Russia has significantly outperformed Europe in expanding defense production since its full-scale invasion of Ukraine, posing a strategic threat to NATO’s deterrence capabilities, according to a comprehensive new report by the Royal United Services Institute (RUSI).
The report, “Winning the Industrial War: Comparing Russia, Europe and Ukraine, 2022–24,” reveals that despite having a much smaller economy than NATO members, Russia has successfully mobilized its defense industry to outproduce European nations in military equipment throughout 2022-2024.
“Russia’s continuing advantage in defence production poses a strategic threat to NATO and the credibility of its conventional deterrence,” warn RUSI analysts Oleksandr Danylyuk and Jack Watling. “It poses a catastrophic risk for Ukraine, since its international partners have become its strategic depth.”
Russia’s effective industrial mobilization
According to the RUSI study, Russia’s success stems from a well-developed industrial mobilization plan implemented early in the war. Moscow’s centralized approach has enabled rapid coordination across its defense sector, with state corporations like Rostec, Roscosmos, and Rosatom playing crucial roles.
The report details Russia’s remarkable production increases.
- Artillery ammunition production has grown dramatically, with 152mm shell production rising from 250,000 in 2022 to over 1.3 million in 2024.
- Russia also successfully scaled production of cruise missiles, with Kh-101 output increasing from 420 units in 2023 to over 500 in 2024, while 9M723 ballistic missile production jumped from 250 to more than 700 in the same period.
To achieve this expansion, Russia invested heavily in modernizing facilities, redirected funds from civilian sectors, and implemented special financing mechanisms. The Kremlin ensured defense enterprises could secure low-interest loans (5-6% annually) while offering wage incentives to attract workers, including students and even prisoners.
“The Russian leadership decided to wage a war of attrition against Ukraine, counting on the unwillingness of Kyiv and its Western partners to maintain the necessary level, pace and duration of funding,” the report notes.
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Europe’s failed industrial response
In stark contrast, European nations have struggled to convert capital and intent into increased production capacity. Despite ample rhetoric and funding announcements following Russia’s invasion, actual output has remained disappointingly low.
The EU initiative to deliver one million artillery shells to Ukraine within a year achieved only half its target, with framework agreements through the European Defence Agency resulting in just 80,000 new shells contracted. Much of the ammunition delivered came from dwindling existing stocks or international market purchases rather than expanded production.
RUSI identifies several key factors behind Europe’s poor performance:
- Lack of coherent industrial mobilization plans and data to support rapid scaling
- Fragmented, market-based approach without effective government coordination
- Unwillingness to provide long-term contracts that would justify capacity investments
- Poor understanding of supply chain vulnerabilities, particularly in explosives and propellants
- Excessive regulatory barriers slowing response time
- Absence of effective multinational coordination despite interdependent supply chains
The cost disparity is equally telling. While Russia fixed the price for 152mm ammunition at approximately $1,000 per shell, equivalent European 155mm rounds now cost between $4,000-8,000 each, limiting how much support Ukraine’s partners can provide within fixed budgets.
“For most of Europe,” the report concludes, “the market has proven a very poor driver in response to the conflict.”
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Ukraine’s emerging defense industry offers a solution
Amid these challenges, the RUSI analysis identifies Ukraine’s rapidly developing defense industry as a potential game-changer for European security. Despite severe constraints, Ukraine has shown remarkable resilience and innovation in scaling defense production.
Ukrainian manufacturers tripled weapons production in 2023 and have continued expanding capacity despite frequent Russian attacks targeting industrial facilities.
By October 2024, approximately half of all ammunition used by Ukrainian forces was domestically produced.
The country now manufactures both Soviet-caliber 152mm and NATO-standard 155mm artillery shells, with the latter costing only about $1,500 – significantly undercutting European prices.
Ukraine’s manufacturing ecosystem has also demonstrated exceptional innovation, particularly in unmanned systems. The country now produces over 100,000 drones monthly through more than 120 companies while also developing sophisticated electronic warfare systems like Sky Fortress at a fraction of Western costs.
The report highlights successful European-Ukrainian partnerships already proving the concept.
Denmark financed production of 18 Bohdan self-propelled howitzers that were manufactured and delivered within just two months. In September 2024, Denmark signed a further agreement worth $630 million for Ukrainian weapons production, with nearly $440 million funded through frozen Russian assets. Similar initiatives are emerging with Lithuania, Norway, Latvia, and the UK.
“With proper investment and partnership, Ukraine’s 500 defense enterprises employing 300,000 personnel could become a crucial component in strengthening European security while simultaneously supporting Ukraine’s economy and defense capabilities,” the report suggests. These enterprises contributed 1.5% to Ukraine’s 4.9% GDP growth in 2023.
The RUSI analysis particularly recommends joint ventures where Western countries could provide sensitive components and technology while Ukraine manufactures other parts at lower cost. Such partnerships could create mutually beneficial arrangements that address Europe’s production shortfalls while building Ukraine’s industrial capacity.
As Europe faces the prospect of greater self-reliance with potentially reduced US support, the report concludes that integrating Ukrainian production capabilities may be the most effective path to rapidly enhance European security while simultaneously strengthening Ukraine’s defensive capabilities and economic resilience.
