Recent floods across Asia kill hundreds, leave devastation in their wake
2 hours ago
Russia’s wartime economy has delivered a dramatic expansion in defence production since the start of its full-scale invasion of Ukraine. But according to new research by the Kyiv School of Economics (KSE), the scale and speed of this growth could prove both unsustainable and destabilising in the medium term.
The report, “The Russian Military-Industrial Complex: Scale, Structure, and Sustainability”, outlines how Russia’s defence sector has grown to account for an estimated 6%-7% of GDP in 2024, more than double pre-war levels. Military-related output, including weapons, ammunition, and vehicles, now absorbs around 30% of the federal budget and is being financed in large part by record oil and gas revenues, redirected spending and off-budget flows.
“Russia has managed to mobilise production capacity at a pace unseen since Soviet times,” the KSE Institute notes. “However, this mobilisation has come at the expense of private consumption, public services and investment in non-military sectors.”
Russia has already burnt through its stockpiles complied since Soviet times and is sending increasingly outdated models to the front as it starts to scrap the barrel.
“Russia sends less gear for refurbishment than repair stations can handle. That means it’s running out. 1970s T-72s [tanks] and T-80s are still fighting in Ukraine. Even T-54s from the 1940s were spotted in combat,” Tymofiy Mylovanov, rector of the Kyiv School of Economics (KSE) and former economics minister, said in a social media post, referring to Russia’s Cold War-era tank models.
The volume of military equipment shipments from storage bases declined by more than 25% in 2024, and early 2025 data suggest that these numbers will continue to slide, KSE reports. Russia’s stockpile of Soviet-era equipment – including some materiel that is ready for the battlefield and some that must be repaired – has been irreversibly depleted. Russia is also increasingly shipping equipment directly to the front line instead of repair facilities, indicating the creation of restoration capacities near its storage bases and front line.
As Russia’s own stocks are depleted, it has become increasingly reliant on its allies China and North Korea to supply it. Russia now gets over half of its explosive materials from North Korea, the FT reports. In 2024, 52% of such shipments came from Nakhodka, a port used by Pyongyang. Before the war: zero. In 2024: 250,000 tonnes, reports KSE Institute, adding that 40% of Russia’s ammo comes from North Korea.
Iran has also become a major source of arms: an estimated 13,000 tonnes of explosives entered Russia’s logistics chain from Caspian Sea routes, which experts believe is Iranian in origin.
According to KSE, Russia uses the low quality and unreliable DPRK artillery shells to maintain fire rates in Ukraine and is stockpiling the better quality home-produced shells for a possible Nato war.
“Meanwhile, China supplies the backbone,” says Mylovanov. “Shipments from eastern Russia to defence factories have doubled to over 3mn tonnes since 2021… China may not ship lethal aid, but it sends the machines and components to keep Russia’s war industry alive.”
One of the starkest findings is that over one-third of total industrial output is now linked directly to the military-industrial complex, with arms production growing by more than 50% year on year in real terms. At least 3.5mn people are estimated to be employed directly or indirectly in the defence sector, while civilian sectors – especially in machinery, transport and metallurgy – have been retooled for military use.
Long-term trouble
But the report raises critical concerns about long-term viability. “This level of mobilisation is economically inefficient, vulnerable to labour shortages, and subject to supply chain fragilities,” the authors write. Key bottlenecks include high dependence on imported machine tools, microelectronics and advanced materials, despite efforts to substitute sanctioned imports with domestic or Chinese alternatives.
While Russia’s military-industrial base has adapted to sanctions more effectively than many observers anticipated, this resilience may be short-lived. “The strain on fiscal policy is mounting,” the KSE warns, pointing to an expanding budget deficit, growing reliance on the National Wealth Fund, and increasing quasi-fiscal activity by state banks. Recently the Russian economy has been cooling and some argue that is facing a recession.
The report also highlights a shift toward non-transparent spending channels, including classified budget lines and off-balance-sheet procurement, which obscure the true cost of the war economy. “There is a risk of distorted policy incentives, rent-seeking and inefficient resource allocation.”
With Russia’s war effort increasingly dependent on industrial output, the sustainability of this economic model is becoming central to the trajectory of the conflict. As the KSE concludes: “The military-industrial expansion has provided short-term gains for Russia on the battlefield, but at the cost of long-term economic resilience and institutional integrity.”
Related Content
Features
Recent floods across Asia kill hundreds, leave devastation in their wake
From South and Southeast Asia to Central and East Asia, communities have been grappling with flash floods, landslides and glacial lake outbursts as warming temperatures and shifting monsoon dynamics fuel increasingly erratic weather.
Only two bidders left in the auction for HSBC’s Maltese operations
The auction for HSBC’s Maltese operations has attracted more interest than first expected with the number of bidders rising to five at its peak. However, three have dropped out and only Bank of Georgia and Armenia’s Ardshinbank remain in the race
Saudi Arabia launches second phase of Art Bank initiative
Saudi Arabia's Social Development Bank has launched the second phase of its "Art Bank" initiative to support visual artists and freelancers across the kingdom.
Putin worked as a stuntman in 1970s Soviet movie industry – report
Russian President Vladimir Putin is reported to have performed stunt work in Soviet war films during the 1970s, according to former colleagues and a recently resurfaced caption in a St Petersburg university exhibit.
