Russia’s War in Ukraine Hurts Its Arms Industry, Creating Openings for Rivals

Russia has long been the world’s second-largest arms exporter, after the U.S., but its sales have declined ever since Moscow-backed forces seized parts of Ukraine in 2014.

Now, last year’s invasion of Ukraine is set to further erode Russia’s share of the global arms trade, analysts say, as growing Western sanctions, Russia’s need to conserve arms output for itself and a reputational hit on the battlefield reduce its exports.

Russia’s arms exports dropped 31% in the five years that ended in 2022, compared with the five years ended in 2017, according to data released Monday by the Stockholm International Peace Research Institute, a think tank. Russia’s share of global arms exports dropped to 16% from 22%.

The institute uses multiyear periods because annual figures can be distorted by large deliveries; it bases its figures on a points system that calculates the military value of arms exports. 

Export deliveries of Russian weapons fell 1.3% in 2022 compared with the previous year, Sipri said. The drop means export deliveries last year were 35% of deliveries in 2013.

Lower exports threaten to sap revenues for Russia and deprive the country of foreign sales that typically subsidize the development and production of new weapons systems.

For Western defense suppliers, Russia’s decline is creating new business opportunities, as Moscow’s traditional clients start to look elsewhere for military hardware. 

Serbia, a longtime Russian ally and buyer of its arms, said last month it was in talks with France’s

Dassault Aviation SA

about placing an order for its Rafale jet fighters, because sanctions have made it harder to get parts for its existing Russian-made fleet.

Serbia has had talks with France’s Dassault Aviation, a maker of jet fighters, about an order because it has been harder to get parts for its Russian-made fleet.



Photo:

yannis kolesidis/Shutterstock

The Philippines canceled an order for 16 Mi-17 Russian transport helicopters in the months after Russia’s invasion, saying sanctions made it hard to pay for them.

“It was no longer feasible to pursue the project given the major sanctions imposed on Russia,” Jose Faustino Jr., a senior defense official, told a Philippine Senate hearing in September.

The following month, U.S. Ambassador MaryKay Carlson announced $100 million in aid to the Philippines military that she said could “be used to offset the decision to cancel the Mi-17 helicopter purchase.”

President

Ferdinand Marcos Jr.

later said his country had “secured an alternative supply” of helicopters from the U.S., having agreed to buy 32 Black Hawks from

Lockheed Martin Corp.

U.S. Ambassador MaryKay Carlson said the Philippines could use $100 million in U.S. aid to its military to offset the decision to cancel an order for Russian helicopters.



Photo:

Basilio Sepe/Zuma Press

Russia’s performance on the battlefield will likely further dent demand for its equipment, some analysts say. 

“Images of wrecked and abandoned vehicles call into question the quality and reliability of Russian-manufactured military hardware,” said Ian Storey, a fellow at the ISEAS-Yusof Ishak Institute, a Singapore-based research group.

Others say it is too early to determine whether the problems are because of equipment, or poor training, tactics and maintenance, noting that Ukraine has successfully deployed some Russian-made equipment, like T-72 tanks.

The Russian government didn’t respond to requests for comment. 

A Russian vehicle advanced toward the front line in Ukraine last week in a handout photo from the Russian Defense Ministry.



Photo:

RUSSIAN DefenSe Ministry Press S/TASS via ZUMA Press

In August,

Dmitry Shugaev,

head of Russia’s Federal Service for Military-Technical Cooperation, told state news agency TASS that operations in Ukraine have led to increased interest in Russian weapons from countries in Africa, Latin America and elsewhere.

Russia’s arms industry has been hindered since 2014 when sanctions curtailed the flow of Western components used in some weaponry.

At least 450 foreign electronic components, such as chips, were found inside 27 pieces of Russian military equipment examined by the Royal United Services Institute, a London-based defense-and-security think tank, since last year’s invasion.

French contractor

Thales SA,

for instance, provided the optics for many Russian tanks, a supply which sanctions have stopped. Russia’s inability to produce high-quality optics, which are used for imaging and targeting, will likely undermine its efforts to make new equipment, British military intelligence has said.

In recent weeks, Russia launched repeated attacks on the eastern Ukrainian town of Vuhledar, where Western and Ukrainian officials say Moscow lost dozens of armored military vehicles and hundreds of troops. WSJ examines videos from the area to understand Russian tactics. Photo: Planet Labs/Ukrainian Handout

One beneficiary of Russia’s problems in recent years has been France, according to Sipri. France’s share of global arms exports was 11% in the 2018-2022 period, up from 7.1% in the five years ended 2017, Sipri data show.

The U.S. market share has also grown, up 7 percentage points to 40%, over the same period, Sipri data show. U.S. exports have been boosted by increased spending by European allies including on the F-35 jet fighter, partly driven by a perceived threat from Russia. 

China and India, typically big Russian customers, are also producing more of their own weaponry.

Russian arms exports to China have been falling since 2005, Sipri data show. While China was once dependent on Russian technology, it is increasingly developing its own, analysts say, including switching to Chinese engines in its jet fighters.

India is also working to reduce its reliance on Russian arms. Soon after Russia’s invasion of Ukraine, India’s Defense Ministry published a list of foreign-made components that it wanted to produce at home, including parts for Russian weaponry. And India, which has typically bought its helicopters from Russia, last year introduced a domestically developed light-combat helicopter into the Indian Air Force.

Other Asian countries appear to be stepping away from Russian arms. Vietnam in December held an arms expo that it said was aimed at diversifying where it sourced weapons. Before 2014, almost all Vietnam’s weapons imports came from Russia. Since then, Vietnam has for the first time in decades bought some U.S. equipment, including reconnaissance drones and electronics.

Russian equipment, though, will likely retain its edge over the West on price.

For example, Germany’s Leopard 2 tanks each cost more than €10 million, the equivalent of about $10.68 million, while Russia’s new T-90 tanks will likely sell for less than half that price, said Nicholas Drummond, a defense-industry consultant.

China’s rise as an arms manufacturer could challenge Russia’s dominance over the West at the lower end of the market, analysts say.

“It’s the difference between going to Walmart and going to Bloomingdale’s,” said Vasabjit Banerjee, an associate professor at Mississippi State University, who has studied Russia’s arms industry. And, he said, “China is getting into that market.”

Write to Alistair MacDonald at Alistair.Macdonald@wsj.com and Jon Emont at jonathan.emont@wsj.com

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