As Ukraine has scrambled to source ammunition, arms and equipment for its defence, Russia has presided over a massive ramping up of industrial production over the last two years that has outstripped what many western defence planners expected when Vladimir Putin<\/a> launched his invasion.<\/p>\n Total defence spending has risen to an estimated 7.5% of Russia\u2019s GDP<\/a>, supply chains have been redesigned to secure many key inputs and evade sanctions, and factories producing ammunition, vehicles and equipment are running around the clock, often on mandatory 12-hour shifts with double overtime, in order to sustain the Russian war machine for the foreseeable future.<\/p>\n The transformation has put defence at the centre of Russia\u2019s economy. Putin claimed this month that 520,000 new jobs had been created in the military-industrial complex, which now employs an estimated 3.5 million Russians, or 2.5% of the population. Machinists and welders in Russian factories producing war equipment are now making more money than many white-collar managers and lawyers, according to a Moscow Times analysis<\/a> of Russian labour data in November.<\/p>\n Putin on Thursday visited Uralvagonzavod, the country\u2019s largest producer of main battle tanks, where workers boasted that it had been among the first to establish round the clock production. The Russian leader promised funding to help train an additional 1,500 qualified employees for the plant.<\/p>\n As Russia\u2019s war in Ukraine drags into its third year, the massive Russian investment in the military, projected this year to be the largest as a share of GDP since the Soviet Union, has worried European war planners, who have said Nato underestimated Russia\u2019s ability<\/a> to sustain a long-term war.<\/p>\n \u201cWe still haven\u2019t seen where is Russia\u2019s breaking point,\u201d said Mark Riisik, a deputy director in the policy planning department of Estonia\u2019s defence ministry. \u201cBasically one-third of their national budget is going on military production and on the war in Ukraine<\/a> \u2026 But we don\u2019t know when it will actually impact on society. So it\u2019s a little bit challenging to say when will this stop.\u201d<\/p>\n One key indicator in the artillery war has been the domestic manufacture of shells, which experts put at 2.5m to 5m units a year. Riisik called the trends worrying, noting that production could run above 4m units in the next year or two. The import of more than a million shells already from North Korea, and a strategic stockpile of shells in the millions, gives Russia an additional cushion.<\/p>\n While that number may not give Russia the needed capacity<\/a> to make significant territorial gains in 2024 or 2025, it nonetheless puts Ukraine at a significant disadvantage on the frontlines, where Russia has at least a three-to-one superiority in artillery fire, and often even more.<\/p>\n \u201cIt\u2019s a lot higher than we expected, really,\u201d Riisik said of the Russian production numbers.<\/p>\n Much of this was baked into Russia\u2019s military-industrial complex, a sprawling behemoth of nearly 6,000 companies, many of which rarely turned a profit before the war. But what it lacked in efficiency, it made up for in spare capacity and flexibility when the Russian government suddenly ramped up defence production in 2022.<\/p>\n Richard Connolly, an expert on Russia\u2019s military and economy at the Royal United Services Institute thinktank in London, called it a \u201cKalashnikov economy\u201d, which he said was \u201cquite unsophisticated but durable, built for large-scale use and for use in conflicts\u201d.<\/p>\n He said: \u201cThe Russians have been paying for this for years. They\u2019ve been subsidising the defence industry, and many would have said wasting money for the event that one day they need to be able to scale it up. So it was economically inefficient until 2022, and then suddenly it looks like a very shrewd bit of planning.\u201d<\/p>\n Armata tanks during the 2016 May Day Parade in Red Square, Moscow. Click to enlarge<\/p><\/div>\n That differs significantly from western, especially European, arms manufacturers, who generally run lean operations that work across borders and are designed to maximise profit for shareholders.<\/p>\n Russia can often run its military industry by fiat, reassigning personnel, increasing budgets and filing large orders on an ad hoc basis. Russia will have difficulties sourcing components for more complex weapons such as missiles, especially if sanctions are enforced more strictly. But for now it has managed to continue to supply Iskander ballistic missiles and Kh-101 cruise missiles as well.<\/p>\n Early in 2023, the Russian government transferred more than a dozen plants, including several gunpowder factories, to the state conglomerate Rostec in order to modernise and streamline production of artillery shells and other key elements in the war effort, such as military vehicles.<\/p>\n The Kazan gunpowder plant, one of the country\u2019s largest, took on more than 500 workers in a December hiring spree that increased average monthly salaries at the plant more than threefold, from 25,000 roubles (\u00a3217) to 90,000 roubles (\u00a3782), according to Alexander Livshits, the plant\u2019s director. Job adverts offer night shifts from midnight to 8am and protection from military service for those trying to avoid the frontlines.<\/p>\n Many of those hired had to be lured from neighbouring regions, evidence of the severe shortage of skilled labour across Russia. In a twist, the main competition for workers at the factories can come from the military, which promises a salary of more than 200,000 roubles (\u00a31,730) a month to those who sign up to fight in the war.<\/p>\n Russian arms production plant. Click to enlarge<\/p><\/div>\n<\/div>\n In regions across Russia, that kind of money can be transformative. \u201cThe war has led to an unprecedented redistribution of wealth, with the poorer classes profiting from government spending on the military-industrial complex,\u201d said Denis Volkov, the director of the Levada Center, a polling and sociological research firm in Moscow. \u201cWorkers at military factories and families of soldiers fighting in Ukraine suddenly have much more money to spend. Their income has increased dramatically.\u201d<\/p>\n Levada\u2019s polling showed that 5-6% of those who \u201cpreviously did not have enough money to buy consumer goods like a fridge now have moved upwards towards the middle classes\u201d.<\/p>\n Russia will pay for that by boosting defence spending to nearly 11tn roubles (\u00a395.7bn) next year, a 70% increase, which would surpass social spending for the first time since the Soviet Union. Putin is trying to finance the war, maintain social spending and avoid runaway inflation all at once, in what Alexandra Prokopenko, a Carnegie endowment scholar, calls an \u201cimpossible trilemma<\/a>\u201d.<\/p>\n For now, high oil prices are helping to cushion the blow. But the war is set to transform the Russian economy from within.<\/p>\n \u201cIn the past, for that whole post-Soviet period, I would have said that oil was the leading sector of the Russian economy,\u201d Connolly said. \u201cNow I say it\u2019s defence, and oil that will be paying for it. And that poses problems over the longer term.\u201d<\/p>\n New analysis by the International Institute for Strategic Studies (IISS) estimates that Russia has lost 3,000 armoured fighting vehicles in the last year and close to 8,800 since the war began.<\/p>\n Unable to produce anywhere near that number of vehicles, Russia has mainly refurbished ageing hardware that Connolly said many other states would have discarded long ago.<\/p>\n Workers assemble self-propelled artillery systems at a factory in Ekaterinburg, Russia. Click to enlarge<\/p><\/div>\n Russian factories claimed to have delivered 1,500 main battle tanks this year, of which 1,180 to 1,280 had been reactivated from storage, according to IISS. Those numbers, along with reactivated armoured personnel carriers and infantry fighting vehicles, meant Russia would \u201cbe able to sustain its assault on Ukraine at current attrition rates for another two to three years, and maybe even longer\u201d, the group said.<\/p>\n On the ground, Russian factories have built new production lines and gone on hiring sprees, sometimes looking to forced labour in order to raise production.<\/p>\n Kurganmashzavod, which produces the BMP-2 and BMP-3 infantry fighting vehicles, has brought in student and convict labour in order to help the factory meet its deadlines. Dmitry Medvedev, Russia\u2019s former president and now the deputy chair of the security council, toured the factory in 2022, and had warned at a tank factory about the potential for criminal charges for unfilled state contracts.<\/p>\n\u2018Kalashnikov economy\u2019<\/strong><\/h2>\n
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<\/a>Round-the-clock production<\/strong><\/h2>\n
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