After two consecutive years of decline in defense expenditure in the years 2017 and 2018, Russian defense spending recovered in 2019 and is valued at US$46.1 billion for 2019. The total allocation for 2019 marks the first surplus budget for the Russian Federation. The country, buoyed by the recent recovery in oil and gas prices, is anticipated to steadily increase its funding for the defense sector. Russia’s defense expenditure is expected to register a CAGR of 5.46% over the forecast period to reach US$59.3 billion by 2024.
Russian defense modernization has traditionally been funded by booming oil and gas profits; however, the crash in the global energy market resulted in an erosion of the country’s revenues and forced the country to adopt austerity measures to cut down on government expenditure during the historic period. As a consequence, Russian defense expenditure declined drastically from US$56.7 billion in 2016 to US$48.9 billion in 2017 and US$45.2 billion in 2018.
With the recovery in global energy prices, Russia’s financial position has slowly started to improve, and the value of its Ruble has started to recover against the US dollar. Starting in 2019, Russian defense expenditure is anticipated to start reflecting a positive growth trend and increase from US$48 billion in 2020 to US$59.3 billion 2024, reflecting a CAGR of 5.46% 2020–2024. Russian defense capital expenditure is anticipated to witness concurrent growth, increasing from US$24.6 billion in 2020 to US$30.3 billion in 2024, reflecting a CAGR of 5.46%.
The capital expenditure allocation, which stood at an average of 47.4% during the historic period, is expected to increase to an average of 51% over the forecast period, primarily due to Russia’s decision to build-up its forces in the Arctic, which is expected to drastically increase its funding to create infrastructure within the Arctic. The country is expected to focus on the modernization and procurement of C4ISR systems, transport aircraft, naval vessels, multirole aircraft, and conventional and nuclear submarines, among others. In November 2017, Russia unveiled its new modernized TU-160M2 Blackjack strategic bomber, which is scheduled to enter service by 2021.
Russian homeland security (HLS) expenditure stood at US$37.1 billion in 2018 and recorded a CAGR of -9.57% during the historic period. However, it is expected to record a CAGR of 5.22% over the forecast period to value US$45.8 billion in 2023. This expenditure is primarily driven by the need to protect the country from cyber threats and to strengthen its border protection.
Russian defense exports expected to increase over the forecast period. Aircraft accounted for 48.4% of Russia’s total arms exports during 2013–2017, as a result of strong international demand for the country’s Sukhoi and MiG fighter jets. Russian weapons and equipment are in high demand internationally, due to its affordability and performance standards. India, China, Vietnam, Algeria and Egypt are among Russia’s biggest defense export consumers but have reduced procurements over the last couple of years. As a result, the Russian government is now focusing on expanding its export market to countries in South America and Africa. Other major consumers of Russia’s military goods include Azerbaijan, Iraq, and Venezuela, among others.
The report “Russian Defense Market - Attractiveness, Competitive Landscape and Forecast to 2024” offers detailed analysis of the Russian defense market with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.
In particular, it provides an in-depth analysis of the following -
- The Russian defense industry market size and drivers - detailed analysis of the Russian defense industry during 2019–2024, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country’s expenditure and modernization patterns
- Budget allocation and key challenges: insights into procurement schedules formulated within the country and a breakdown of the defense budget with respect to capital expenditure and revenue expenditure. It also details the key challenges faced by defense market participants within the country
- Porter’s Five Force analysis of the Russian defense industry: analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry
- Import and Export Dynamics: analysis of prevalent trends in the country’s imports and exports over the last five years
- Market opportunities: details of the top five defense investment opportunities over the next 10 years
- Competitive landscape and strategic insights: analysis of the competitive landscape of the Russian defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.
- Russia’s defense expenditure in 2019 values US$46.4 billion, recording a CAGR of -3.11% during the historic period, and is expected to cumulatively value US$268.4 billion over the forecast period. Russia, as the largest country in the world, spans across an area of 17.1 million km? and therefore has the longest land border in the world. The country shares its land borders with 16 different countries, and also shares maritime borders with Japan, via the sea of Okhotsk, and the US state of Alaska, across the Bering Strait. The country remains deeply distrustful of the expansion of the NATO alliance and perceives it to intrude within its sphere of influence. The need to deter NATO is anticipated to fuel investments in the Russian defense sector and the country is expected to progressively increase defense spending.
- During the historic period, the Russian government allocated an average of 47.4% of its total defense budget to capital expenditure and the remaining 52.6% to revenue expenditure. Capital expenditure is expected to increase over the forecast period to an average of 51%, owing to the Russian government’s decision to speed up its defense modernization program under its new State Armaments Program (SAP) 2027.
- The MoD is expected to mainly invest in Critical Infrastructure Protection (CIP), land based C4ISR, and airborne C4ISR capabilities.
Reasons To Buy
- This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Russian defense industry market trends for the coming five years
- The market opportunity section will inform the user about the various military requirements that are expected to generate revenues during the forecast period. The description includes technical specifications, recent orders, and the expected investment pattern by the country during the forecast period
- Detailed profiles of the top domestic and foreign defense manufacturers with information about their products, alliances, recent contract wins, and financial analysis wherever available. This will provide the user with a total competitive landscape of the sector
- A deep qualitative analysis of the Russian defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts
Companies mentioned: United Aircraft Corporation (UAC), Sukhoi, Irkut Corporation, Rostec, Uralvagonzavod (UVZ), Splav, KBP Instrument Design Bureau, V.A.Degtyarev Plant, Kalashnikov Concern, Oboronprom Corporation, United Engine Corporation (UEC), Tactical Missiles Corporation,Almaz-Antey, Kurganmashzavod, and United Shipbuilding Corporation (USC).