According to the U.S. Treasury, Department of Commerce and State Department’s report on the consequences of eight months of sanctions, the embargo on technology exports has undermined the Russian military machine’s ability to successfully replace weapons destroyed in combat. More than 6 thousand units of military equipment, including tanks and armoured personnel carriers, have been irretrievably lost by the Russian army.
Since the start of the war, Russian imports of semiconductors, which U.S. officials describe as “the lifeblood of Russian weaponry,” have fallen by about 70%. This has brought the production of hypersonic ballistic missiles to a virtual halt, according to the report. Washington also believes that since automotive production is down three-quarters from last year, this can be read as a clear indication that critically important advanced microchips are being diverted from civilian cars to the military. Russian military factories are being forced to use microchips from washing machines, dishwashers and refrigerators (the US Secretary of Commerce mentioned this issue back in May). They have also had to resort to using Soviet-era equipment, originally meant for defence purposes.
According to the American government’s report, due to the lack of foreign components, one of Russia’s largest tank manufacturers, Uralvagonzavod, has even had to lay off some of its workers. In March, the General Staff of the Armed Forces of Ukraine noted that production at the factory had been suspended. As a result, Russia has been forced to source equipment and components from technologically less developed countries, such as Iran and North Korea.
“Vladimir Putin’s war” (in the report, the war in Ukraine is called “Putin’s war” and not “Russia’s war”) has led to a sharp contraction of the Russian economy and will slow down its development for many years to come. To confirm this statement, the document provides a consolidated estimate of the IMF, the World Bank and the OECD, which expect that Russia's GDP will contract by 3.4-5.5% in 2022 and by 2.3-4.5% in 2023. The most negative forecast comes from OECD experts, who expect the Russian economy to decline by 5.5% this year and 4.5% next year. However, it should be noted that Russian macro indicators have outperformed the dire predictions given by leading international institutions back in spring. The Russian government expects Russia's GDP to contract by 2.9% in 2022, and by only 0.8% in 2023.
In the long term, U.S. officials expect the potential growth of the Russian economy to be “very low”. This can be explained by the fact that Russia has ramped up its military spending at the expense of domestic investment, lost access to vital technologies and reduced its human capital via a brain drain. To add to this, Russian companies have found themselves cut off from developed financial markets.The question of whether Russia has the means to wage a protracted war with Ukraine has become no less urgent than the issue of the country’s army transitioning from contracts to mobilisation. Ukraine receives weapons from Europe and the U.S., although the number is limited. Sanctions have significantly crippled Russia’s ability to replace its own equipment. As we outlined earlier, spending on defence and security has sharply increased in Russia’s budget, yet there is no mention of large amounts of additional finances to be spent on replacing crucial imported parts. At the same time, the Russian government has significant financial resources at its disposal, and these can be used to pay for Iran and North Korea’s defence industries, and to ramp up local production of affordable weapons. Having taken all of this into account, it seems inevitable that the country will gradually exhaust its ability to wage a conventional war in Ukraine using effective equipment.