Alexey D Muraviev
Following the launch of Russia’s invasion of Ukraine on 24 February 2022, the United States, Europe and some Asia Pacific nations have imposed an extraordinarily tight sanctions regime on Moscow. Although the United States and its allies refused to counter Russia’s offensive militarily, the severity of the new sanctions regime can arguably be seen as a declaration of economic war on the Russian state.
Among the first Russian assets to be targeted were its massive national defence industry and associated banks. But it remains to be seen how these new sanctions will impact Russia’s capacity to export defence technologies and systems to the Indo-Pacific.
The Indo-Pacific defence market is among Moscow’s top defence business priorities. Over the past 20 years, Russia has, alongside the United States, consolidated its position as one of the two principal providers of defence capabilities to Indo-Pacific partners and clients while also establishing market dominance in regions such as Southeast Asia.
Russia’s 2014 annexation of Crimea triggered the first round of targeted sanctions against its defence enterprises, a move that coincided with the decision by Ukrainian authorities to suspend military–technological cooperation with Moscow. Russia was forced to seek alternatives for an array of technologies — among them ship turbines, aircraft engines and fire control systems — previously supplied by Western or Ukrainian manufacturers.
Russia initiated a program aimed at reducing the import dependency of the national defence industry as part of a broader strategy of increasing self-sufficiency, otherwise known as importozameshchenie. The industry received special government support alongside Rb 3 trillion (US$9.7billion) to upgrade the country’s defence design and production capability.
With the exception of high-tech products like central processing units (CPUs), over 80 per cent of the commodities and components used by the Russian defence industry were produced domestically by early 2022. The Taiwan Semiconductor Manufacturing Company was until recently responsible for manufacturing the Russian-designed ‘Elbrus’ dual-use CPU, but Taiwan’s role as a reliable provider of critical components for the Russian military was compromised after Taipei joined the US-led sanctions regime this year.
Given the intensification of Russia’s offensive operations in Ukraine and associated material losses, the Kremlin is likely to make the replenishment of used or lost armaments and equipment a priority. According to Russia’s Deputy Prime Minister Yuri Borisov, who is responsible for the defence industry, the government is confident that the state defence order for 2022 will be completed.
The higher self-sufficiency of the Russian defence industry compared with 2014 will give Moscow some confidence in its ability to continue to meet foreign contract obligationsRussia’s steady export of military technology represents an avenue of earning much needed hard currency or important goods or commodities in exchange for weaponry under individual barter arrangements.
China could become a temporary lifeline for CPUs and other foreign-produced components, though Russia is likely to invest in the development of local production facilities in the long term — in part because of concerns about the quality of Chinese products. Additionally, Russian may attempt to reanimate some of the Soviet Cold War practices of acquiring much need components via third parties.
The need to replenish the Russian military’s losses in Ukraine and an emerging shortage of microelectronic components may temporarily halt the export of high-end defence products. As an interim measure, Moscow may offer regional clients more off-the-shelf military equipment from its domestic surplus.
Russia can also breathe a sigh of temporary relief that, despite significant pressure from the West, its main regional clients remain reluctant to compromise their strategic relations with Moscow. China, India, Vietnam, Pakistan and ASEAN show little appetite for condemning Russian aggression, while the ruling military junta in Myanmar has expressed support for the Kremlin.
The current systematic destruction of Ukraine’s defence enterprises undermines Kyiv’s capacity to export defence goods, including to the Indo-Pacific, where it had solidified a niche market presence. Prior to the war, China and Thailand were among the top consumers of Ukraine’s defence technology, occupying 36 and 17 per cent of the country’s total defence exports respectively. Pakistan and India also featured prominently in Ukraine’s defence exports.
The immediate impact of Russia’s actions has already been felt by Ukraine’s regional clients like India. Should Russia succeed in completely destroying Ukraine’s capacity to design, manufacture and sell weaponry, it may open up opportunities for Moscow to consolidate its position with Kyiv’s former customers.
Russian defence exports to the region are in a grey zone filled with challenge and opportunity. There is a risk that sanctions and the bloody war with Ukraine will disrupt Russia’s capacity to promote its high-tech products. With the war dragging on amid mounting human costs, Russia’s regional defence clients, perhaps with the exception of Myanmar, may find it difficult to ignore Russia’s aggression — eventually forcing them to rethink their strategic engagement with Moscow. But there are opportunities for Moscow to gain ground by replacing Ukraine as an alternative supplier of Soviet weaponry to the Asia Pacific.
Should Russia secure a military victory over Ukraine, Moscow will likely use it to promote its military hardware. A military defeat would inflict serious damage on the reputation and appeal of Russia’s defence products — damage likely to be exploited by competitors like the United States. But what is clear is that regardless of the outcome of the war and the impact of sanctions, Russia will fight hard to keep its place in the regional defence market.
Alexey Muraviev is Associate Professor of National Security and Strategic Studies at Curtin University, Western Australia.
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