Russian dominance in weapons exports, the second largest in the world behind the United States at 25% of the market, could falter as China and India become more self-sufficient and economic conditions internally could take their bite. Moscow has historically excelled at air defense systems, aircraft, and missiles; however, there is increased competition on the way from Asia.
An aging workforce and an education system that is not effectively tied to the defense industry is also impacting future business opportunities. The uncertainty of continued Western sanctions is placing additional stress on the defense sector in the Russian economy, reports IBD.
Sanctions have also restricted the ability of Russia to offshore production of certain parts, forcing domestic factories to step in. A report by the Chatham House Think Tank outlined these trends and highlighted weak after sale support by Russia as an additional factor.
With the price of crude oil on international markets refusing to break the $50 handle to the upside, diversifying the Russian economy away from hydrocarbons is a serious concern for the Kremlin going forward to maintain growth as the economy starts to slowly recover from the recent crisis. Defense exports, in addition to food production, have been helpful in this regard.