10/30/2025
Problems with the Russian budget have hit the defense industry. The Russian publication “Arbat Media”, citing statistical data, published a report that production in Russia at military factories, which were previously the main source of economic growth, has begun to decline.
The military-industrial sector, which accounted for trillions in budget spending, has experienced a sharp slowdown in growth. The arms-related industry has gone from stable development to stagnation. Thus, the output of finished metal products, which grew by 26.4% in 2023 and by 31.6% in 2024, in September 2025 decreased by 1.6% year-on-year. Compared to August, the overall decline was 20%, Raiffeisen bank reports. Analysts note that the decline in the defense industry has reduced the entire production index, which grew by only 0.4% in September compared to 2.4% in August. Natalia Orlova, chief economist at Russia’s Alfa Bank, attributes this to budget problems. According to her, the state defense engineering complex also showed a decrease – minus 0.1% after growing by 15.7% a month earlier. The expert believes that the tightening of fiscal policy may lead to a further slowdown in industrial growth in the coming months.
In September, the growth rate of the Russian military industry began to decline. Production indicators are decreasing, and the enterprises of the defense-industrial complex are experiencing a shortage of components, personnel, and logistical resources. Even huge budget injections no longer compensate for the structural problems accumulated over the years of militarization.
Despite the huge spending on state defense orders from the budget, Russia’s military-industrial complex has shown a decline in production for the first time. Experts note that the Russian economy has exhausted the resource of military growth, and the bet on a constant increase in military spending is no longer working. The symbolic collapse of this sector in September was a clear sign that the “military miracle” of the Russian economy is approaching its limit. The industry, which the Kremlin calls the “locomotive of the economy”, no longer demonstrates its former scope. Against the background of a general weakening of the economy, the last hope that kept the militarized Russian system afloat is collapsing.
While the authorities are hastily busy supporting oil refining and export revenues, the military-industrial complex is losing its stability and growth inertia. Russia is facing the burnout effect of the military development model: the economy, “sharpened” for war, is losing its balance and is entering a protracted weakening, where military priorities no longer save, but only exacerbate the overall decline in GDP. All this, together with budget constraints and new sanctions, will lead to stagnation.
Forecasts of the collapse of the Russian economy are becoming more and more realistic, the industrial decline goes beyond the “defense industry”, civilian industries are also “falling” all year and by September went into the red by 1.1%. The manufacturing industry, which until recently was considered the mainstay of domestic production, found itself in a deep recession: a decrease was recorded in 18 of the 24 areas tracked by Russian statistics. Since 2024, representatives of the Russian military-industrial complex have repeatedly complained that the prices set by the Russian Ministry of Defense are forcing the industry to work at a loss. Therefore, even the Kremlin’s multi-billion dollar defense orders do not guarantee that the Russian economy “tied” to the war is able to “pull” the industry out of the hole.
After almost three years of continuous double-digit growth, defense enterprises began to lose momentum, and the military industry began to decline for the first time. The sharpest slowdown is recorded in the metallurgical segment. A similar picture is seen in the category of “other vehicles”, which includes the production of tanks, armored vehicles, and military vehicles. Here, growth fell more than tenfold: from 61.2% in August to just 6% in September. For comparison, in 2023, production in this sector increased by 34.2%, and a year earlier – by 29%. Such a collapse in the pace of development shows that even the defense industry, which has long been considered the “supporting pillar” of the Russian economy, is beginning to lose its stability. An additional blow to the Russian economy is being inflicted by new American sanctions, which for the first time hit the oil giants Rosneft and Lukoil. The loss of the Indian market, which was key, can also sharply reduce foreign exchange earnings and undermine the budget. Against the backdrop of a decline in industry and a slowdown in the growth of the military-industrial complex, the risk of a “hard landing” for the Russian economy is turning from theory into reality.
Russian bankers believe that the industry’s serious problems are related to budget constraints. They predict spending cuts in the fourth quarter to meet the plan, which could lead to “overcooling of the economy.” In addition, analysts expect an even greater blow to the Russian economy due to new US sanctions. At the same time, the Russian top leadership reports on the allegedly successful test of the Burevestnik unlimited-range cruise missile with a nuclear power plant and the need to develop the appropriate infrastructure to deploy this weapon in the Russian armed forces. But against the backdrop of stagnation in the Russian military-industrial complex, even the very fact of a successful test and the issue of developing the infrastructure for the new missile seem unlikely.
The first years of mobilization demand temporarily supported production, but this resource has already been exhausted. Russia’s military-industrial complex is unable to provide an economic multiplier – military orders do not create new technologies and jobs. When budget priorities shift, the industry quickly degrades. The military-industrial complex has exhausted its growth potential. Despite official statements about “resilience”, Russian industry faces a technological and personnel famine. Restrictions on the import of equipment and technologies have deprived enterprises of access to critical components.
Industry has not adapted, it simply survives on the remaining reserves and state subsidies, and sanctions are undermining the industrial base of the economy. Industrial decline leads to the closure of enterprises, rising unemployment and falling real incomes. Mono-cities are again in the position of the 1990s, when the “support” factories cease to be points of development. The authorities compensate for this with propaganda and militarization of consciousness, but not with real opportunities for people. The social cost of Russian stagnation is growing, the authoritarian model of governance is stifling development.
State control and lack of competition make industry inefficient and dependent. Decisions are made not economically, but politically, for the sake of “indicators” and loyalty. Without freedom of entrepreneurship and reforms of management institutions, neither import substitution nor technological breakthrough is possible. Statements about “successful tests” of the Burevisnik missile look more like an element of a propaganda spectacle than a real technological achievement. In the conditions of stagnation of the Russian military-industrial complex, limited access to Western components and financing, such a complex project looks unrealistic. Russia has lost an industrial base capable of stably producing advanced weapons systems, and is making up for this with loud statements about “breakthroughs” not confirmed by independent sources.
News like “Burevisnyk” serves a political function – to divert attention from the worsening economic situation, increasing poverty and falling incomes. Sanctions systematically undermine the economy: exports are declining, imported components are becoming more expensive, and logistics chains are collapsing. Against this background, attempts to increase military spending only exacerbate the imbalance. “Guns instead of bread” are becoming not a metaphor, but a reality, when resources are not spent on development, but on supporting the illusion of military greatness. The Russian government is demonstrating missiles to hide the half-empty refrigerators of citizens and the impasse of industrial policy. The result is obvious: instead of a technological breakthrough, there is imitation, instead of modernization, there is militarization. A significant bill has come to pay for Russia’s unprovoked war against Ukraine. The Kremlin is still pretending not to notice it. But the time of reckoning will soon come.
“A significant bill has come to pay for Russia’s unprovoked war against Ukraine. The Kremlin is still pretending not to notice it. But the time of reckoning will soon come.”
That’s for damned sure.
The West could destroy what’s left of the mafia land economy overnight, but to their shame they are still funding the russian side.
History will never forget the West’s countless mistakes in this war. There are many names that will be stained forever.