Kiev will have an easier time severing military-industrial ties than Moscow will.
Harsher sanctions, meant specifically to limit technologically advanced imports to the Russian armaments industry, are on the way from the countries of Europe and North America. In response, President Putin earlier this week convened a meeting of officials from government and industry on “import replacement.” The sanctions, he asserted in his opening remarks, will provide “needed incentive to develop our production capability in areas where we had not done so yet.” But while Putin said that Russian industry is “definitely” capable of producing everything that the Russian military needs, doing so will come with a cost.
Doug Irwin of Dartmouth College studied this question about ten years ago in the context of another grab for autarky—the closure of US ports to all overseas shipping in 1807. The issue at the time was also war: the Napoleonic Wars, during which British and French warships were roughing up American merchants in their efforts to impose their alternating versions of blockades. To avoid military entanglement (at least until 1812), the US government took the Spartan approach to international trade: just say no. For over a year, the country was awash with agricultural products it didn’t need, so prices for farmers crashed, which admittedly benefitted the hungry. It was also sorely lacking manufactured goods, which delighted domestic producers, but impoverished consumers. Given the assaults on efficiency, the net costs were notable. In 1806, international trade had accounted for about 13 percent of US GDP; by 1808, the country had lost fully 5 percent of total GDP. (See “The Welfare Cost of Autarky: Evidence from the Jeffersonian Trade Embargo, 1807–1809,” Review of International Economics, 2005.)
The Russians will now have, on a relatively smaller scale, the same problem: Russia was buying inputs for its weapons—or whole helicopter carriers—overseas because its domestic alternatives are either too expensive, lacking in quality, or just altogether unavailable. While the Russian and Soviet Navies have had larger ships, new carriers were sought from France’s SFX because all the earlier ones had been built in Ukrainian shipyards. That possibility is now wholly foreclosed. In the short run, the Russian armed forces may face supply shortages, particularly in systems that had entirely come from abroad, such as helicopter engines from Ukraine’s Motor Sich. In the long run, Mr. Putin can build out those segments of industry, but only at considerable cost. And as the world probably does not need another state-subsidized turbine manufacturer, overseas sales will not materialize overnight, particularly if the sanctions regime sticks.
Eventually, an entire state-sanctioned upstart enterprise can be successful—but recall that even Brazil’s very accomplished Embraer was for decades a cash-devouring monster in a country that could ill-afford it. Ukraine, on the other hand, already stands amongst the ranks of the world’s largest arms exporters; its defense industry has been one of the few international money-makers to navigate the two lost decades of its corruption-fueled economic oppression. In replacing future sales foregone in Russia, Ukraine’s task is easier: it has the world from which to choose in finding new customers. Russia, on the other hand, must find new inputs in Russia alone. Russian taxpayers will pay more, and the Russian military will struggle with supply for some time. The end result may be self-sufficiency, but only at a steep price.
James Hasik is a senior fellow at the Brent Scowroft Center on International Security.