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Despite sanctions, Russia’s war economy fuels its artillery. India must prioritise similar self-reliance in defence production
Soldiers stand next to a Russian RS-24 Yars ballistic missile parked along Tverskaya street. (AP Photo/File)
Despite a contracting economy and international sanctions that have begun to bite on Russia, the country is still managing to fire approximately 0.3 million artillery shells into Ukraine each day. Furthermore, Russia produces three million artillery shells annually, demonstrating its ability to sustain an arms manufacturing industry despite US sanctions. Additionally, it is engaged in designing and manufacturing advanced missile systems, which it periodically showcases to demonstrate that it is still in business.
While it has been predicted that the Russian economy cannot sustain itself forever, and economic indices showing signs of going downward, government spending on defence does not appear to have decreased. The longevity of such spending could well be questioned, but with no signs of Russia seeking to end the war in Ukraine, it appears that its war economy management may buy more time than previously assessed.
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More importantly, with strong and persistent government support, defence production—particularly of artillery and rocket ammunition—appears to be increasing. This suggests that Russia’s capacity to wage a war of attrition in Ukraine can be sustained in the medium term if required.
An overview of the Russian economy shows that GDP in the last quarter of 2024 declined to 3.1 per cent from 4.1 per cent the previous year. The defence industry has maintained its production momentum due to substantial government financial support. Meanwhile, most other sectors of the economy are experiencing a downturn, driven by lower hydrocarbon prices and OPEC+ production cuts.
Russian industry is operating at 81 per cent of its capacity; however, labour shortages affect 73 per cent of the sector. Unemployment stands at 2.3 per cent. As a result, the domestic economy is unable to meet demand fuelled by the state’s aggressive spending, necessitating greater imports and subsequently increasing the demand for foreign currency.
Despite these economic indicators, defence spending now exceeds 8 per cent of GDP and accounts for 40 per cent of total government expenditure. The primary focus of this substantial expenditure is on defence production and salaries for defence personnel.
Within the framework of defence spending, the production of armoured vehicles and ammunition takes the main chunk, while, more recently, drone manufacturing has also gained significant government attention. In 2025, Russia increased military expenditure to 6.3 per cent of GDP, up from 5.9 per cent in 2023. According to Reuters, defence spending in 2025 is expected to reach 13.5 trillion roubles, a sharp rise from just 5.5 trillion roubles in 2022. While the emphasis on defence in Russia’s war economy is evident, a lack of reliable information makes it difficult to assess the country’s actual capacity and capability.
However, some estimates are available; one of which, for instance, indicates that between 2014 and 2022, the production of tube and rocket artillery ammunition totalled 748,987 shells. Additionally, Russia’s pre-war capacity for repairing unserviceable rounds of ammunition was estimated at 300,000 annually in 2020. More recently, in February 2024, the Royal United Services Institute (UK) estimated that Russia’s ammunition production capacity for 2023 stood at 1.3 million artillery shells and 800,000 122 mm shells. Even assuming Russia had used up 50 per cent of this inventory, its industries are likely producing the same, if not greater, quantities of ammunition.
Another Eastern European source suggests that the refurbishment of artillery shells increased from 40,000 in 2021 to between 3 and 4 million in 2023. The total production forecast for 2024 was 4.5 million rounds. This underscores the scale of Russia’s defence expenditure, particularly in artillery ammunition production.
Russia sustaining such high levels of defence spending, especially when sanctions have been imposed on almost all sectors of its economy, shows its ability to maintain a war economy, just as Iran did earlier.
In broad terms, a centralised governance system—where President Putin makes all key decisions—the existence of vast war wastage reserves, and continued government subsidies to the military-industrial complex provide the foundations for such sustained military production. The unique circumstances of the conflict in Ukraine have necessitated the diversion of all available resources from other industries to the defence sector (a decision announced in October 2023), alongside the implementation of a special wartime work regime involving additional shifts and overtime in production.
In February 2024, President Putin claimed that the defence industry had created 520,000 jobs annually since the start of Russia’s military campaign in Ukraine and was employing 3.5 million workers. This, in part, helps explain how the defence industry has also played a role in addressing unemployment.
Western analysts have highlighted Russia’s reliance on the West for microelectronic components, machine tools, and metallurgical materials, among other critical items. The production of more complex systems, such as missiles, has evidently posed challenges. However, Russia appears to have either found ways to circumvent sanctions—procuring materials from other countries such as China—or shifted its focus to prioritising existing capabilities. The import of weapon systems from North Korea, Iran, and China has also helped compensate for capability gaps. A notable example is Russia’s purchase of off-the-shelf drones from Iran, which has enabled it to maintain offensive combat capability. Additionally, reports suggest that 90 per cent of machine tools entering Russia originate from China.
While efficiency may not be the defining characteristic of Russia’s military-industrial complex, spare capacity and strong government support have enabled the sector to expand and meet the demands of the Russian armed forces.
The longevity of this war economy will depend on the ability of the government to support the defence industry and revitalise old equipment and systems with money. This, in turn, will be determined by the overall state of the Russian economy. More significantly, China’s aid and assistance in keeping Russia’s economy afloat will be crucial.
There are lessons here for India, particularly regarding the need to enhance defence production in preparation for future conflicts. While India is not on the brink of war, ongoing tensions with China and Pakistan, along with other strategic considerations, necessitate that the armed forces closely study the dynamics of Russia’s manufacturing system.
A key example is India’s artillery ammunition requirements. In 2024, the government selected five companies to supply 2,000 terminally guided 155 mm munitions. To put this in perspective, during the Kargil War, approximately 250,000 shells were fired in just two weeks of intense combat. Given the scale of modern warfare, today’s requirements would be significantly higher.
Fortunately, private industry has stepped in to provide some relief to the Indian Army. Companies such as Adani, Bharat Forge, SMPP, Economic Explosives, and Premier Explosives have been awarded contracts to develop artillery ammunition. Notably, several Original Equipment Manufacturers (OEMs) worldwide have expressed interest in partnering with Indian companies to manufacture 155 mm shells. Additionally, with these firms expanding their involvement in ammunition production across various categories, the potential for exports has also increased.
The war in Ukraine has demonstrated Russia’s resilience in sustaining artillery and rocket ammunition production. The lessons to be learnt beyond the battlefield must therefore be studied carefully. While future conflicts for India may be multi-spectrum, incorporating electronic and cyber warfare, ground battles will still require a steady supply of arms and ammunition in the hands of Indian soldiers.
The author is a retired director, NSCS. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views.
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March 07, 2025, 21:15 IST
News opinion Opinion | Russia’s War Economy: Lessons For India’s Defence Preparedness