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The Future of the Russian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2023

The Future of the Russian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2023

Summary

Russian defense modernization has traditionally been funded by booming oil and gas profits; however the crash in the global energy market resulted in erosion in the country’s revenues and has forced the country to adopt austerity measures to cut down on government expenditure.

Russian defense expenditure declined drastically from US$56.7 billion in 2016 to US$48.7 billion in 2017, however with the recovery in global energy prices, Russia’s financial position has slowly started to improve, and its value has started to recover against the US dollar. The country’s defense expenditure increased to US$51.9 billion (RUB 2.95 trillion) in 2018. The finalized defense expenditure of US$51.9 Billion (RUB2.95 trillion) for 2018 is 8.1% higher than the US$48 billion (RUB2.73 trillion) which was initially earmarked for defense spending in the draft budget.

In addition, capital expenditure is expected to increase at a CAGR of 9.17% during 2019-2023, compared to the CAGR of -15.62% recorded during the historic period.

During 2018-2027, the Russian government is expected to prioritize the development of long-range hypersonic and supersonic Precision Guided Munitions (PGM) and weapon systems, missile vessels and nuclear submarines for the navy.

The country is expected to focus on the modernization and procurement of C4ISR systems, transport aircraft, naval vessels, multirole aircraft, and conventional and nuclear submarines, among others. In November 2017, Russia unveiled its new modernized TU-160M2 Blackjack strategic bomber, which is scheduled to enter service by the year 2021.

The report ""The Future of the Russian Defense Industry - Market Attractiveness, Competitive Landscape and Forecasts to 2023"" offers detailed analysis of the Russian defense industry with market size forecasts covering the next five years.

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

- The Russian defense industry market size and drivers: detailed analysis of the Russian defense industry during 2018-2023, 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, Irkut Corporation, Rostec, Uralvagonzavod (UVZ), Splav, KBP Instrument Design Bureau, V.A.Degtyarev Plant, Kalashnikov Concern, Oboronprom Corporation, United Engine Corporation (UEC), Tactical Missiles Corporation,Almaz-Antey, Kurganmashzavod, and United Shipbuilding Corporation (USC)

Scope

- Russia’s defense expenditure in 2018 values US$51.9 billion, recording a CAGR of -5.79% during the historic period, and it is expected to cumulatively value US$308.5 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 50.7% of its total defense budget to capital expenditure and the remaining 49.3% to revenue expenditure. Capital expenditure is expected to increase during the forecast period to an average of 58.2%, due to the adoption of State armaments program 2018-2027 in the year 2017.
- The MoD is expected to invest in land based ISR, Critical Infrastructure Protection (CIP), and airborne C4ISR capabilities.

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 Top Procurement Programs by Value (US$ Million) 2018-2023
3.1.6 Social, Political and Economic Environment and Support for Defense Projects
3.1.7 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 5.86% to value US$68.9 billion by 2023
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 3.56% 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 6.21% 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$43.4 billion by 2023
3.4.2 Border security and the fight against cyber-attacks are the main factors encouraging growth in the homeland security market
3.4.3 The Terrorism Heat Map considers Russia a “highly affected” region
3.4.4 Russia faces a “high risk” from acts of terrorism
3.4.5 Russia faces a significant threat from terrorists
3.5 Benchmarking with Key Global Markets
3.5.1 Russia’s defense budget is expected to grow significantly during the forecast period
3.5.2 Russia is the world’s third largest defense spender
3.5.3 Russia allocated 3.4% of its GDP to defense in 2018
3.6 Market Opportunities: Key Trends and Growth Stimulators
3.6.1 Top Defense Market Sectors by Value (US$ Million) - Projections over 2018-2023
3.6.2 Land Based C4ISR
3.6.3 Critical Infrastructure Protection (CIP) - Physical Security
3.6.4 Airborne C4ISR
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 2013-2017
4.2 Export Market Dynamics
4.2.1 Russia’s exports witnessed a decline during 2013-2017
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 the 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 The domestic industry is consolidating to provide 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 United Aircraft Corporation (UAC) - Recent Contract Awards
7.2.6 United Aircraft Corporation (UAC) - Financial Analysis
7.2.7 Sukhoi - Overview
7.2.8 Sukhoi - Major Products
7.2.9 Sukhoi- Recent Announcements and Strategic Initiatives
7.2.10 Sukhoi - Alliances
7.2.11 Sukhoi: Recent Contract Awards
7.2.12 Irkut Corporation - Overview
7.2.13 Irkut Corporation - Major Products
7.2.14 Irkut Corporation - Recent Announcements and Strategic Initiatives
7.2.15 Irkut Corporation - Alliances
7.2.16 Irkut Corporation - Recent Contract Wins
7.2.17 Irkut Corporation - Financial Analysis
7.2.18 Rostec - Overview
7.2.19 Rostec - Major Products
7.2.20 Rostec- Recent Announcements and Strategic Initiatives
7.2.21 Rostec - Alliances
7.2.22 Rostec: Recent Contract Awards
7.2.23 Uralvagonzavod - Overview
7.2.24 Uralvagonzavod - Major Products
7.2.25 Uralvagonzavod - Recent Announcements and Strategic Initiatives
7.2.26 Uralvagonzavod - Alliances
7.2.27 Uralvagonzavod - Recent Contract Wins
7.2.28 Splav - Overview
7.2.29 Splav - Major Products
7.2.30 Splav - Recent Announcements and Strategic Initiatives
7.2.31 Splav - Alliances
7.2.32 KBP Instrument Design Bureau - Overview
7.2.33 KBP Instrument Design Bureau - Major Products
7.2.34 KBP Instrument Design Bureau - Recent Announcements and Strategic Initiatives
7.2.35 KBP Instrument Design Bureau - Recent Contract Wins
7.2.36 V.A.Degtyarev Plant - Overview
7.2.37 V.A.Degtyarev Plant - Major Products
7.2.38 Kalashnikov Concern - Overview
7.2.39 Kalashnikov Concern - Major Products
7.2.40 Kalashnikov Concern - Recent Announcements and Strategic Initiatives
7.2.41 Oboronprom Corporation - Overview
7.2.42 Oboronprom Corporation - Major Products
7.2.43 Oboronprom Corporation - Recent Announcements and Strategic Initiatives
7.2.44 Oboronprom Corporation - Alliances
7.2.45 Oboronprom Corporation - Recent Contract Wins
7.2.46 United Engine Corporation (UEC) - Overview
7.2.47 United Engine Corporation (UEC) - Major Products
7.2.48 United Engine Corporation (UEC) - Recent Announcements and Strategic Initiatives
7.2.49 Tactical Missiles Corporation: Overview
7.2.50 Tactical Missiles Corporation - Major Products
7.2.51 Tactical Missiles Corporation - Recent Announcements and Strategic Initiatives
7.2.52 Tactical Missiles Corporation - Alliances
7.2.53 Tactical Missiles Corporation - Recent Contract Wins
7.2.54 Almaz-Antey - Overview
7.2.55 Almaz-Antey - Major Products
7.2.56 Almaz-Antey - Recent Announcements and Strategic Initiatives
7.2.57 Almaz-Antey - Alliances
7.2.58 Almaz-Antey - Recent Contract Wins
7.2.59 Kurganmashzavod - Overview
7.2.60 Kurganmashzavod - Major Products and Services
7.2.61 Kurganmashzavod - Recent Announcements and Strategic Initiatives
7.2.62 Kurganmashzavod - Alliances
7.2.63 Kurganmashzavod - Recent Contract Wins
7.2.64 United Shipbuilding Corporation - Overview
7.2.65 United Shipbuilding Corporation (USC) - Major Products and Services
7.2.66 United Shipbuilding Corporation (USC) - Recent Announcements and Strategic Initiatives
7.2.67 United Shipbuilding 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 a Percentage 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 Long Range Ballistic Missile Programs
Table 3: Ongoing Nuclear Delivery Platform Programs
Table 4: Ongoing Naval Modernization Programs
Table 5: Key Tactical Attack Weapon Systems and Precision Guided Munitions Projects
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: Top Russian Defense Procurement Programs by Value (US$ Million) 2018-2023
Table 17: Russian Defense Expenditure (RUB Billion & US$ Billion), 2014-2023
Table 18: Russian GDP Growth and Defense Expenditure as a Percentage of GDP Growth, 2014-2023
Table 19: Russian Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023
Table 20: Russian Defense Capital Expenditure (RUB Billion and US$ Billion), 2014-2023
Table 21: Russian Per Capita Defense Expenditure (US$), 2014-2023
Table 22: Russian Homeland Security Expenditure (RUB Billion & US$ Billion), 2014-2023
Table 23: Terrorism Index, 2018
Table 24: Benchmarking with Key Markets: 2014-2018 vs. 2019-2023
Table 25: Top Russian Defense Market Sectors by Value (US$ Million) - 2018-2023
Table 26: Russian Budget Formation Timetable
Table 27: Top Defense Suppliers in The US Defense Industry - By Value (US$ Million) 2018-2023
Table 28: Competitive Landscape of the Russian Defense Industry
Table 29: United Aircraft Corporation - Major Products
Table 30: United Aircraft Corporation - Alliances
Table 31: United Aircraft Corporation (UAC) - Recent Contract Wins
Table 32: Sukhoi - Major Products
Table 33: Sukhoi - Alliances
Table 34: Sukhoi - Recent Contract Wins
Table 35: Irkut Corporation - Major Products
Table 36: Irkut Corporation - Alliances
Table 37: Irkut Corporation - Recent Contract Wins
Table 38: Rostec - Major Products
Table 39: Sukhoi - Alliances
Table 40: Rostec - Recent Contract Wins
Table 41: Uralvagonzavod - Major Products
Table 42: Uralvagonzavod - Alliances
Table 43: Uralvagonzavod - Recent Contract Wins
Table 44: Splav - Major Products
Table 45: Splav - Alliances
Table 46: KBP Instrument Design Bureau - Major Products
Table 47: KBP Instrument Design Bureau - recent contract wins
Table 48: V.A.Degtyarev Plant - Major Products
Table 49: Kalashnikov Concern - Major Products
Table 50: Oboronprom Corporation - Major Products
Table 51: Oboronprom Corporation - Alliances
Table 52: Oboronprom Corporation - Recent Contract Wins
Table 53: United Engine Corporation (UEC) - Major Products
Table 54: Tactical Missiles Corporation - Major Products
Table 55: Tactical Missiles Corporation - Alliances
Table 56: Tactical Missiles Corporation - Recent Contract Wins
Table 57: Almaz-Antey - Major Products
Table 58: Almaz-Antey - Alliances
Table 59: Almaz-Antey - Recent Contract Wins
Table 60: Kurganmashzavod - Major Products and Services
Table 61: Kurganmashzavod - Alliances
Table 62: Kurganmashzavod - Recent Contract Wins
Table 63: United Shipbuilding Corporation (USC) - Major Products and Services
Table 64: United Shipbuilding Corporation - Recent Contract Wins
List of Figures
Figure 1: Russian Defense Expenditure (RUB Billion), 2014-2023
Figure 2: Russian Defense Expenditure (US$ Billion), 2014-2023
Figure 3: Russian GDP Growth vs. Defense Expenditure as Percentage of GDP Growth, 2014-2023
Figure 4: Russian Defense Budget Split Between Capital and Revenue Expenditure (%), 2014-2023
Figure 5: Russian Defense Capital Expenditure (RUB Billion), 2014-2023
Figure 6: Russian Defense Capital Expenditure (US$ Billion), 2014-2023
Figure 7: Russian Per Capita Defense Expenditure (US$), 2014-2023
Figure 8: Russian Homeland Security Budget (RUB Billion), 2014-2023
Figure 9: Russian Homeland Security Budget (US$ Billion), 2014-2023
Figure 10: Terrorism Heat Map, 2018
Figure 11: Terrorism Index
Figure 12: Benchmarking with Key Markets - 2014-2018 vs. 2019-2023
Figure 13: Defense Expenditure of the World’s Largest Military Spenders (US$ Billion), 2018 and 2023
Figure 14: Defense Expenditure as a Percentage of GDP of Largest Military Spenders (%), 2018
Figure 15: Land Based C4ISR Market Size (US$ Million), 2018-2023
Figure 16: Critical Infrastructure Protection (CIP) - Physical Security Market Size (US$ Million), 2018-2023
Figure 17: Airborne C4ISR Market Size (US$ Million), 2018-2023
Figure 18: Top Russian Defense Procurements in Terms of Their Supplier Relationships
Figure 19: Russian Defense Import Trend, 2013-2017 (TIV values)
Figure 20: Russian Defense Imports by Country (%), 2013-2017
Figure 21: Russian Defense Imports by Category (%), 2013-2017
Figure 22: Russian Defense Export Trend, 2013-2017 (TIV values)
Figure 23: Russian Defense Exports by Country (%), 2013-2017
Figure 24: Russian Defense Exports by Category (%), 2013-2017
Figure 25: Industry Dynamics - Porter’s Five Forces Analysis
Figure 26: United Aircraft Corporation (UAC) - Revenue Trend Analysis (RUB Billion), 2012-2016
Figure 27: United Aircraft Corporation (UAC) - Operating Profit Trend Analysis (RUB Billion), 2012-2016
Figure 28: United Aircraft Corporation (UAC) - Net Profit Trend Analysis (RUB Billion), 2012-2016
Figure 29: Irkut Corporation - Revenue Trend Analysis (RUB Billion), 2012-2016
Figure 30: Irkut Corporation - Operating Profit (RUB Million), 2012-2016
Figure 31: Irkut Corporation - Net Profit Trend Analysis (RUB Million), 2012-2016
Figure 32: GDP Per Capita in US$, 2015-2025
Figure 33: GDP (Current US$ Billion), 2015-2025
Figure 34: Exports of Goods and Services (LCU Billion), 2005-2014
Figure 35: Imports of Goods and Services (LCU Billion), 2005-2014
Figure 36: Gross National Disposable Income (US$ Billion), 2008-2013
Figure 37: LCU Per US$ (Period Average), 2015-2024
Figure 38: Market Capitalization of Listed Companies (US$ Billion), 2005-2012
Figure 39: Market Capitalization of Listed Companies (% of GDP), 2005-2012
Figure 40: Government Cash Surplus/Deficit as a Percentage of GDP (LCU), 2005-2012
Figure 41: Goods Exports as a Percentage of GDP, 2005-2014
Figure 42: Goods Imports as a Percentage of GDP, 2005-2014
Figure 43: Service Imports as a Percentage of GDP, 2005-2014
Figure 44: Services Exports as a Percentage of GDP, 2005-2012
Figure 45: Foreign Direct Investment, Net (BoP, Current US$ Billion), 2005-2014
Figure 46: Net Foreign Direct Investment as a Percentage of GDP, 2005-2014
Figure 47: Mining, Manufacturing, Utilities Output (LCU Billion), 2005-2014

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