• Sanctions Haven’t Stopped Russian Defense Industry From Booming

    Sanctions against Russia have crippled the ruble and prompted high levels of inflation, but one industry appears to have avoided the economic malaise to record profits: the defense industry.

    A strong push from the Kremlin to modernize Russia’s military by 2020 through a massive $350 billion investment has led to a burgeoning defense sector, Defense News reports. Adm. Vladimir Komoyedov, head of the State Duma’s Defense Committee, stated that in 2014, the Russian government allocated $43.8 billion to defense procurements.

    Aside from government investment, defense contractors also took advantage of the surge in exports. In 2014, firms exported $14.2 billion of military hardware to foreign buyers. The export market hasn’t taken a major shift, since most of the buyers are outside the western bloc and include countries like China, India and Venezuela.

    Almaz-Antey, the largest defense firm, jumped 10 percent in revenue to $9.2 billion. Revenue for the United Aircraft Corp grew by 7 percent. Russian Helicopters moved up 16 percent from 2013.

    The Russian defense industry is experiencing a boom, but sanctions mean that the Kremlin can afford only half of what it could two years ago, owing to a floundering ruble and plummeting oil prices. Although Russia maintains a respectable 10 percent debt-to-GDP ratio, it’s been cut off from traditional borrowing sources. But for the defense industry, the problem isn’t so much one of sufficient revenue as it is access to crucial component parts manufactured outside of Russia.

    Russia has been scrambling to find a replacement for Ukrainian-made turbines. Until officials find a suitable substitution, shipbuilding for at least two frigate classes will remain dead in the water.

    Not all countries want to see sanctions extended for the foreseeable future. Slovenia, for example, is pushing for the European Union to end punitive measures put in place following Russia’s annexation of Crimea from Ukraine last year, as trade between Slovenia and Russia has suffered greatly as a result.

    “Slovenia wants to see an end to EU-imposed sanctions against Russia as it’s hurting trade between the two nations,” Slovenian Prime Minister Miro Cerar said on Monday, according to Bloomberg. “We will press our case with the rest of EU, but it’s the whole EU that has to take the final decision.”

    Greece has also gone on record espousing the same message.

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