The Defense Industrial Implications of Putin’s Appointment of Andrey Belousov as Minister of Defense

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On May 12, 2024, Russian president Vladimir Putin unexpectedly appointed Andrey Belousov to succeed Sergei Shoigu as Russian minister of defense. Belousov, a relatively unknown Russian bureaucrat, is an economist by trade and worked as Putin’s economic assistant from 2013 to 2020 before transitioning into the role of deputy prime minister in January 2020. Notably, Belousov is the first Russian defense minister without prior military experience. His appointment reflects the Kremlin’s recognition of the role that a strong industrial base plays in their war of attrition against Ukraine. Additionally, given Belousov’s record as an advocate of central planning, his appointment signals Putin will continue to push for centralized control over Russia’s defense industry. Russia’s singular focus on developing and maintaining a wartime economy offers a worrisome contrast to the more sporadic security assistance offered by Ukraine’s supporters.

As an economist, Belousov is regarded as an advocate for a strong government role in shaping economic policies and private markets, and he gained notoriety in 2018 by proposing a tax on “excess profits” earned by large metallurgical and chemical corporations. In response to criticism of the tax, Belousov said that there cannot be equality between the state and business and that the relationship should resemble that of “senior partners and junior partners.” The excess profits tax that Belousov advocated for, which was enacted by the Russian Duma in 2023, is expected to generate $300 billion rubles.

Belousov has repeatedly presented government intervention as the solution to Russia’s macroeconomic challenges. During the Russian financial crisis of 2014–2016, Belousov, as Putin’s lead economic aide, helped Russia avoid a ruble liquidity crisis by emboldening the Russian central bank to stabilize the currency. In 2021, Belousov defended the government’s guarantee of employee wages with a preferential loan program during the coronavirus pandemic by emphasizing the requirement that firms employ 90 percent of their pre-pandemic staff. Recently, Belousov has involved himself in developing Russia’s strategy to achieve “technological sovereignty,” which envisions Russia as a near self-sufficient manufacturer of high-tech products such as microelectronics, precision machine tools, and advanced defense technologies.

The “industrial” front of Russia’s longstanding conflict with Ukraine, dating back to the annexation of the Crimean Peninsula in 2014, has been characterized by the Kremlin’s renewed interest in import substitution and broader autarkic economic concepts. Russia’s annexation of Crimea resulted in the severing of defense industrial ties between the previously interdependent states. The Russian financial crisis of 2014–2016 taught the Kremlin that its economic links to the West were weaknesses which could be leveraged to weaken Russia. As a result, Russia attempted to develop a resilient defense industry that was insulated from Western inputs.

However, Russia’s invasion of Ukraine in 2022 proved that achieving autarky was impossible and that import substitution could be achieved by diversifying imports away from the West and toward friendly regimes—China, Iran, and North Korea in particular. These states support Russia’s war economy with both finished systems and critical dual-use goods.

China’s General Administration of Customs data showed that bilateral trade between Russia and China totaled more than $93.8 billion from January to May in 2023, a 40.7 percent increase from the previous year. Additionally, China’s exports to Russia have reached $42.96 billion since January 2023, a 75.6 percent increase from the previous year, indicating that Russia is increasingly looking to Chinese manufacturers to substitute now-sanctioned Western goods. As a component of this increased trade, China has also sent several categories of dual use goods including vehicle imports, ball bearings, semiconductors, recreational drones, and other items that likely aid Russia’s war efforts in Ukraine.

Though Belousov has just begun his tenure as Russia’s minister of defense, he already accompanied Putin on his trip to China from May 15–16. This is not Belousov’s first trip to China. On November 20, 2023, as first deputy prime minister, he visited Beijing to participate in the Russian-Chinese Commission on Investment Cooperation. Regarding Russia’s relations with China, Belousov said at the commission, “[bilateral relations] are built on a foundation of mutual respect, equality, trust, noninterference in internal affairs, and the promotion of our development and prosperity” (authors’ translation).

As Russia pursues this form of production diplomacy, Belousov is unlikely to allow Russia to grow fully reliant on foreign arsenals of autocracy and is likely to pursue the continued revitalization of an independent Russian defense industrial base in support of long-term Russian interests. Prior to Belousov’s appointment to the Russian Ministry of Defense, Russian economic strategy has articulated an interest in indigenizing many of the core elements of a high-tech supply chain.

Specifically, Russia’s Concept of Technological Development Until 2030, authored by Belousov, stated that domestic Russian goods should compose 75 percent of the country’s consumption of high-tech products, including aerospace and dual-use products. Russia has reportedly begun these efforts by increasing production of semiconductors by 7.5 million units—a 142 percent increase from January to February 2023 compared to 2022. Belousov will likely aim to replicate similar production increases across other imported goods.

The defense industrial implications of Belousov’s appointment as minister of defense are two-fold—with both implications posing an immediate threat to European security. In the short-term, Russia will likely continue to import critical components for its war machine, but its domestic defense industry will be postured by the Kremlin for a war of attrition which Moscow believes it can win. In the long-term, Belousov will likely aim to stave off Russian dependence on China. Given Belousov’s comments at the 2023 St. Petersburg International Economic Forum, he likely perceives China as a major regional, if not global, economic power and would prefer a Russia that is not directly shaped by Beijing—hence the goal of Russia’s Concept of Technological Development Until 2030 being to consume Russian high-tech products as opposed to imports.

Under Belousov, Russia’s defense industry can expect tighter integration with the Ministry of Defense’s vision of the future Russian armed forces. The Russian government increased its defense budget from 3.9 percent of its 2023 gross domestic product to 6 percent in 2024, or 4.6 to 10.3 trillion rubles ($112 billion). Even with this investment in resources, the efficacy of Belousov’s approach to defense economics remains to be seen, since central planning has not always yielded the desired results. Regardless, the United States and its allies should prepare for a protracted conflict in Ukraine as Russia is showing little to no signs of backing down. Belousov’s appointment pits a central planner against the defense industrial bases of the United States and its allies.

While centrally planned economic systems have inherent challenges, Russia’s war in Ukraine offers insights into the demand that can be used to drive industrial planning. By contrast, the inconsistency and occasional unreliability of security assistance from the United States and its allies means that Ukraine will struggle to counter what is increasingly a whole-of-government effort from Moscow. The United States and its allies’ strategy regarding Ukraine requires industrial consistency, multilateral coordination, and strategic agility to respond to changes in the conflict. Fortunately, both the European Defence Industrial Strategy and the United States’ National Defense Industrial Strategy highlight the need for expanding production capacity and the urgent need for allied coordination. The considered and consistent implementation of both strategies will be necessary to counter the full-scale war economy that Belousov will be working to build on.

Nicholas Velazquez is a research assistant with the Defense-Industrial Initiatives Group at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Maeve Sockwell is a graduate intern with the Defense-Industrial Initiatives Group at CSIS. Cynthia R. Cook is the director of the Defense-Industrial Initiatives Group and senior fellow in the International Security Program at CSIS.

Nicholas Velazquez

Nicholas Velazquez

Former Research Assistant, Defense-Industrial Initiatives Group

Maeve Sockwell

Graduate Intern, Defense-Industrial Initiatives Group
Cynthia Cook
Director, Defense-Industrial Initiatives Group and Senior Fellow, International Security Program