Putin’s business is collapsing

In fact, he wanted to make Russia a superpower again, with the help of a strong army. However, with his attack on Ukraine, Vladimir Putin’s dreams of becoming a great power seem to have vanished in the distant future. Militarily, the Russian army loses many soldiers and heavy weapons in the war, and there is growing concern in the Kremlin that the domestic war economy cannot produce equipment and ammunition fast enough.

While Russia is still a major nuclear power, Putin’s war is conventionally demilitarizing the country at a rapid pace — and the Kremlin chief still doesn’t seem ready to give up his war goals. But even before this conflict, a key pillar of international influence for the Kremlin seemed increasingly shattered: Russian arms exports have been collapsing for several years, but Putin’s invasion now threatens to deal a knockout blow to a important Russian industry. The consequences are fatal.

The Russian arms industry currently has to produce mainly for its own army in the war in Ukraine. As a result, Moscow cannot keep up with its deliveries to other countries – that costs Putin confidence, money and Russian influence worldwide.

Like the Soviet Union before it, Russia has the problem that it hardly has any soft power. This means that the Kremlin can hardly exert power over other states with cultural attractiveness, with ideology, with development aid or with an attractive political system without resorting to violence. That is why Putin militarily intimidates his neighboring states or uses dependencies by selling cheap raw materials or weapons to other states.

But according to the Swedish peace research institute SIPRI, Putin’s arms industry has been heading for crisis for more than a decade. Russian arms exports peaked in 2011, but by 2019 sales had plummeted by 20 percent. Russia was very close to the US in 2011, supplying 35 countries, according to SIPRI. Eleven years later, in 2022, there are only twelve countries left and sales have fallen by 70 percent from their peak in 2011.

After taking power, Putin began to technically modernize the Russian army. After that, the Kremlin advertised internationally powerful weapon systems such as the S-300 or S-400 anti-aircraft systems, which are cheaper compared to the systems from the West. But the Russian arms boom seems to be over.

Russia is arming despotic and revisionist leaders such as Hugo Chávez in Venezuela and Bashar al-Assad in Syria and helped them consolidate their power. In particular, from 2010 to 2013, Moscow supported the Syrian government in the civil war with arms. But in the middle of the last decade, headwinds came and a few years later Putin’s main industry was in a storm.

What are the causes of the crisis?

The slump in Russian arms exports is primarily a reflection of Russia’s increasing international isolation since its annexation of Crimea in 2014. The collapse of the Russian arms trade is an indication of how costly Putin’s imperialism is to Russia as well. Not only does it cost tens of thousands of lives, but it also has a huge impact on Moscow.

Declining arms exports are in principle conducive to peace. But the gap left by Russia in the markets is being filled by other states. The US and France in particular will benefit from this.

According to SIPRI, U.S. arms exports increased 14 percent from 2013 to 2017 compared to 2018 and 2022. Overall, the United States accounted for 40 percent of global arms exports in 2018-2022. In the same period, Russia’s market share fell from 22 percent to 16 percent, while France’s rose from 7.1 percent to 11 percent.

This development could intensify even further in the future. “It is likely that the invasion of Ukraine will further restrict Russian arms exports,” said SIPRI researcher Siemon T. Wezeman in March 2023. The reason: “Russia will prioritize its armed forces in supply and demand from other countries will be low because of trade sanctions against Russia and mounting pressure from the US and its allies.”

For the West, Russia’s current weakness offers an opportunity to free some states from their security dependence on Russian arms imports. An example of this is India: a representative of the Indian Air Force stated in March 2023 that due to the war in Ukraine, a “major delivery” from Moscow “will not take place”. Russia cannot deliver.

India, China and Egypt were the largest buyers of Russian weapon systems, but Moscow supplied significantly fewer arms to India and China in the first year of the war, and none at all to Egypt. This shows that Russia is a declining armament force and that Putin’s clients are losing patience.

The consequences for Russia are heavy. The loss of revenue from arms sales — more than $15 billion in 2015 — increases Russia’s dependence on oil and gas sales. But the most important buyers of Russian raw materials in Europe have also disappeared after Putin’s invasion of Ukraine. Moscow is trying to sell its raw materials to India and China, but at bargain prices. Because these states are exploiting Russia’s current weakness.

In any case, the Kremlin has mainly subordinated itself to China through the war of aggression. Without Beijing, Putin would probably no longer be able to fight his war, because modern semiconductors for Russian tanks and other equipment now have to come from the People’s Republic. “The tank shells are in the factories, but they can’t be put together because basic parts are missing,” military and Russia expert Gustav Gressel told t-online. “The Russian arms industry in general cannot produce enough night vision devices, radios or devices with control chips.”

Ultimately, arms exports are always a deadly trade, but for Russia or the US it is an important lever to form alliances and exert diplomatic influence on states that buy arms. Since the Russian arms industry cannot even meet the needs of its own army, this will become much more difficult for Putin in the future. Since the Kremlin can no longer use its weapons as an instrument of power, it now uses wheat exports.

In addition, Putin has exhibited his modern weapon systems in Ukraine. The result for the Kremlin was sobering as many systems did not work as planned. The T-14 Armata apparently reached the battlefield after a year of war, and its guided missiles were often characterized by failures and inaccuracies. On the other hand, in the first year of the war, Ukraine succeeded in pushing back Russian troops with light weapons systems from the West and modern war tactics. That, too, is not good publicity for Putin’s arms industry.

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