An analysis by the Royal United Services Institute (RUSI) reveals that Russia has dramatically outpaced Europe in the race to produce arms during the war in Ukraine, raising alarm about NATO’s readiness. The report, “Winning the Industrial War: Comparing Russia, Europe and Ukraine, 2022–24,” finds that Moscow’s defence industry surged ahead with a clear plan, while European efforts to boost weapons production stumbled despite ample funding. Ukraine has been able to innovate low-cost solutions rapidly, an agility that large defence industries often lack.
Ukraine, for its part, has shockingly managed to build a burgeoning arms industry in the midst of war, offering a potential lifeline to its Western backers. The findings of RUSI analysis bluntly suggest that the war in Ukraine is as much an industrial contest as a military one – and right now, Russia has the upper hand. “Russia’s continuing advantage in defence production poses a strategic threat to NATO and the credibility of its conventional deterrence,” the report warns, calling it a “catastrophic risk” for Ukraine if Western support falters.
Russia’s War Industry in Overdrive
From the outset of its full-scale invasion, Russia activated a wartime economy to churn out weapons and ammunition at scale. It had a well-prepared industrial mobilization plan and a tightly centralised coordination of its defence sector, allowing state-owned conglomerates like Rostec, Roscosmos, and even nuclear agency Rosatom to focus on weapons production.
The results have been stark. Russian factories have multiplied their output of key munitions several-fold. The annual production of 152-mm artillery shells jumped from 250,000 rounds in 2022 to over 1.3 million in 2024. Stocks of missiles have similarly swelled: in 2024, Russia produced 500+ Kh-101 cruise missiles (up from 420 in 2023) and over 700 short-range ballistic missiles (up from ~250 the year before). By late 2024, the output of attack drones reached 30 per day, and Russia was refurbishing or building around 5,000 tanks and armoured vehicles a year – though most are rebuilt older models.
Such a torrent of weaponry is no accident. The Kremlin poured resources into its defence industry, even at great cost. It modernised factories, diverted funds from civilian projects, and offered special financing so that arms producers.
Defence firms got low-interest loans (5–6 percent) and wage boosts to lure more workers – including students and prison inmates – onto assembly lines. In effect, Moscow embraced a “war of attrition” strategy, betting that it could outlast Ukraine and the West by sheer volume of output. This strategy appears to be working in the short term, as Russia’s military machine keeps humming. But it has come at a steep price: the government has quietly raided other budgets and forced banks to bankroll about half the war’s costs, a burden that could hobble Russia’s economy in the medium term.
Even so, the immediate impact is clear. Russia’s armaments chief boasted that the country’s defence industry is now running 24/7, and RUSI’s analysts note that Russia’s production achievements have confounded many Western expectations. Moscow is turning money and manpower into tanks, shells, and missiles at a rate Europe has not been able to match – and that tilts the balance of a prolonged war. Russia’s factories have become just as crucial as its frontline troops in challenging NATO’s resolve.
Europe’s Struggles to Arm Up
In contrast, according to the RUSI study, Europe’s attempt to ramp up defence production has largely faltered. Despite unprecedented pledges of cash and political urgency after the invasion, European countries have not managed to translate money into materiel at the scale needed. A glaring example is the European Union’s much-touted plan to supply one million artillery shells to Ukraine within a year. That program delivered barely half the target, and much of that came by scraping old stockpiles or buying abroad, not from new manufacturing.
The European Defence Agency’s joint procurement effort resulted in orders for only about 80,000 fresh shells – a fraction of the goal. In an attritional war that consumes ammunition on an industrial scale, Europe’s output shortfall is impossible to ignore.
RUSI’s report makes clear that this is not for lack of funds – the money was there, but the system wasn’t. Unlike Russia, Europe had no coordinated plan to surge armaments production, and governments initially lacked even basic data on industrial capacity, leading to chaotic and inefficient spending. Rather than direct a unified effort, European governments largely left it to the market and existing contractors. The result has been fragmentation and competition instead of cooperation: defence firms chasing their own contracts, countries outbidding each other for limited supplies, and nobody ensuring the whole supply chain can meet new demand. RUSI analysts bluntly conclude, “for most of Europe, the market has proven a very poor driver in response to the conflict”. Multiple factors have hampered Europe’s response, the study finds. Virtually everything that could go wrong did.
- No pre-war mobilization strategy – Europe had no coherent plan or assigned authority to ramp up arms production when war broke out.
- Lack of coordination – Nations could only cajole industry rather than command it, and no one had a full picture of crucial supply chains, causing bottlenecks and infighting.
- Short-sighted contracting – Governments were unwilling to issue long-term orders out of peacetime habit, leaving industry unsure if it should invest in new factories or hire workers – many firms feared building capacity that might become idle.
- Supply chain vulnerabilities – Europe discovered critical gaps (for example, shortages in explosives and propellant ingredients) only after trying to boost output. These weak links slowed production of everything from shells to missiles.
- Bureaucratic red tape – Cumbersome regulations and approval processes made it slow and expensive to scale up production or start new projects. Safety and environmental rules, while important, proved self-defeating when speed was of the essence.
- Poor multi-national teamwork – Although European armies rely on each other’s industries, there was little effective cross-border cooperation to expand capacity. Each country largely fended for itself in the arms market, an approach RUSI calls “massively uneven” in results.
One stark illustration of Europe’s woes is the cost of its ammunition. By late 2024, NATO countries were paying $4,000–$8,000 for a single 155-mm artillery shell, while Russia had fixed the price of its slightly smaller 152-mm shells at roughly $1,000 apiece. Ukraine can manufacture similar shells for about $1,500 each. This huge price gap means Western budgets achieve only a fraction of the quantity. In a war of attrition, paying four to eight times more per round is simply not sustainable. European officials now acknowledge they “fell far short” in getting ammo production moving. RUSI’s report drives the point home: Europe’s defence-industrial base has been “manifestly inadequate” for the demands of this war.
Government leaders are scrambling to fix these shortcomings, but tensions have flared between officials and industry. Frustrated by delays, some politicians have publicly blamed arms manufacturers for not delivering. “We’ve done the contracts… industry now has to deliver. It has to step up its game,” Dutch defence minister Kajsa Ollongren scolded in November. EU foreign policy chief Josep Borrell even accused European firms of continuing to export 40% of their output globally instead of prioritising Ukraine. Defence companies bristled at these charges.
The European industry association replied that decades of under-investment left no quick fix – factories cannot magically expand overnight after years of layoffs and plant closures. They noted that industry is straining to both support Ukraine and restock NATO armies at the same time, a “double challenge” that “needs more time – more time than originally envisaged by EU leaders” to solve. In short, Europe is learning a hard lesson that industrial mobilization for war cannot be improvised on the fly.
Ukraine’s Homegrown Arms Boom
In an unexpected twist, Ukraine has managed to build a wartime arms industry of its own that is now supplying a significant share of its needs. Before the invasion, Ukraine’s defence production was modest. But faced with existential necessity, Kyiv leveraged its Soviet-industrial legacy and an influx of wartime innovation to rapidly expand output. According to the RUSI report, Ukraine tripled its production of weapons and military equipment in 2023, and was on track for similar growth in 2024. By October 2024, roughly half of all the ammunition Ukraine’s army was firing was coming from domestic factories. In other words, Ukraine went from nearly total import dependence to producing one out of every two shells and bullets it uses – all in the span of about 18 months.
This surge includes both Soviet-calibre munitions and Western-standard types. In late 2022, Ukraine began locally manufacturing 152-mm howitzer shells for its older artillery, and by September 2024, it had started producing NATO-standard 155-mm shells as well. Norway provided a license and machinery to help make that happen. The cost advantage Ukraine has achieved is striking: Ukrainian-made 155mm rounds cost about $1,500 each, a fraction of what they’d cost if purchased from Western suppliers. This price efficiency extends across many items, giving Ukraine and its sponsors more “bang for the buck” at a time when budgets are stretched.
Rows of newly built Ukrainian 2S22 Bohdana 155-mm self-propelled howitzers – part of an order of 18 funded by Denmark – at a production facility in Ukraine, 2023. With foreign financing, Ukrainian factories can deliver heavy weapons quickly. All 18 were completed in two months.
Perhaps most impressive has been Ukraine’s knack for innovating under fire. Despite frequent Russian missile strikes aimed at its industrial base, Ukraine has cultivated a vibrant ecosystem of private defence tech firms. A flagship success is the drone sector. Ukraine is now producing over 100,000 unmanned aerial vehicles (UAVs) per month – ranging from small reconnaissance drones to loitering munitions. Dozens of startup companies have sprung up to meet battlefield needs, iterating new drone designs at a blistering pace. This distributed approach isn’t always the most efficient, the report notes, but it has yielded an unprecedented flow of UAVs to the front. Similarly, Ukrainian engineers developed an ingenious “Sky Fortress” acoustic sensor network that uses cheap microphones to detect incoming cruise missiles and drones, providing early warning to air defences. The whole system was built for about $5 million – a rounding error by Western military standards – using off-the-shelf components and was up and running quickly.
Ukrainian private manufacturers are now turning out heavy weapons as well. In 2024, a Ukrainian firm began serial production of the Bohdan 155-mm self-propelled howitzer, managing to build about 15 units each month. For context, that exceeds France’s monthly output of its comparable CAESAR howitzers. Other local workshops are refurbishing captured Russian tanks, building armoured vehicles, and even developing indigenous missiles. Ukraine’s defence-industrial complex now encompasses some 500 enterprises employing 300,000 people, making it a significant sector of the economy. By official figures, defence production contributed 1.5 percentage points of Ukraine’s 4.9% GDP growth in 2023, softening the war’s economic blows.
All this has been achieved under the extreme pressure of war. The government in Kyiv has cut red tape and given the industry wide latitude to experiment – in some cases operating outside normal regulations to meet urgent needs. The downside is that Ukraine’s arms makers still face chronic financing gaps – the country’s 2024 defence budget had to devote the bulk of funds to paying troops, leaving only about $6 billion for equipment purchases. This means many Ukrainian firms are running on thin margins, waiting for orders. Even so, the progress to date suggests that Ukraine has transformed into an emerging arsenal. It’s a remarkable turnaround for a nation that, at the war’s start, relied almost entirely on foreign military aid.
Tapping Ukraine’s Industrial Potential
With Russia digging in for a long war and Europe’s armament pipelines sputtering, RUSI’s study argues that Ukraine’s defence industry could be a game-changer for the West. Rather than viewing Ukraine only as a recipient of aid, the report suggests treating it as a partner in arms production. Ukraine has proven it can produce quality hardware quickly and cheaply; what it lacks is scale and certain high-tech components. Western countries, on the other hand, have advanced technology and capital, but limited production capacity for basic hardware. Marrying these strengths could rapidly fill the gap in Europe’s defences. We are already seeing the first steps in this direction. Denmark pioneered a scheme in early 2024 by financing the production of 18 Bohdan self-propelled howitzers in Ukraine, which were then delivered to the Ukrainian Army.
The entire batch was completed in just two months – a speed Western factories would struggle to match – and their performance was convincing enough that Denmark expanded the program. In September 2024, Copenhagen inked a new $630 million deal with Kyiv to fund even more Ukrainian-made weapons, nearly $440 million of which will come from seized Russian assets. Other nations are following suit. Lithuania put money into a Ukrainian-developed long-range drone project “Palyanytsia”, Norway announced plans to purchase arms directly from Ukrainian manufacturers, and by late 2024, Britain and Latvia had invited Ukrainian companies to bid in their defence tenders. These initiatives mark a notable shift: Ukraine is becoming an exporter of security, not just a consumer.
German-made Marder infantry fighting vehicles at a new joint venture facility between Rheinmetall and Ukroboronprom in Ukraine, June 2024. Western companies are partnering with Ukrainian industry to refurbish and produce equipment, blending advanced technology with Ukraine’s manufacturing capacity.
RUSI’s experts argue that deeper Europe-Ukraine industrial partnerships could substantially boost NATO’s firepower and resilience. Joint ventures can combine Western tech (for example, precision components or designs that Ukraine still needs) with Ukraine’s ability to produce at scale. Not only would this approach deliver weapons faster and at lower cost, but it would also expand Europe’s overall industrial base – something especially vital as the U.S. may scale back support in the future. “With proper investment and partnership, Ukraine’s 500 defence enterprises… could become a crucial component in strengthening European security while simultaneously supporting Ukraine’s economy and defence capabilities,” the report suggests. Such cooperation would effectively integrate Ukraine into the broader NATO supply chain. It also has long-term benefits: European armies would gain additional sources for equipment (enhancing their readiness), and Ukraine’s post-war economy would have a robust high-tech manufacturing sector to build on.
Officials and analysts are increasingly receptive to this idea. NATO Secretary General Jens Stoltenberg has noted that Ukraine’s struggle underscores the need to “scale up” European defense production and rethink old models. The notion of using Ukrainian industry to help rearm Europe kills two birds with one stone: it helps Ukraine become more self-sufficient and less dependent on external aid over time, and it helps European militaries get the matériel they urgently require to deter Russia. As one European diplomat put it recently, “Investing in Ukraine’s factories is basically investing in our own security.” The RUSI report’s findings reinforce this, making plain that the centre of gravity in the arms race is shifting Eastward – towards a Ukraine that is armed not just with Western weapons, but with its own industrial might.
The RUSI study delivers a wake-up call to the defence community: modern wars can be won or lost on the factory floor. Russia’s head start in the “industrial war” has given it a dangerous advantage, and Europe can no longer take for granted its ability to out-produce a determined adversary. The silver lining is Ukraine’s unexpected rise as a manufacturing power in wartime. Leveraging that capacity – through funding, partnerships, and shared technology – may be the quickest way for NATO to close the gap. As Europe prepares to deter Russia with potentially reduced US involvement, retooling the arsenal of democracy has become an urgent task. The message from the report is blunt: to avoid losing the industrial war, the West must think and act differently – and soon.
