bolster its bottom line by shifting to produce products for the domestic market.
The Russian defense industry's inherent weaknesses could become self-perpetuating; the failure to find markets for Russian products will increase the costs of production and, therefore, military modernization.

Russia's defense industry is face to face with a major foe, but it's not a foreign military power. The great power has been striving to modernize all branches of its military, but the country's defense industry is struggling due to decreasing volumes of orders, difficulties in attracting high-skilled talent and limits to its technological capabilities. The fall is triggering concern over the competitive strength of Russia's defense industry, whose health is critical if the country is to project itself as a military power in the longer term. Russian Deputy Prime Minister Yuri Borisov attributed the reduction in output to a slowdown of orders for military systems, but projections suggest the slowdown is not just a short-term fluctuation; in fact, it's expected to become even worse in the future. The downturn in oil prices has taken a bite out of Russia's bottom line, squeezing spending for the military -- all at a...

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