27.09.23 Sanctions Review

Bad Weapons for the Poor and the Unfortunate: Russia is irreversibly losing its place in the middle-tech arms markets but may still maintain its position as a supplier to impoverished and isolated nations

The impact of war and sanctions has dealt an irreversible blow to Russia's strategic place in the global arms export markets. In the competitive niche of middle-tech weaponry, which Russia had dominated for decades, its partners are now being forced to seek new suppliers or engage in import substitution. Russia may still retain its niches in simpler and cheaper arms products, supplying them to conflict zones and isolated countries distanced from Western markets. However, sanctions and diminishing arms export revenues will deprive the Russian military-industrial complex of the resources needed to modernise and develop the production of technologically advanced weapons, and will push Russia further to the periphery of the global arms trade. Thus, it can be said that one of the few niches in technological exports that Russia inherited since the Soviet era has now been irretrievably lost.

Russia's role as a major global arms supplier is under threat, according to a report by the Center for Strategic and International Studies (CSIS). As Re:Russia has previously reported, the international competitiveness of the Russian arms export industry has been in decline since the early 2010s due to previous rounds of Western sanctions and efforts by China and India to increase their own arms production. Moscow's share of global arms exports has fallen from an average of 22% in 2013–2017 to 16% in 2018–2022. Russia's full-scale invasion of Ukraine in February 2022, which has placed an inordinate strain on the production capacity of the Russian military-industrial complex, coupled with comprehensive new sanctions, has exacerbated these issues.

Moscow still maintains some competitiveness in areas such as the production of missiles, air defence systems, aircraft, armoured vehicles, naval systems, and engines. However, in the near future, export volumes in all these areas will inevitably decline, as China, India, Egypt, and Algeria will continue their policies of import substitution and diversification of suppliers, the authors of the report write. The dynamics of exports to India is the most vivid example of these processes: Russia's share of India's total arms imports dropped from 64% in 2013–2017 to 45% in 2018–2022, while imports from France increased nearly fivefold over the same period.

The reorientation of Russia's defence industry towards the domestic market as a result of its military actions leads to supply disruptions and makes Russia an unreliable partner. For example, Vietnam has historically been a country heavily dependent on Russian arms imports, but after February 2022, Hanoi had to increase domestic production of armoured vehicles, small arms, drones, anti-ship missiles, and seek new suppliers from the United States, Israel, India, Turkey, South Korea, and Japan. Thus, even after the war ends, Russia is unlikely to regain the lost niches it had maintained since Soviet times.

Moreover, in addition to the above, importers are now also concerned about the quality of Russian-produced goods. For many years, Moscow marketed its weapons by highlighting the fact that Russian-made weapons had been tested in combat, for example, in Syria. It was assumed that the invasion of Ukraine would allow Russia to demonstrate its new-generation weapons in combat, but in Ukraine, unlike in Syria, Russia has failed to create favourable conditions for such a showcase. Instead, this war has demonstrated the ineffectiveness and obsolescence of Russian technologies. A significant portion of Russian tanks and armoured vehicles proved highly vulnerable to modern anti-tank weapons. Finally, Russia's disconnection from the international financial system has complicated payment for Russian arms shipments, forcing customers to seek alternative arrangements.

Thus, Russia is likely to lose the remaining markets for high-tech weaponry (such as aircraft, air defence systems, and modern battle tanks) irrevocably, but it may still maintain its positions in the supply of less technologically complex systems, primarily to low-income countries or those isolated from advanced arms suppliers. This trend has been observed in recent years, with Moscow increasingly focusing on states interested in arms systems costing up to $300 million (such as South Africa, Eswatini, Angola, Eritrea, among others). At this lower tier of the market, Russia could establish itself as a supplier of arms to regions where the West seeks to restrict such deliveries. In addition, despite the existing vulnerabilities of the Russian defence industry, the experience gained from waging war in Ukraine under conditions of international sanctions may lead to important innovations that Russia may later offer customers in the Global South as a competitive alternative to Western technologies. For example, Russia's effective use of kamikaze drones, particularly the 'Lancet', could become a future success for the Russian defence industry. In this role, Russia will compete with Iran, which, as Re:Russia recently reported, has been under sanctions for decades and has been developing an arms export niche of this kind.