Market Trends of Russia Defense Industry
This section covers the major market trends shaping the Russia Defense Market according to our research experts:
Russo-Ukraine War Expected to Drive Significant Defense Investments
Russian military expenditure grew for the third consecutive year in the base year. Russia's spending rose by 2.9% to reach USD 65.9 billion (or 4.1% of its GDP). The recent upward trend in Russian military expenditure followed a period of decline in the wake of Western sanctions over Russia's annexation of Crimea in 2014 and a sharp drop in energy prices in 2015. Russia contributes a 3.1% share of the total defense expenditure globally. However, with the Russia-Ukraine war in February 2022, the defense expenditure scenario of the country changed drastically, leading to significant growth opportunities over the coming years.
The 'national defense' budget line, which accounts for three-quarters of SIPRI's estimate of the total Russian military spending and includes funding for operational costs and arms procurement, was revised over the year. From an initial value of USD 42.3 billion in December 2020, the budget line rose to USD 48.4 billion by the end of 2021, an increase of 14% over the year, which mostly went towards additional operational costs. In late 2021 Russia amassed troops along the Ukrainian border, which preceded its invasion of Ukraine in February 2022.
The ongoing war significantly drove the use of various weapon systems the country had in its inventory for a long time, with some weapons reported as 25-30 years old. The Russian military had a variety of conventionally armed cruise and quasi-ballistic missiles at its disposal, including the islander-M system, Bastion-P, Kinzhal, Kh-101, and Kh-22/32, along with Kalibr, Kh-101, and other similar methods. Depleting inventory of these missiles due to the war has driven higher investments to restock the country's stock, leading to higher growth potential for the market.
Air Force is Expected to Witness High Investments due to War Losses
In recent years, the Russian government has invested in improving defense capabilities. The country focuses on procuring advanced fighter aircraft to enhance its aerial capabilities. Currently, the Russian Air Force has more than 3500 military aircraft in service, which include fighters, bombers, tankers, and other particular mission aircraft. Furthermore, in 2020, the Russian military received its first Su-57 fighter jet, and the Russian Air Force forecasts to have at least 22 Su-57 fighters by the end of 2023, and the number will rise to 76 by 2028.
Additionally, the Russian Air Force received the most advanced fighter aircraft amid the war with Ukraine. In June 2022, the Russian Defense Ministry announced that the Air Force received its first modernized Su-34M multipurpose bombers. This fighter jet order was placed in 2020 for around 76 aircraft, which will be completed by 2027. The modernized Su-34M variant features advanced avionics, high-precision weapons, and suspended reconnaissance equipment.
Due to the ongoing war with Ukraine, the country is expected to channel many investments into developing and producing new, highly advanced fighter aircraft to win the war. The country severely depleted its aircraft in storage by using them in the ongoing war, losing up to 36 fighter jets during the war. As a result, Russia is expected to be highly focused on developing its aircraft, which will help carry out various intelligence, surveillance, and reconnaissance (ISR) activities along with combat mission capabilities. In anticipation of an increase in the need for better fighter aircraft, the country started investing in its airforce segment in 2021. For instance, in July 2021, Russia unveiled the new stealth fighter 'Checkmate' as a counter to the United States F-35. This new aircraft is powered by a single engine and advanced technological capabilities to counter further adversary attacks from enemies successfully.
Due to multiple such causes, the airforce segment of Russia is expected to witness a significant growth rate during the forecast period.
