Defense Industry As a Black Hole: How the Military-Industrial Complex of the rf Is Swallowing up the Civilian Economy and Failing to Save Even Those Who Work for It

For years, moscow has been promoting the narrative of the military-industrial complex as the engine of economic growth. The reality turned out to be fundamentally different. The military-industrial complex functions as a giant pump that sucks resources out of all other sectors, including the enterprises that directly serve it.

Every third ruble of the federal budget is spent on the war – and even that is not enough. The real hole in the treasury has reached 8.01 trillion rubles, compared to the official 5.65 trillion rubles reported by the ministry of finance of the rf. Compared to 2024, the deficit has grown by 130%, and the ministry of finance’s initial plan has been exceeded almost seven times. The actual deficit in 2025 was by 41.8% higher than officially declared and amounted to 3.7% of GDP instead of 2.6%. Almost all sectors of russia’s economy are showing a decline, while the official statistics does not reflect the real state of affairs. Even companies that directly serve the war are on the verge of bankruptcy.

Illustrative is the situation in nizhny novgorod region – one of the country’s key industrial regions. The “composite factory”, with production facilities covering more than 20,000 square meters, fulfills direct state defense orders under the control of the ministry of defense. Despite this, in early 2025, the tax service imposed a collection penalty on the company’s accounts in the amount of 215 million rubles (~$2.4 million). The accounts were frozen. The enterprise, which had valid defense contracts, came to a standstill.

Another nizhny novgorod manufacturer, “regional industrial company”, faced the consequences of war inflation. Credit lines opened in 2023 at 10.5–13% had already reached 29.4% by early 2026. Turnover in 2024 was almost three times higher than in 2022, and the company was called “exporter of the year”. In 2025, turnover fell below the levels of the year 2022. In February 2026, payments effectively stopped: there is shortage of money for salaries, taxes, and purchase of raw materials. The company is developing the “aerokrafter 3010” UAV, but the project is in serious danger of being scrapped. Requests to regional authorities for refinancing of 93 million rubles and allocation of additional 50 million remain unanswered.

The model chosen by russia leads to systemic degradation: the state finances the military-industrial complex, the military-industrial complex draws away personnel and resources, civilian industry declines under the pressure of expensive loans, while enterprises working for defense needs are being destroyed by tax pressure and a debt spiral.