After more than three years of heavy investment, Russia’s military production has gone into surplus, producing more arms and ammo than it needs to perpetrate the war in Ukraine, the Kiel Institute reported.

All the main arms categories – tanks, military vehicles, artillery, and drones – have seen production increase by almost 200% or more since the war began in 2022. Before its full-scale invasion of Ukraine in 2022, it had planned to deliver about 400 armoured vehicles the following year. It’s now shipping ten-times that.

Sanctions were designed to starve the Russian budget of the means to fund its war against Ukraine, but the latest production numbers show that effort has decisively failed.

Russian military production
Equipment Type	Q4 2022 Production (per quarter)	Q2 2024 Production (per quarter)	Percentage Increase	Notes
Tanks	123	387	215%	Modern T-90 variants; stockpiles depleting but production ramping.
Armoured Vehicles	585	1,409	141%	Includes BMP and BTR series; key for infantry support.
Artillery Guns	45	112	149%	Howitzers and self-propelled guns; daily shell output at 10,000.
Short-Range Air Defence Systems	9	38	200%	Pantsir and Tor systems; first combat use of upgraded variants.
Medium/Long-Range Air Defence	6	12	100%	S-300/400 equivalents; reducing reliance on Soviet stocks.
Lancet Loitering Munitions	93	535	475%	Drone-based; massive scaling for precision strikes.
Source: Kiel Institute for the World Economy (September 2024). Data reflects net production after losses, highlighting Russia's shift to wartime economy since October 2022. Overall output has tripled in some categories, outpacing European peers like Germany.

“Russia has dramatically scaled military output since late 2022, doubling or tripling production in most categories despite sanctions. Annual figures include 1,776 main battle tanks, 6,564 infantry fighting vehicles (IFVs), and 672 self-propelled howitzers, with monthly peaks of 150 tanks and 550 armoured vehicles. Artillery shell production reaches 10,000 daily, supported by 7% GDP defence spending (comparable to EU+UK combined in PPP terms),” the report found. “However, output has plateaued since the first quarter 2024, relying on Soviet stockpiles and allies like North Korea. By 2030, Russia could add 12-16 brigades, totalling 1.5mn active troops. Production has doubled across the board or increased even further, as in the case of tanks.”

Arms race

Russia has just released its latest 2026-2028 budget that keeps military spending at around 8% of GDP after Russian President Vladimir Putin put the entire economy on a war footing as soon as invasion happened over three years ago.

Ukraine is, however, entirely dependent on external funding from its allies: it is short some $8bn-$19bn (depending on if there is a ceasefire) for 2025 and the unfunded gap in next year’s budget was just increased to $65bn by the International Monetary Fund (IMF), all of which will have to come from European partners this year, after the US sent no money to Ukraine since US President Donald Trump took office. Ukraine is standing on a financial cliff the IMF reported on September 12 and faces a possible macroeconomic collapse if its allies cannot find more money to fund its war effort.

While Russia suffered from shortages and the lack of access to technology in the first years of the war, those problems have been solved in the meantime. Factories in Russia’s hinterland are working three shifts 24/7 to churn out the materiel that the Armed Forces of Russia (AFR) needs.

Ukraine has also been investing heavily into its domestic defence sector with the help of Western allies under the so-called Danish model. Earlier this month Ukrainian President Volodymyr Zelenskiy said the Armed Forces of Ukraine (AFU) now sources some 60% of all it needs from its own factories, up from 40% at the start of this year. Ukraine has also become entirely self-sufficient in the production of drones, the determining factor in the war, and more recently has started making its own Flamingo cruise missiles, which could prove to be a game changer.

However, the AFU remains under pressure as Russia is outproducing it in terms of arms and ammo to the point where it has started to restock Soviet-era stockpiles depleted by years of war. The Kremlin has a long-term plan to rebuild its military over the next decade and even if a ceasefire were called tomorrow, analysts say the Kremlin will continue its heavy spending on its military-industrial complex, in a throwback to the Cold War-era.

And it's not just the volume of production that has improved: Russian engineers have innovated and the Kremlin’s partners have supplied it with new technology.

At the start of the war, Russia imported thousands of Iranian-made Shahed drones, but in the meantime it has built factories to manufacture the Gerad-2 attack drones, based on Iran’s Shahed 136 design, most recently adding a jet engine to the drone to improve its speed and range. Having initially imported 140,000 drones in 2023, it made 1.5mn last year and is on course to double that number this year.

Ukraine made an estimated 2mn drones in 2024 and plans to raise that number to 4mn this year, if it can find the funding to expand. Zelenskiy said last week that up to 60% of Ukraine’s drone production capacity is currently idle for lack of investment. There is talk of easing export controls on arms to attract investment and Kyiv is in talks with Warsaw about supplying it to create a drone wall to improve Europe’s eastern flank defences.

At the same time a decoy drone was found on the battlefield in Ukraine that was filled with Chinese technology; previously Russian drones and missiles were entirely dependent on imported or smuggled Western chips and tech.

In other areas like electronic warfare (EW), the advantage has swing back and forth in the drone war between Kyiv and Moscow, but Russia is believed to have the upper-hand at the moment and was also the one that introduced the idea of fibre optic-controlled drones that are impervious to EW counter measures; Ukraine initially belittled the innovation, but before widely adopting it for its own drones.

Guns and butter

Russia continues to spend heavily on defence, but the latest budget cuts military spending for the first time since the war began as Russia pulls ahead of Ukraine in the arms race and is devoting more money to the social sector and reconstruction of the Ukrainian regions it controls. Defence outlays between 2022 and 2024 were at least RUB22 trillion ($263bn), according to the Ministry of Finance (MinFin).

For the first time since the war started in 2022, Russia's defence spending in 2026 will be modestly reduced, according to data cited by Reuters, from RUB13.5 trillion to RUB12.6 trillion ($153.7bn, 5.8% of GDP) from a total spend of around RUB48 trillion. Moreover, it will be slightly lower than the 2026 plans set when the previous budget was approved a year ago (RUB12.8 trillion).

The Russian surplus means that it is also returning to the international arms market and intends to restart arms exports, previously a major earner for the Russian economy. Russian President Vladimir Putin is in active talks for sales of things like the SS-400 surface-to-air defence system with India and Russian companies are reappearing at major international arms fairs in India, China, the Middle East and Africa, reports Bloomberg. State arms exporter Rosoboronexport, which handles about 85% of foreign sales, says pent-up demand has sent its pipeline of orders to a record $60bn. Russia could export $17bn to $19bn of military kit annually in the first four years after the war in Ukraine, the Center for Analysis of World Arms Trade estimates. Nevertheless, Rosoboronexport’s order book is still only half of what the Kremlin is spending on defence.

Putin is well aware of the dangers of overspending on the military-industrial sector and ignoring the civilian sector. In his “guns and butter” speech to the assembled heads of Russia’s six military districts he said that military investment should be directed to both parts of the economy. In a related move he appointed his top economic advisor Andrei Belousov as Defence Minister, who has no military experience whatsoever, but is a leading advisor to Putin on the management of the Russian economy. The focus is on dual-use production, which should already be possible for components in sectors such as shipbuilding, aviation, electronics, medical equipment and agriculture, according to Putin.

Europe lagging behind

The Kiel report compared Russia’s production to Europe’s and found it wanting. Europe's rearmament progress, while accelerated since 2022 (defence spending up to over 2% of GDP), remains inadequate for 2030 readiness. Russia's production surge outpaces Europe's in key areas, and procurement delays (averaging 3-4 years) exacerbate Europe’s vulnerabilities. Europe must procure equipment for 25-50 brigade-equivalent units to counter Russia, but reliance on US systems and bureaucratic hurdles are going to make this very difficult, the authors conclude. The €800bn EU ReArm programme may suffice in nominal terms but not at inflated wartime prices, requiring a focus on cost-effectiveness and R&D, the authors conclude.

"We show that the situation today is even more concerning if Europe aims to be fit for war by 2030," the authors said. "Production must increase by a factor of around five to tilt the balance decisively in Europe’s favour."

European stockpiles have declined since the Cold War, with no significant replenishment despite procurement rises, the report found.

The current annual production lags Russia’s by a large margin: 50 tanks, 214 IFVs, and 202 howitzers, while artillery shell production will hit 1.95mn by 2027, surpassing US but still trailing Russia and its allies’ output.

European procurement is still tied up in red tape and lack of funds. Delivery delays average 3 years, with over half of the existing orders still undated. Technological shortfalls also abound, including a lack of next-generation tanks plans or sixth-generation jets by 2045 that China, a close Russian ally, is already producing. Currently Europe is entirely dependent on imports of advanced air defence from the US.