Russian War Factories Boom Strengthens Economy's Resilience to Sanctions

Even if weapons are absent from the Ukrainian arena tomorrow, the Russian economy may not be able to move away from the battlefields, because years of huge military spending have turned Russian factories into an important supporter of the economy's durability and have introduced hundreds of thousands of workers into the defense sectors, creating a semi-permanent economy in a military mobilization mode. This military entrenchment, analysts told Bloomberg, makes any economic downturn risky and makes Russia committed to continuing to arm.

Russian President Vladimir Putin sees a lasting need for a well-equipped combat force, raising fears among Western leaders that it could be used against NATO in the next five years. Therefore, Putin seeks to integrate a thriving defense industry into his long-term economic vision.

Meanwhile, as Europe pours billions of dollars into retooling its militaries, Russia faces a massive surplus of tanks and missiles produced by its factories. Such equipment may shift from a budget burden to a potential source of income via arms exports to allies such as China, but its presence on NATO's eastern border threatens the stability of relations with Europe, and increases pressure on an economy beset by sanctions, a fragile banking system, and sluggish growth.

Escalation of military production

• Before the full-scale invasion of Ukraine in 2022, Russia was planning to deliver about 400 armored vehicles the following year. Today, the number is ten times that.

• Russia began manufacturing drones internally after they became an essential part of military operations, producing1.5 million drones in 2024compared to 140,000 in 2023.

• Between 2022 and 2024, defense spending was22 trillion rubles ($263 billion), with high spending expected to continue over the next three years.

History Lessons, Exports, Markets… and Challenges

Experts suggest to Bloomberg that the experience of the Soviet Union after World War II may provide a model for Russia, where military factories later turned into a major source of revenue from arms exports. This reflects Putin's vision to continue supporting military production, including seeking new exports and markets in the Middle East, Africa, and Asia.

In practice, for exports and markets, the following should be noted:

• Russian arms exports have recorded growing interest in India, China, the Middle East and Africa.

• The Center for Analysis of the Global Arms Trade predicted that Russia's military exports would reach$17 – 19 billion per year in the first four years after the war.

• Systems such asRosoboronexportThe accumulated demand for weapons provides long-term contracts and ensures continued production.

However, there are challenges that can be summarized by these points:

• Despite the large volume of orders, they cover only half of the annual defense budget.

• Some markets may face pressure from the West, as has happened with US interventions in energy and arms deals.

• Salary cuts or partial layoffs are likely to occur in military factories despite continued production.

At the level of future vision, Putin is focused on integrating military production with civilian (dual-use products) in sectors such as aviation, ships, electronics, medical equipment and agriculture, while maintaining a ready and reliable combat capability for future use.