Putin rearms. We consult the bean counters.

Two reports ring alarm bells on Western defence industrial strategy

Elsewhere this week I’ve written about new research on the scale of the nuclear arms race. And in other news, the 2022 hack of my email account was finally attributed to Russia’s FSB. This week’s Conflict & Democracy is devoted to Western rearmament - and the absence of the industrial capacity to make it happen.

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Destroyed Russian BTR outside Avdiivka, Ukraine. Unfortunately, there’s more coming off the production lines…

Russia plans to hike defence spending close to a third of its total state budget next year. At 10.8 trillion rubles, Putin’s military budget will be the equivalent of $117bn - or around 6% of Russian GDP.

“Next year, we focus the state’s resources to achieve the main goal of our victory,” said finance minister Anton Siluanov announcing the hike in October. The money, which more than doubles the amount spent on the war this year, will, he said:

“…allow us to solve the tasks set as part of the special military operation, including the supply of weapons and military equipment, material and technical support for military personnel."

Though its production figures have to be viewed with skepticism, given the reported degradation of output quality due to Western sanctions, Russia claims to have already increased tank production sevenfold, with ammunition output now claimed to be 60x its peacetime rate, and production of long range missiles up from 40 per month to 100.

Putin, in short, is drawing on Russia’s strategic depth - and looks likely not only to attempt a long, attritional campaign of strikes on Ukrainian infrastructure over the winter, but a second ground offensive when weather conditions allow.

That is not just bad news for Ukraine. It means that, contrary to the claims of some Western military chiefs, Russia looks ready to rearm rapidly and at scale after any ceasefire, will soon stand poised once again to threaten NATO allies.

What to do about this is both clear and unavoidable: the West needs to go on arming Ukraine, with a concrete response to the requests by Gen. Valery Zaluzhny for a military-technological solution to the impasse on land.

But to do that we need to face uncomfortable facts - not just about Western hesitancy over continued support, but about its physical ability to sustain the fight.

Two articles this week show the dire mismatch between the capacities of the Western defence industry and the demand for rearmament.

The US problem…

The first involves a leak to Politico of the Pentagon’s draft national defense industrial strategy. It warns that the US defence manufacturing base is simply not ready for a major confrontation with a peer competitor like China or Russia. The US defence industry:

“does not possess the capacity, capability, responsiveness, or resilience required to satisfy the full range of military production needs at speed and scale.”

The report, commissioned by DOD procurement chief William Laplante, continues:

“…just as significantly, the traditional defense contractors in the [defense industrial base] would be challenged to respond to modern conflict at the velocity, scale, and flexibility necessary to meet the dynamic requirements of a major modern conflict.”

“This mismatch presents a growing strategic risk as the United States confronts the imperatives of supporting active combat operations … while deterring the larger and more technically advanced pacing threat looming in the Indo-Pacific”.

Let’s break this down. The problem is not just that there is a shortage of physical manufacturing plant, and of skilled workers, and that China has hogged some of the raw materials needed for complex weapons production.

It is that the structure of the industry - which has become globalised and financialised - means that manufacturers can’t invest fast enough to meet the new demand, even though the market signals are plain as a pikestaff. It concludes, plaintively:

“We must solicit entrants of all types: large and small, domestic, and foreign, and those with no previous relationship to the DoD or defense production”.

The European problem…

In the second article, Professor Justin Bronk, a senior research fellow at the Royal United Services Institute in London, shows how the European defence industry faces the same problem, only worse. He writes:

“Russia has now transitioned its economy onto a war footing; US production is not sufficient to replenish its own stockpiles and fulfil Ukraine’s needs; and European countries are trying to manage an increasingly dangerous situation from an unsustainable peacetime defence and industrial posture.”

Professor Bronk notes that, with the exception of Poland, increased European commitments to defence spending have barely materialised. The European Defence Agency’s multinational plan to boost 155mm artillery shell supply to Ukraine is “glacially slow” - while North Korean ammo looks set to give Russian artillery an edge on the battlefield between now and mid-2024.

Here in the UK, the government’s “aspiration” to raise defence spending to 2.5% of GDP remains, well, aspirational - while in the cold reality demonstrated by the NAO report, the British MOD’s ten year equipment budget actually carries a £17bn black hole. Bronk concludes:

In the event of a clash with China in the Indo-Pacific that removes the capacity for large-scale US military reinforcement and support elsewhere, Europe will be left vulnerable to concurrent military aggression by Russia.

This is particularly true because Europe has always relied on the USA for the supply of key weapons and capabilities even at levels of intensity associated with peacetime. Bronk lists SEAD/DEAD, ammunition resupply, tanker aircraft, command and control and satellites as key vulnerabilities, were the attention of the Pentagon to be suddenly diverted to the Pacific.

Paradoxically, the two “Western” allies who have shown capability to ramp up their own arms production in response to the Ukraine war are South Korea and Japan, with the former now one of the biggest supplier of artillery shells to Kyiv.

As for the UK, poised between two strategic allies, our defence industrial situation is a mixture of excellence and a fiasco. It is a microcosm of all the bad stuff the DOD’s report is expected to catalogue - outsourcing, offshoring, skills shortages and the takeover of defence firms by private equity investors looking for short-term returns - without any of the good stuff, like the USA’s manufacturing strength in depth, and the Treasury’s deep pockets, or the state-directed companies common in the Nordic countries.

The politics of rearmament

We’ve been here before - and the lessons of history are learnable if we’re prepared to face them. The essential problem of rearmament, as demonstrated by the British example after 1936, is:

• You need to raise the % of GDP spent on defence rapidly, while keeping the population happy

• You need to reallocate both capital and labour from the civilian sector to the defence sector

• … while expanding the armed forces and the reserves out of the same limited pool of skilled and motivated people.

• And if capital won’t reallocate itself fast enough, you have to use state direction and even state ownership to solve the problem.

This can only be achieved by state control, even if the tools the state wants to use are de-risking of private investment, borrowing instead of taxation etc. Everything has to be explained, phased and executed by government, even if the ultimate builders of all the new machines remain in the private sector.

The essential problem today is that - from Washington to London to Berlin - the process has not really begun, because the political argument with the electorate has not been made.