Russia Makes Great Money On Wars

Apparently, Russian defense companies are making record-breaking earnings even though the country is struggling due to Western sanctions.

“Russian defense firms featured in this year’s Defense News Top 100 ranking saw surging revenues as exports reached new highs and the government poured money into defense procurement,” Defense News reported in its article.

Defense News provides an example of a company that saw a 48.6 percent rise in its annual revenue to $2.8 billion – the Tactical Missile Corporation JSC. Meanwhile, Russia’s major producer of air defense systems and equipment, Almaz-Antey, saw a 10 percent rise to $91.2 billion (up $882.5 million) compared to 2013.

According to Defense News, there is also a number of other companies that achieved great success, including “the United Aircraft Corp., which owns Sukhoi, MiG and Irkut, and saw revenues rise 7 percent to $6.2 billion; Russian Helicopters, which finished at $3.96 billion, up 16 percent over 2013; and the United Engine-building Company, which saw a 25 percent increase over 2013 revenues to $3.3 billion in 2014.”

It is also important to note that the world’s largest main battle tank developer UralVagonZavod, which has recently presented its brand new cutting-edge T-14 Armata main battle tank saw only one percent revenue rise in 2014.

However, the tank manufacturer is expected to see great increases in its revenue due to the mass production of the T-14 tanks that is due to be launched in 2017. Russian Defense Ministry expects the company to produce a total of 2,300 T-14 tanks by 2020.

The problem is that such a huge order will cost Russia $8 million per unit, which raises questions of whether the Kremlin will be able to withstand such expenses amid the plummeting oil prices, weakness of ruble as well as U.S. and EU sanctions, which have been recently renewed for another six months.

Is there enough money for Putin’s military appetite?

There are a few explanations for such a hike in the defense industry of Russian President Vladimir Putin’s country. First of all, Russia saw major exports in 2014: the country sold military hardware worth of about $13.2 billion. It is also interesting to note that Russia exports its military equipment mostly to non-Western countries such as China, India, Venezuela and others.

Second of all, Russia’s domestic spending. Mr Putin launched a $400 billion, decade-long military modernization campaign back in 2010. The modernization is aimed at replacing about 70 percent of old Soviet-era military hardware with new cutting-edge military ‘toys’ (including Armata T-14) by 2020.

The modernization will include 50 new warships for Russian Navy, hundreds of new fighter jets as well as thousands of brand new heavy military hardware for Russian forces.

As Western sanctions still stand and Russian economy is declining day by day, it does not seem possible that the Russian government will be able to withstand such expanses.

After a year since imposing critical financial sanctions against Russia as well as Russia’s grocery embargo in response, Russian economy continues its free fall, while Putin does not do anything to get his country out of the crisis. It seems that the only ‘strategy’ that the government follows today is to simply wait for crude oil to go up in price again. But what happens if it won’t go up?

Russia struggles with consequences of its own stupidity

During foreign exchange trading in Moscow on July 28, Russia’s ruble currency had the cost of one U.S. dollar rising over 60 rubles for the first time since March 20. It happens a year after the beginning of a serious sanctions war.

On August 1, 2014, the European Union had cut Russian governmental banks from Western capital markets. In return, the Kremlin put an embargo on importing groceries from the countries that imposed sanctions against Russia, which led to the growing inflation.

In December 2014, Russian government responded to Russia’s currency plummeting by doing a little bit of crisis management and increasing the key interest of the Bank of Russia. However, ever since then there haven’t been any critical economic steps made in order to improve the life of Russian citizens.

All the Russian government is doing is diving the budget among ‘their own people’, while Russian lawmakers appear on Russian TV channels urging to ban Western products in Russia, building plans how they would destroy the West and other ridiculous things. However, nobody seems to care about social and political reforms in Russian national economy.

When Will Russian Society Wake Up From Putin’s Nightmare?

Here is a short list of what Russia has come up with in the recent days: burning up sanction products at the borders – the idea was proposed to Putin by the minister of Russia’s agriculture. Is it really what Russia needs right now instead of improving the state of Russia’s agricultural industry?

Other ministers expressed an idea to ban the import of Dutch flowers as a response to the Netherlands initiating an international tribunal on the case for the Malaysian The Boeing Company (NYSE:BA) accident in Ukraine.

It was also proposed to create National rating agency, as if foreign investors would believe in Russia’s overblown ratings and