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The Future of the Russian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022

The Future of the Russian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022

Summary

Russian military expenditure values US$48.7 Billion in 2017 and registered a CAGR of -7.40% during 2013-2017. Russian defense modernization has traditionally been funded by booming oil and gas profits; however the crash in the global energy market has resulted in erosion in the country’s revenues and as such has forced the country to adopt austerity measures to cut down on government expenditure. The problem is further compounded by the on-going sanctions on Russia, which have forced the country to rationalize its expenditure and prioritize investments.

Russian homeland security (HLS) expenditure recorded a CAGR of -16.80% during the historic period. However, it is estimated to record a CAGR of 5.39% during the forecast period to 2022. This expenditure is primarily driven by the need to protect the country from cyber threats, and to strengthen its border protection, by investing in surveillance and intelligence technologies such as electronic identification documents, automated border crossing systems, and CCTV (closed circuit television) systems.

Aircraft accounted for the largest share of imports during 2012-2016, with Ukraine being the biggest supplier. The country acquired Antonov An-148 aircraft in 2013, Mi-28N helicopters and Mi-35M helicopters, Su-27SM3, Su-34, Yak-130, and Su-35S aircraft during 2012-2016, and the other significant import partners include Italy, the Czech Republic, Turkey, and France. However, the sanctions placed on Russian entities, owing to its involvement in the Ukrainian civil war have effectively ceased any further supplies to the Russian arms industry, except Turkey, none of the other European defense trade partners have supplied any major defense equipment to the country since 2014.

Russian weapons and equipment are also in high demand internationally, due to affordability and performance standards. India, Vietnam and China are Russia’s biggest defense export consumers, but have reduced procurements over the last couple of years; as a result the Russian Government is now focused on expanding its export market to countries in South America and Africa. Other major consumers of Russia’s military goods include Algeria, Venezuela, Azerbaijan, and Iraq.

The report “The Future of the Russian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2022” offers detailed analysis of the Russian defense industry with market size forecasts covering the next five years. This report will also analyze factors that influence demand for the industry, key market trends, and challenges faced by industry participants.

In particular, it provides an in-depth analysis of the following -

- The Russian defense industry market size and drivers: detailed analysis of the Russian defense industry during 2018-2022, including highlights of the demand drivers and growth stimulators for the industry. It also provides a snapshot of the country’s expenditure and modernization patterns.
- Budget allocation and key challenges: insights into procurement schedules formulated within the country and a breakdown of the defense budget with respect to capital expenditure and revenue expenditure. It also details the key challenges faced by defense market participants within the country.
- Porter’s Five Force analysis of the Russian defense industry: analysis of the market characteristics by determining the bargaining power of suppliers, bargaining power of buyers, threat of substitution, intensity of rivalry, and barriers to entry.
- Import and Export Dynamics: analysis of prevalent trends in the country’s imports and exports over the last five years.
- Market opportunities: details of the top five defense investment opportunities over the next 10 years.
- Competitive landscape and strategic insights: analysis of the competitive landscape of the Russian defense industry. It provides an overview of key players, together with insights such as key alliances, strategic initiatives, and a brief financial analysis.

Companies mentioned in this report: United Aircraft Corporation (UAC), Sukhoi, Splav, Tactical Missiles Corporation, Almaz-Antey, KBP Instrument Design Bureau, V.A.Degtyarev Plant, Kurganmashzavod, Uralvagonzavod, Izhevsk Mechanical Works (IZHMASH), Irkut Corporation, Oboronprom Corporation

Scope

- Russia’s defense expenditure in 2017 values US$48.7 billion, recording a CAGR of -7.40% during the historic period, and it is expected to cumulatively value US$270.8 billion over the forecast period. Russia has the world’s longest land border, which it shares with 16 other countries, along with maritime borders with Japan, via the sea of Okhotsk, and the US state of Alaska, across the Bering Strait. The country places the utmost importance on the protection of its borders and critical infrastructure, which covers a large geographical area that is rich in natural resources.
- During the historic period, the Russian Government allocated an average of 47.1% of its total defense budget to capital expenditure and the remaining 52.9% to revenue expenditure. Capital expenditure is expected to decrease during the forecast period to an average of 40.2%, due to the Russian Ministry of Finance setting a target of cutting defense spending by 12% by 2018.
- The MoD is expected to invest in space based ISR, transport aircraft, and multi-role aircraft.

Reasons to buy

- This report will give the user confidence to make the correct business decisions based on a detailed analysis of the Russian defense industry market trends for the coming five years
- The market opportunity section will inform the user about the various military requirements that are expected to generate revenues during the forecast period. The description includes technical specifications, recent orders, and the expected investment pattern by the country during the forecast period
- Detailed profiles of the top domestic and foreign defense manufacturers with information about their products, alliances, recent contract wins, and financial analysis wherever available. This will provide the user with a total competitive landscape of the sector
- A deep qualitative analysis of the Russian defense industry covering sections including demand drivers, Porter’s Five Forces Analysis, Key Trends and Growth Stimulators, and latest industry contracts


1 Introduction
1.1 What is this Report About?
1.2 Definitions
1.3 Summary Methodology
1.4 About Strategic Defence Intelligence
2 Executive Summary
3 Market Attractiveness and Emerging Opportunities
3.1 Current Market Scenario
3.1.1 Primary Threat Perception
3.1.2 Military Doctrine & Strategy
3.1.3 Military Fleet Size
3.1.4 Procurement Programs
3.1.5 Social, Political and Economic Environment & Support for Defense Projects
3.1.6 Political and Strategic Alliances
3.2 Defense Market Size Historical and Forecast
3.2.1 Russia’s defense budget to grow at a CAGR of 8.62% to value US$65.2 billion by 2022
3.2.2 Military modernization and defense exports to drive defense expenditure over the forecast period
3.2.3 Defense expenditure as a percentage of GDP is expected to average 3.14% over the forecast period
3.3 Analysis of Defense Budget Allocation
3.3.1 The majority of Russia’s defense budget is allocated to revenue expenditure
3.3.2 Capital expenditure is expected to record a CAGR of 20.47% during the forecast period
3.3.3 Per capita defense expenditure expected to increase over the forecast period
3.4 Homeland Security Market Size and Forecast
3.4.1 Russian homeland security expenditure forecast to reach US$41.1 billion by 2022
3.4.2 Border security and the fight against cyber-attacks are mains factors for growth in the homeland security market
3.4.3 The Terrorism Heat Map considers Russia a “highly affected” region
3.4.4 Russia faces “high risk” from acts of terrorism
3.4.5 Russia faces a significant threat from terrorists
3.5 Benchmarking with Key Global Markets
3.5.1 Russia’s defense budget is expected to grow significantly during the forecast period
3.5.2 Russia is world’s third largest defense spender
3.5.3 Russia allocated 3.1% of its GDP to defense in 2017
3.6 Market Opportunities: Key Trends and Growth Stimulators
3.6.1 Space-based ISR
3.6.2 Transport Aircraft
3.6.3 Multi-role Aircraft
4 Defense Procurement Market Dynamics
4.1 Import Market Dynamics
4.1.1 The country’s defense imports are low owing to a developed indigenous sector
4.1.2 Ukraine was the key defense supplier to Russia
4.1.3 Aircraft and engines were the key defense imports during 2012-2016
4.2 Export Market Dynamics
4.2.1 Russia’s exports witnessed a decline during 2012-2016
4.2.2 India, China, and Vietnam are Russia’s main defense equipment purchasers
4.2.3 Aircraft and ships account for the majority of Russia’s defense exports
5 Industry Dynamics
5.1 Five Forces Analysis
5.1.1 Bargaining power of supplier: medium to high
5.1.2 Bargaining power of buyer: high
5.1.3 Barrier to entry: high
5.1.4 Intensity of rivalry: high
5.1.5 Threat of substitution: high
6 Market Entry Strategy
6.1 Market Regulation
6.1.1 Entry into defense sector is highly regulated
6.2 Market Entry Route
6.2.1 Budgeting Process
6.2.2 Procurement Policy and Process
6.3 Key Challenges
6.3.1 Russian Government’s aversion to Western defense technology
7 Competitive Landscape and Strategic Insights
7.1 Competitive Landscape Overview
7.1.1 Domestic industry in the process of consolidation for better focus and fund allocation
7.1.2 Defense sector is dominated by domestic firms, with no foreign presence
7.2 Key Domestic Companies
7.2.1 United Aircraft Corporation - overview
7.2.2 United Aircraft Corporation - Major Products
7.2.3 United Aircraft Corporation - recent announcements and strategic initiatives
7.2.4 United Aircraft Corporation - Alliances
7.2.5 Sukhoi: overview
7.2.6 Sukhoi: Products
7.2.7 Sukhoi: recent announcements and strategic initiatives
7.2.8 Sukhoi: Alliances
7.2.9 Sukhoi: Recent Contract Awards
7.2.10 Splav - overview
7.2.11 Splav - Major Products
7.2.12 Tactical Missiles Corporation: overview
7.2.13 Tactical Missiles Corporation - Major Products
7.2.14 Tactical Missiles Corporation - recent announcements and strategic initiatives
7.2.15 Tactical Missiles Corporation - Alliances
7.2.16 Tactical Missiles Corporation - Recent Contract Wins
7.2.17 Almaz-Antey - overview
7.2.18 Almaz-Antey - Major Products
7.2.19 Almaz-Antey - recent announcements and strategic initiatives
7.2.20 Almaz-Antey - Alliances
7.2.21 Almaz-Antey - Recent Contract Wins
7.2.22 KBP Instrument Design Bureau - overview
7.2.23 KBP Instrument Design Bureau - Major Products
7.2.24 KBP Instrument Design Bureau - recent announcements and strategic initiatives
7.2.25 KBP Instrument Design Bureau - Recent Contract Wins
7.2.26 V.A.Degtyarev Plant - overview
7.2.27 V.A.Degtyarev Plant - Major Products
7.2.28 Kurganmashzavod - overview
7.2.29 Kurganmashzavod - Major Products and Services
7.2.30 Kurganmashzavod - recent announcements and strategic initiatives
7.2.31 Kurganmashzavod - alliances
7.2.32 Kurganmashzavod - recent contract wins
7.2.33 Uralvagonzavod - Overview
7.2.34 Uralvagonzavod - Major Products
7.2.35 Uralvagonzavod - Recent Announcements and Strategic Initiatives
7.2.36 Uralvagonzavod - Alliances
7.2.37 Uralvagonzavod - Recent Contract Wins
7.2.38 Izhevsk Mechanical Works - overview
7.2.39 Izhevsk Mechanical Works - Major Products
7.2.40 Izhevsk Mechanical Works - recent announcements and strategic initiatives
7.2.41 Irkut Corporation - overview
7.2.42 Irkut Corporation - Major Products
7.2.43 Irkut Corporation - recent announcements and strategic initiatives
7.2.44 Irkut Corporation - Alliances
7.2.45 Irkut Corporation - Recent Contract Wins
7.2.46 Irkut Corporation - financial analysis
7.2.47 Oboronprom Corporation - overview
7.2.48 Oboronprom Corporation - Major Products
7.2.49 Oboronprom Corporation - recent announcements and strategic initiatives
7.2.50 Oboronprom Corporation - Alliances
7.2.51 Oboronprom Corporation - Recent Contract Wins
8 Business Environment and Country Risk
8.1 Economic Performance
8.1.1 GDP Per Capita, US$
8.1.2 GDP (current US$ Billion)
8.1.3 Exports of Goods and Services (LCU Billion)
8.1.4 Imports of Goods and Services (LCU Billion)
8.1.5 Gross National Disposable Income (US$ Billion)
8.1.6 LCU per US$ (Period Average)
8.1.7 Market Capitalization of Listed Companies (US$ Billion)
8.1.8 Market Capitalization of Listed Companies (% of GDP)
8.1.9 Government cash surplus/deficit as % of GDP (LCU)
8.1.10 Goods Exports as a Percentage of GDP
8.1.11 Goods Imports as a Percentage of GDP
8.1.12 Services Imports as a Percentage of GDP
8.1.13 Services Exports as a percentage of GDP
8.1.14 Foreign Direct Investment, net (BoP, current US$ Billion)
8.1.15 Net Foreign Direct Investment as a Percentage of GDP
8.1.16 Mining, Manufacturing, and Utilities Output (LCU Billion)
9 Appendix
9.1 About SDI
9.2 Disclaimer
List of Tables
Table 1: Key Electronic Warfare Systems
Table 2: Key Tactical Attack Weapon Systems and Precision Guided Munitions Projects
Table 3: Key Long Range Ballistic Missile Programs
Table 4: Ongoing Nuclear Delivery Platform Programs
Table 5: Ongoing Naval Modernization Programs
Table 6: Key Air Force Modernization Programs
Table 7: Key Air Defense Programs
Table 8: Key Air Force Transport Aircraft Modernization Programs
Table 9: Key Programs for Development of Unmanned Systems
Table 10: Key Army Modernization Programs
Table 11: Russian Ground Forces Strength
Table 12: Russian Aerospace Defense Forces Strength
Table 13: Russian Naval Forces Strength
Table 14: Russian - On-going Development and Procurement Programs
Table 15: Russian - Future Procurement Programs
Table 16: Russian Defense Expenditure (RUB Billion & US$ Billion), 2013-2022
Table 17: Russian GDP Growth and Defense Expenditure as a Percentage of GDP Growth, 2013-2022
Table 18: Russian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Table 19: Russian Defense Capital Expenditure (RUB Billion and US$ Billion), 2013-2022
Table 20: Russian Per Capita Defense Expenditure (US$), 2013-2022
Table 21: Russian Homeland Security Expenditure (RUB Billion & US$ Billion), 2013-2022
Table 22: Terrorism Index, 2017
Table 23: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Table 24: Russian Budget Formation Timetable
Table 25: Competitive Landscape of the Russian Defense Industry
Table 26: United Aircraft Corporation - Major Products
Table 27: United Aircraft Corporation - Alliances
Table 28: Sukhoi - Major Products
Table 29: Sukhoi - Alliances
Table 30: Sukhoi - Recent Contract Wins
Table 31: Splav - Major Products
Table 32: Tactical Missiles Corporation - Major Products
Table 33: Tactical Missiles Corporation - Alliances
Table 34: Tactical Missiles Corporation - Recent Contract Wins
Table 35: Almaz-Antey - Major Products
Table 36: Almaz-Antey - Alliances
Table 37: Almaz-Antey - Recent Contract Wins
Table 38: KBP Instrument Design Bureau - Major Products
Table 39: KBP Instrument Design Bureau - recent contract wins
Table 40: V.A.Degtyarev Plant - Major Products
Table 41: Kurganmashzavod - Major Products and Services
Table 42: Kurganmashzavod - Alliances
Table 43: Kurganmashzavod - Recent Contract Wins
Table 44: Uralvagonzavod - Major Products
Table 45: Uralvagonzavod - Alliances
Table 46: Uralvagonzavod - Recent Contract Wins
Table 47: Izhevsk Mechanical Works - Major Products
Table 48: Irkut Corporation - Major Products
Table 49: Irkut Corporation - Alliances
Table 50: Irkut Corporation - Recent Contract Wins
Table 51: Oboronprom Corporation - Major Products
Table 52: Oboronprom Corporation - Alliances
Table 53: Oboronprom Corporation - Recent Contract Wins
List of Figures
Figure 1: Russian Defense Expenditure (RUB Billion), 2013-2022
Figure 2: Russian Defense Expenditure (US$ Billion), 2013-2022
Figure 3: Russian GDP Growth vs. Defense Expenditure as Percentage of GDP Growth, 2013-2022
Figure 4:Russian Defense Budget Split Between Capital and Revenue Expenditure (%), 2013-2022
Figure 5: Russian Defense Capital Expenditure (RUB Billion), 2013-2022
Figure 6: Russian Defense Capital Expenditure (US$ Billion), 2013-2022
Figure 7: Russian Per Capita Defense Expenditure (US$), 2013-2022
Figure 8: Russian Homeland Security Budget (RUB Billion), 2013-2022
Figure 9: Russian Homeland Security Budget (US$ Billion), 2013-2022
Figure 10: Terrorism Heat Map, 2017
Figure 11: Terrorism Index
Figure 12: Benchmarking with Key Markets - 2013-2017 vs. 2018-2022
Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2017 and 2022
Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2017
Figure 15: Space-Based ISR Market Size (US$ Million), 2017-2027
Figure 16: Transport Aircraft Market Size (US$ Million), 2017-2027
Figure 17: Multi-Role Aircraft Market Size (US$ Million), 2017-2027
Figure 18: Russian Defense Import Trend, 2012-2016 (TIV values)
Figure 19: Russian Defense Imports by Country (%), 2012-2016
Figure 20: Russian Defense Imports by Category (%), 2012-2016
Figure 21: Russian Defense Export Trend, 2012-2016 (TIV values)
Figure 22: Russian Defense Exports by Country (%), 2012-2016
Figure 23: Russian Defense Exports by Category (%), 2012-2016
Figure 24: Industry Dynamics Porter’s Five Forces Analysis
Figure 25: Irkut Corporation - Revenue Trend Analysis (RUB Billion), 2012-2016
Figure 26: Irkut Corporation - Operating Profit (US$ Million), 2012-2016
Figure 27: Irkut Corporation - Net Profit Trend Analysis (US$ Million), 2012-2016
Figure 28: GDP Per Capita in US$, 2015-2025
Figure 29: GDP (Current US$ Billion), 2015-2025
Figure 30: Exports of Goods and Services (LCU Billion), 2005-2014
Figure 31: Imports of Goods and Services (LCU Billion), 2005-2014
Figure 32: Gross National Disposable Income (US$ Billion), 2008-2013
Figure 33: LCU Per US$ (Period Average), 2015-2024
Figure 34: Market Capitalization of Listed Companies (US$ Billion), 2005-2012
Figure 35: Market Capitalization of Listed Companies (% of GDP), 2005-2012
Figure 36: Government cash surplus/deficit as % of GDP (LCU), 2003-2012
Figure 37: Goods Exports as a Percentage of GDP, 2005-2014
Figure 38: Goods Imports as a Percentage of GDP, 2005-2014
Figure 39: Service Imports as a Percentage of GDP, 2005-2014
Figure 40: Services Exports as a Percentage of GDP, 2005-2012
Figure 41: Foreign Direct Investment, Net (BoP, Current US$ Billion), 2005-2014
Figure 42: Net Foreign Direct Investment as a Percentage of GDP, 2005-2014
Figure 43: Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2014

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