MOSCOW — Russia’s surge in military spending for 2025 has kept the assembly lines moving, but the Russian defense industry is still struggling to secure the high-end components and skilled labor needed to sustain and modernize production. Sanctions and export controls have widened gaps in microelectronics, machine tools and optics, forcing slower and costlier workarounds even as the Kremlin writes bigger checks, Dec. 27, 2025.
Russian defense industry hits the limits of money
Draft budget documents published in late 2024 projected “national defense” spending of 13.5 trillion rubles ($145 billion) in 2025 — about 32% of total federal expenditure — as Reuters reported. The Russian Finance Ministry said the money was intended for weapons and military pay while “supporting defence industry enterprises,” underscoring how central the Russian defense industry has become to the broader war economy.
Independent estimates put the overall war-related bill higher, partly because some military spending is packaged under other budget lines. The Stockholm International Peace Research Institute estimated Russia’s total planned military expenditure at 15.5 trillion rubles in 2025, about 7.2% of gross domestic product, and said diminished transparency makes the headline defense chapter an increasingly unreliable proxy for true wartime costs.
Sanctions expose the missing pieces
A September 2025 report by the U.S. Government Accountability Office found U.S. agencies assess export controls have “hindered but not completely prevented” Russia’s efforts to obtain U.S. military technologies, citing enforcement challenges and third-country procurement networks. For the Russian defense industry, that often translates into higher prices, longer lead times and a heavier reliance on intermediaries for dual-use goods.
A 2025 Chatham House research paper said Russia is “struggling to build genuinely new and technologically advanced systems” and leaning on legacy designs and third-party suppliers as import substitution falls short. The report warned the tradeoff may be simplified production and reduced quality — a long-term drag on innovation for the Russian defense industry even if short-term output stays high.
Pressure is not only external. Reuters reported in December 2025 that the head of a Moscow-area defense components firm described crushing deadlines and price disputes under state contracts and asked, “How is it that a company that is getting growing orders and fulfils those orders is dying?” In the same report, Rostec, Russia’s state defense conglomerate, dismissed assertions of Russian defense industry “degradation” as “propaganda myths.”
Continuity since 2022
The technology squeeze has shadowed the war since its first months. In an August 2022 Reuters investigation, a senior Ukrainian official said, “Without those U.S. chips, Russian missiles and most Russian weapons would not work,” underscoring Moscow’s dependence on imported microelectronics for precision systems tied to the Russian defense industry.
As sanctions tightened, supply chains grew more opaque rather than disappearing. A December 2022 Reuters report traced an “elastic, sanctions-evading supply chain” supporting Russian drones, including routes running through Hong Kong.
A May 2023 Carnegie Endowment analysis described Hong Kong as a prominent transshipment hub for diverting Western-made microelectronic components to Russia and said the city doubled integrated-circuit exports to Russia in 2022. A CSIS paper published in February 2023 similarly argued sanctions may not bankrupt Moscow, but can still erode long-term development and raise the cost of sustaining the war — pressures the Russian defense industry now feels in procurement, staffing and modernization.
What to watch for the Russian defense industry
The Russian defense industry has shown it can produce large quantities of “good enough” equipment under wartime mobilization. The harder question for 2026 and beyond is whether it can close critical tech gaps fast enough to keep pace with modern battlefield demands — or whether sanctions, secrecy and industrial constraints keep turning record spending into diminishing returns for the Russian defense industry.
