Jens Asbjørn Bøgen
Russia’s war economy faces a financial crunch
Russia’s war economy faces a financial crunch
What is happening?
Despite record-breaking defence spending, Russian military manufacturers are grappling with severe liquidity issues.
$145 Billion Budget Can’t Plug the Gaps
According to Express, Putin’s government has earmarked an enormous $145 billion (£107bn) for defence this fiscal year—about 6.3% of the country’s GDP.
Yet even with this injection of cash, many defence contractors remain mired in debt and are being dragged into court over unpaid invoices.
Major Steel Producer Sues Tank Manufacturer
Magnitogorsk Iron and Steel Works (MMK), one of Russia’s top steelmakers, recently filed its third lawsuit in two months against Uralvagonzavod (UVZ), the state-owned maker of the T-90M tank.
MMK is seeking to recover 105 million roubles (£995k).
UVZ’s Legal Troubles Mount
UVZ, based in Nizhny Tagil, is now facing more than 160 million roubles (£1.5m) in claims from suppliers.
Longstanding Debts Weigh Down UVZ
Financial difficulties at UVZ aren’t new. Reports suggest the company’s debts had already reached 880 million roubles (£8.3m) by 2020.
The current war-driven pressure has only made things worse.
Sanctions Hit Tank Production Hard
Production at UVZ has plummeted. Western sanctions have cut off access to key components, leaving the company unable to meet its 2023 goal of producing 1,000 T-90M tanks.
It managed only 300, according to the International Institute for Strategic Studies.
Financial Woes Ripple Across the Sector
UVZ isn’t alone. Other cornerstone defence firms are also in trouble.
Tupolev, the maker of Russia’s strategic bombers, is facing a lawsuit from engine supplier Kuznetsov, a subsidiary of United Engine Corporation (UEC).
Tupolev Owes Millions for Engines
In April, UEC’s Kuznetsov division filed a claim in Moscow’s Arbitration Court to recover 425 million roubles (£4m) from Tupolev for unpaid bills related to aircraft engine production.
Space Industry Also Under Pressure
The financial strain extends to Russia’s space sector.
The Khrunichev State Research and Production Space Centre—responsible for intercontinental ballistic missile (ICBM) technology—is facing legal claims of over 211 million roubles (£2m).
A War Economy on Shaky Ground
Despite Putin’s effort to supercharge military production, the Russian defence sector is buckling under economic stress.
Lawsuits, debts, and sanctions are colliding with state ambitions, raising serious questions about the long-term sustainability of Russia’s war economy.
