Western Sanctions Hurt Russia’s Defense Industry and Put It at Odds with Other Sectors, Luzin Says

Paul Goble

            Staunton, October 30 – Many in Russia and the West believe that Western sanctions have done little to affect the Russian economy let alone Russian policy, but there is at least one area where they have had a major impact – on the Russian defense industry – that has both international security and domestic political consequences, Pavel Luzin says.

            In a commentary for the Riddle portal, the Russian analyst says that sanctions on Russian defense producers have been used since the 1990s and have had slowed modernization, increased costs and intensified tensions between that sector and the Kremlin (ridl.io/ru/sankcii-i-rossijskaja-oboronnaja-promyshlennost/).

            In evaluating the impact of sanctions, Luzin says, it is important to remember that they are less about forcing the target to change his actions than to increase his costs and limit his freedom of action, even as they occur in a situation which allows those who impose them to keep their own freedom of action.

            According to the Russian analyst, Western sanctions have not led to a split in the Russian ruling group but they have “inflicted fundamental harm on the Russian political system through the defense sector. Moscow has always assumed that it can adapt to sanctions as it did in the 1990s but has discovered that it has far more problems when these continue for long periods.

            That has been especially true with regard to the defense sector, Luzin says. Sanctions have made put a break on Russia’s weapons modernization program by increasing costs of development and forcing Moscow to spend a great deal of money trying to work around sanctions via industrial espionage or the purchase of equipment from third parties.

            Between 2015 and 2018, he continues, Moscow was forced to spend at least 25 billion US dollars more for these various programs than it otherwise would have had to, no small amount given the size of the Russian economy and its state sector. Almost all of this was to support the defense sector and came from transfers from others, increasing tensions.

            Given that the Kremlin faces rising problems at home, such transfers only magnify disputes within the elite even if they do not lead to splits. The recent economic difficulties have only magnified the impact of these sanctions, even if they have not had all the consequences some of their authors expected.

            “In other words,” Luzin concludes, “isolating Russian defense industry from Western producers and technological chains has made it less stable” and affected other sectors from which the Kremlin has taken resources in order to maintain its military posture, angering those involved in them.

            As this has happened, the defense sector has become increasingly opaque, something that has allowed it to take on far more debt than the central government wants and creating a problem that the regime will eventually have to address in order to prevent a collapse that would spread across the economy.

            This week, the US increased the stringency of its sanctions regime against Russian defense industry, bringing it into line with what it has already done with respect to  China and Venezuela (govinfo.gov/content/pkg/FR-2020-10-29/pdf/2020-23962.pdf and  krizis-kopilka.ru/archives/81241).

            That will only intensify the problems Luzin describes.