U.S., European and Ukrainian officials say Russia has managed to overcome Western-imposed sanctions and export controls to expand its missile production beyond pre-war levels, leaving Ukraine particularly vulnerable to intensified attacks in the coming months.
In addition to spending more than $40 billion on weapons for Ukraine, the United States has made curbing Russia’s military stockpile a key part of its strategy to support Kiev.
As a result of the sanctions, U.S. officials estimate that Russia was forced to dramatically slow production of missiles and other weaponry for at least six months at the start of the war in February 2022. But by the end of 2022, military-industrial production in Moscow began to pick up speed again, US officials who spoke on condition of anonymity to make the sensitive assessment public now admit.
Russia undermined U.S. export controls by using its intelligence services and the Department of Defense to run illegal networks of people who smuggle key components by exporting them to other countries from where they can be more easily shipped to Russia. In less than a year since the war began, Russia has rebuilt trade in crucial components by routing it through countries such as Armenia and Turkey. U.S. and European regulators have tried to work together to curb chip exports to Russia but have struggled to stem the flow through countries linked to Moscow.
Russia’s renewed military output is especially worrying because Moscow has used artillery to target Ukrainian soldiers on the front lines, and used its missiles to attack the power grid and other critical infrastructure, and to terrorize civilians in cities. Officials fear that increased missile stockpiles could mean a particularly dark and cold winter for Ukrainian citizens.
In the meantime, the Pentagon is working on ways to help Ukrainians better take down the missiles and drones that Russia has fired at civilian targets in Kiev and military targets across the country. The Pentagon has supplied Patriot air defense systems and persuaded allies to supply S-300 air defense munitions, both of which have proven effective. It has also provided other air defense systems such as the Avenger system and the Hawk air defense system.
But Ukraine does not have enough air defense systems to cover the entire country, and must pick and choose the locations it defends. An increasing barrage of missiles could overwhelm the country’s air defenses, Ukrainian officials said.
In October 2022, the United States gathered international officials in Washington in an effort to strengthen sanctions on the Russian economy. At the time, U.S. officials said they believed the sanctions and export controls worked in part because they prevented countries from sending microchips, circuit boards, computer processors and other components needed for precision-guided weapons, as well as necessary components for diesel engines, helicopters and other aircraft. tanks.
But Russia quickly adapted with its own efforts to secure supplies of needed parts.
Today, Russian officials have retooled their economy to focus on defense production. Thanks to revenues from high energy prices, Russia’s security services and the Defense Ministry have managed to smuggle in the microelectronics and other Western materials needed for cruise missiles and other precision-guided weapons. As a result, military production has not only recovered, but also increased.
Before the war, a senior Western defense official said that Russia could make a hundred tanks a year; now they produce 200.
Western officials also believe that Russia is on track to produce two million artillery shells a year – double the amount Western intelligence agencies initially estimated Russia could produce before the war.
As a result of this pressure, Russia now produces more ammunition than the United States and Europe. Overall, Kusti Salm, a senior official in the Estonian Defense Ministry, estimates that current Russian ammunition production is seven times greater than that of the West.
Russian production costs are also much lower than those of the West, in part because Moscow sacrifices safety and quality in its efforts to build weapons more cheaply, Mr. Salm said. For example, it costs a Western country $5,000 to $6,000 to make a 155-millimeter artillery shell, while it costs Russia about $600 to produce a comparable 152-millimeter artillery shell, he said.
Yet Russia suffers from some shortcomings. The country does not have huge stockpiles of missiles, although they now have more of certain types – such as the Kh-55 air-launched cruise missile – in stock than at the start of the war, according to people briefed on intelligence reports.
“In certain areas they have been able to significantly increase production,” said Dmitri Alperovitch, an international security expert and chairman of Silverado Policy Accelerator, a Washington-based think tank.
In cases where Russia needs millions of a particular part, export controls could bring production to a halt. But the chips needed to make a few hundred cruise missiles fit in a few backpacks, making sanctions evasion relatively easy, Mr. Alperovitch said.
U.S. officials said they can slow but cannot prevent Russia from smuggling the parts it needs to produce missiles, and that it was unrealistic to think Moscow would not respond to U.S. restrictions. One way Russia has adapted is by shipping parts to third countries and then returning them to Russia, the Commerce Department said.
“Because the controls had a real impact, the Russian government didn’t just throw up its hand and say, ‘You’ve got us, we’re giving up,’” said Matthew S. Axelrod, the Commerce Department’s assistant secretary for export enforcement . “They became more and more creative with their evasion attempts. And we’ve been working very aggressively on a number of different ways to get it under control.”
Currently, the United States and the European Union have a joint list of 38 different categories of items that are restricted from export to Russia. U.S. officials said nine of the 38, mostly microelectronics that power missiles and drones, are top priority to block.
U.S. and European officials have worked with banks to develop an alert system to alert governments to potential sanctions violations. So far, US banks have notified the US government of 400 suspicious transactions. The Department of Commerce was able to use a third of these suspicious activity reports in its investigations.
On August 31, the Commerce Department accused three people of participating in an illegal Russian procurement network. One of the three, Arthur Petrov, a Russian-German citizen, was arrested by the Justice Department and charged with export control violations.
Mr Petrov is accused of acquiring microelectronics from US-based exporters with the intention of sending them to Cyprus, Latvia or Tajikistan. Once there, other companies helped send the components further, eventually finding their way to Russia.
One of the challenges for the US government is that Russia doesn’t need high-end chips that are easier to track, but commoditized chips that can be used for a wide range of things, not just guided missiles.
“It makes our job more difficult because there are many countries where it is legal and fine to sell those chips for legitimate commercial purposes,” Mr. Axelrod said. “The problem is when those chips are then diverted and shipped to Russia.”
U.S. and Western officials say there is good news. Russian production is still not keeping pace with the rate at which the military burns ammunition and wears out equipment. For example, although Russia is on track to produce two million rounds of ammunition per year, the country is simultaneously firing more than ten million artillery rounds. That has left Moscow desperately seeking alternative sources to boost its supplies, most recently by trying to secure an arms deal with North Korea, U.S. and Western officials said.
And while Moscow has been successful in smuggling processors and circuit boards, the country faces shortages of rocket fuel and basic explosives, U.S. officials said, material that could be more difficult to smuggle than circuit boards. These shortages are likely to hinder Moscow as it tries to further increase production of munitions, missiles or bombs.
Russia’s increased military production has also come at a large cost to the Russian economy, especially as interest rates in the country rise. Sanctions have taken a toll on the overall health of the Russian economy, and overcoming Western export bans has not been cheap, U.S. and Western officials said. The senior Western defense official said Russia had allocated almost a third of its commercial economy to arms production. The country is facing a labor shortage, which also makes further industrial gains more difficult to achieve.
Russia scaled back its attacks on Ukraine’s energy grid over the summer. But as temperatures drop, some Ukrainian and Western analysts and government officials think Russia could renew its terror campaign against Kiev, hoping it will undermine Ukrainians’ will to fight.
U.S. officials hope the steady supply of air defense munitions and additional aid to improve the way Ukraine intercepts Russian attacks can help counter an increased barrage of missiles. And the Ukrainian defense has – in some situations – become stronger.
“Ukrainians have become better at defending their infrastructure and building defenses around their power plants and critical electricity grids,” Mr. Salm said. “They have become better at repairing and ensuring that the impact of power outages and other utility outages is not as severe.”