Is Russias Military-Industrial Growth Reaching a Critical Junction Before 2025?

In a recent statement regarding the potential expansion of the conflict in Ukraine, President Vladimir Putin asserted that Russia is prepared to engage in direct military confrontations with Europe if necessary. «We do not intend to instigate a war with Europe, but if Europe decides to initiate one, we are fully prepared at this moment,» Putin remarked.

Simultaneously, Sergei Chemezov, a close ally of Putin and the leader of the state defense conglomerate Rostec, cautioned Western nations not to underestimate Russia’s military production capabilities. «Let me put it this way: Our adversaries couldn’t even fathom such volumes,» he stated.

As Russia’s full-scale military campaign in Ukraine approaches its fourth anniversary, the nation’s defense spending has surged to unprecedented levels since the Soviet era. However, by 2025, there are mounting indications of a potential slowdown in the defense sector, raising concerns about Moscow’s ability to maintain its current military production capacity amid ongoing sanctions and financial pressures.

Military expenditures in Russia have soared nearly 300% since 2021, pre-war, with allocations rising from 3.6 trillion rubles (approximately $39 billion) to 13.5 trillion rubles (around $147 billion) scheduled for 2025.

Attracted by increased salaries, employees from various fields have migrated to defense companies. Major manufacturers such as the Kalashnikov Concern and the Alabuga drone facility have posted hundreds of job openings, with some positions offering monthly wages of approximately 150,000 rubles ($1,870), almost double the national median.

Official estimates indicate that between 600,000 and 700,000 individuals joined the military-industrial complex in 2023 and 2024, bringing total employment in this sector to roughly 3.8 million, accounting for about 5% of the overall workforce.

«This essentially represents a new social contract and an economic model where growth is driven by military-oriented production,» Mathieu Boulegue, a military expert at Chatham House, explained to The Moscow Times. «This aligns with a type of defense Keynesianism, and this trend is likely to influence the wider economy in the future.»

While this approach stimulated industrial and economic growth in 2023 and 2024, signs suggest that it is beginning to lose traction now.

The Ministry of Economic Development anticipates a mere 1% increase in industrial output for 2025, a decline from the 5.6% growth recorded the previous year. The growth rate in sectors related to the military is also showing signs of slowing.

The production of fabricated metal goods essential for artillery and ammunition saw an increase of 15.9% from January to October 2025, compared to a 31.6% rise in 2024. The output of computer, electronic, and optical products suitable for military use grew by 13.6%, down from the 27.9% recorded a year prior.

The category of “other transport equipment,” which encompasses tanks and drones, has remained relatively stable with a growth rate of 33.1% compared to 34.2% in 2024.

There’s also been a decline in imports of dual-use goods—items banned by the West from being shipped to Russia due to their potential military applications.

Imports of battle-related goods from Russia’s primary supplier, China, decreased by 3.7% year-on-year to $2.6 billion from January to November 2025, marking a 14.4% drop compared to the same timeframe in 2023.

Other signs indicate that the initial surge in demand for military production driven by government contracts may be waning. The exiled news outlet Novaya Gazeta Europe reported in September that recruitment in the defense sector has reverted to levels not seen since the early days of the conflict, with analysis of online job postings revealing about 34,500 job openings in defense and military-associated companies in the summer of 2025, down from approximately 52,000 a year earlier.

While specific operational details of military facilities remain largely undisclosed, sporadic reports have surfaced regarding enduring structural issues, such as corruption and deficiencies in state procurement processes. Prosecutors have recently sought to nationalize KIMP, a holding company supplying bearings to defense firms, accusing its owners of profiting «at the expense of the essential interests of society and the state.»

The United Shipbuilding Corporation has begun layoffs at its Rybinsk yard due to a lack of new contracts, while electronics manufacturer Optron-Stavropol and microelectronics company Angstrem have faced financial struggles. Concurrently, the government is intensifying its scrutiny of companies failing to fulfill their contractual responsibilities related to state defense contracts, resulting in criminal charges against at least 34 individuals since the onset of the invasion of Ukraine.

In a dramatic protest against what he labeled as the state’s «Stalinist-style» treatment of defense suppliers, Vladimir Arsenyev, head of the Volna Central Scientific Research Institute, set himself ablaze in Red Square in July 2024.

«A significant increase in government orders has been noted—but issues such as low advance payments, inconsistencies in government orders, and delays in final payments remain,» a source from a company involved in defense procurement reported to The Moscow Times, requesting anonymity.

Additionally, high interest rates are creating ongoing cash-flow challenges that leave some manufacturers in a state of uncertainty.

Despite these challenges, Boulegue from Chatham House suggested that Russia’s defense sector has not yet reached a crisis point. «Russia possesses sufficient resources to maintain its military apparatus at current levels, if not at increased production levels for essential equipment like drones, tanks, and munitions,» he stated. However, he acknowledged that sanctions are gradually diminishing Russia’s ability to produce advanced weaponry. «In the long run, and under the pressure of sanctions, Russia may find it progressively more difficult and costly to acquire sophisticated components such as microelectronics and silicon-based products necessary for electronic warfare, space systems, and precision targeting,» he added.