With its 13th sanctions package against Russia, the European Union is once again targeting the Russian defense apparatus. Although Moscow can continue to produce weapons with its war economy, production is still suffering from the embargoes, says expert Michael Rochlitz in an interview. Rochlitz is Professor of the Economies of Russia, Eastern Europe and Eurasia at St. Antony’s College, University of Oxford.
ntv.de: The European Union’s sanctions have been aimed at damaging Russia’s defense industry since the invasion of Ukraine began. Did it work out?
Michael Rochlitz: On the one hand, the sanctions were intended to make it more difficult for the Russian defense industry to arm and produce weapons. That worked. On the other hand, there was hope that an opposition against President Vladimir Putin would form among the Russian oligarchs, as the EU had sanctioned almost 2,000 people. You are not allowed to enter. Your funds abroad have been blocked. The hope was that these people would oppose Putin because they would suffer directly from the war being waged through the sanctions. But that didn’t work.
Michael Rochlitz is Professor of the Economies of Russia, Eastern Europe and Eurasia at St. Antony’s College, University of Oxford.
Why has the hope of an opposition building up in Russia been dashed?
Through his intelligence and security services, Putin has control over all other political and economic actors in the country. Entrepreneurs and oligarchs are divided and atomized. There are no clubs, associations or unions that operate independently of the Kremlin and in which they can organize to put pressure on politicians. Although many of them are suffering greatly from the sanctions because the entire European market has been lost to them. This is a catastrophe for the Russian civilian economy.
Nevertheless, the shift to a war economy allows Russia to continue producing weapons on a large scale. To what extent have the sanctions against the arms industry worked?
The war has become a major material battle. Russia still has a large arms industry from Soviet times and is also using and expanding it. Military goods are now being produced on a large scale, which are often immediately destroyed in Ukraine and have to be produced again. However, weapons currently manufactured are mainly from the 1960s and 1970s and are based on Soviet technology. You don’t need any high-tech goods from abroad. Russia has tried to modernize its military over the past ten years. Putin has repeatedly presented new weapons, such as supersonic missiles or the T-14 Armata main battle tank. However, this is practically not used in Ukraine because Russia needs Western components for production that are no longer available. It is not impossible to purchase these components. However, the sanctions have made importing more difficult for Russia. This only works via complicated routes via third countries, at high prices and in small quantities.
So Russia is circumventing EU sanctions. The country is still getting Western spare parts for weapons. The trade takes place through an opaque network of subsidiaries in countries such as Turkey, Kazakhstan, Kyrgyzstan and Armenia. Can such sanction holes be plugged?
In December 2023, sanctions were tightened to prevent the further export of technology goods from third countries to Russia. If critical high-performance technology from the West arrives in Russia, companies that manufactured this technology and sold it to companies in Kazakhstan, for example, could be prosecuted. The EU is trying to understand how effective the sanctions have been so far, how they are being circumvented, and then making adjustments with each new package of sanctions. The whole thing is a long-term and iterative process.
The EU is now working on its thirteenth sanctions package. The plans envisage penalizing companies that contribute to Russia’s military and technological strengthening or the development of its defense and security sectors. Why aren’t these companies already under sanctions?
This is more complicated than expected. One might think: Let’s just sanction all companies that supply military goods. However, there are many so-called dual-use goods that can be used in both the military and civilian sectors. It’s difficult to draw the dividing line. The EU is trying not to sanction agriculture, consumer goods and pharmaceuticals in order to protect the Russian population. At the same time, attempts are being made to hit the arms industry as best as possible. However, many goods can be used here and there. The sanctions packages are now really complex. Companies employ entire departments to familiarize themselves with it and understand what can and cannot be exported.
What weapons can Russia no longer build because of the sanctions?
Supersonic missiles are only produced in small quantities and are now imported from North Korea. There were also repeated problems with the T-14 Armata tank. It stopped at a parade on Red Square years ago. But Russia doesn’t need absolutely high-tech weapons that hit precisely over long distances. What the country needs is large quantities of ammunition. Every day thousands of shells are fired in a barrage. For this, Russia does not need the most expensive grenades. The drones supplied from Iran are also cheap. The idea is to fire cheap drones at Ukraine so that Ukraine has to use its expensive anti-drone missiles. The problem is that the defensive weapons here are more expensive than the offensive weapons.
So Putin is tactically relying on attrition and his strategy is working?
Exactly. Russia can continue this war for at least another two or three years. This year, 30 percent of Russia’s budget will go directly to defense. Another ten percent will be invested in the security sector, i.e. in the police, security and secret services. Compared to Western countries, these investments are enormous. In Germany, just 1.5 percent of gross domestic product currently goes to defense. Most Western countries cannot achieve NATO’s goal of spending at least two percent of gross domestic product on defense. But Russia is using six percent of its economic output to wage this war. Ukraine relies on the support of its European partners, who have a much smaller defense budget than Russia. And from these budgets, most of the money goes to the maintenance of its own armies, and only a little is made available directly to Ukraine.
But the switch to a war economy also has negative consequences for Russia, right?
One consequence is the reconstruction of the military-industrial complex in Russia. In the end, the Soviet Union failed precisely because of this. It has bloated ministries and created thousands of administrative jobs. There were many people who depended on the war industry to continue running. These lobby groups are now being rebuilt through the massive promotion of the war industry. When the war is over, these people are afraid of becoming unemployed. They will resist ending the war. That is why economic growth based on war is not sustainable. The Russians build weapons that are destroyed in Ukraine in order to then build new weapons. Every potential grenade that needs to be produced is initially counted as positive for economic growth. But these are not investments in the future. This economy will collapse if the war ends.
Lea Verstl spoke to Michael Rochlitz