British Analysts: Russia to Produce Explosives from Wood; NATO Underestimates Importance of Ammunition Stockpiles

In contrast, Europe lacked both a clear plan and the necessary data to formulate one, making investments in defense-industrial capacity inefficient, the authors critically note. They add that fragmentation of Europe's defense market has led to ineffective use of increased defense spending. Despite its relative economic weakness, Russia was able to produce more military equipment than NATO between 2022 and 2024.

When referring to Russian military production, the term "output" should be used cautiously, as Russia has prioritized refurbishing older weapon systems whenever possible to control costs. Of the 2,100 tanks delivered to Russian forces in 2023, only 210 were newly manufactured. The remainder consisted of refurbished or modernized T-72s and T-80s, as well as some obsolete T-62s. Additionally, Russia employed older T-55/54 tanks primarily as self-propelled artillery or as stationary firing positions to strengthen defensive lines.

By comparison, in 2023 Ukraine received 70 Leopard 2, 31 Abrams M1, and 14 Challenger 2 tanks—none of which were new—as well as approximately 100 Leopard 1 tanks dating from the 1960s and 1970s, as reported by RUSI.

Russia has adopted a similarly cost-effective approach with guided aerial bombs, which have become one of the main weapons used by Russian air forces. Large stockpiles of Soviet-era unguided FAB-series bombs have been converted into guided glide bombs with ranges of up to 70 kilometers.

In addition to relatively precise variants equipped with satellite guidance systems, the Russians produce and deploy simpler versions using inertial guidance systems, as well as versions that only feature attachable wings.

The use of more primitive modifications inevitably reduces accuracy. This is compensated by employing heavy aerial bombs, including cluster and thermobaric bombs, significantly expanding their effective impact area. Due to limited Soviet-era stockpiles, Russia has resumed production of FAB-3000 bombs and has increased production volumes of FAB-1500 and FAB-500 bombs. 

The Russian defense industry is currently attempting similar adaptations for heavier FAB-5000 and FAB-9000 bombs, featuring explosive payloads ranging from five to nine tons. FAB-5000 bombs were first employed during World War II to destroy large industrial facilities, ports, railway infrastructure, and warehouses.

Partial success in upgrading aerial bombs may encourage Russia to explore other relatively inexpensive solutions, such as converting conventional "dumb" 155 mm shells into guided ammunition.

According to the UK think tank, NATO's delay in mobilizing its defense industry has increased the Kremlin's optimism regarding a prolonged war. By the end of 2022, Russian experts believed that Russia was four months ahead of the West in ramping up arms production. Even then, Moscow significantly overestimated NATO's actual readiness to dramatically increase defense output.

The issue is serious and extends beyond Ukraine's ability to defend itself. Russia's ongoing advantage in defense industry production capacity poses a strategic threat to NATO and undermines the alliance's conventional deterrence, according to the report's authors. For Ukraine, this represents a catastrophic risk, as its allies form the country's strategic depth, as Watling and Danylyk conclude.

In its latest issue, Foreign Affairs published an article by Michael Brown titled "Democracy's Empty Arsenal," in which the author offers a rather bleak assessment of America's persistently sluggish defense production capabilities. The U.S. military faces ammunition shortages across nearly all weapon categories, including short- and medium-range missiles. 

Most critically, in the context of a potential conflict in the Pacific, the United States lacks sufficient long-range precision-guided missiles. According to war games conducted by the Center for Strategic and International Studies (CSIS), the U.S. could expend around 5,000 long-range precision missiles per week, depleting its stockpiles within just three to four weeks.

The United States would not be able to replace these missiles quickly enough. According to a 2021 mobilization study by CSIS, restarting production of long-range anti-ship missiles at the required scale could take up to two years. America's defense industry lacks the necessary components, skilled personnel, and manufacturing facilities to swiftly replenish ammunition stockpiles. 

Additionally, the industry does not receive adequate financial support from new Pentagon orders, limiting the ability to speed up production or invest in expanding manufacturing capacity. The author also expresses concern over the willingness of Donald Trump's war-skeptical administration to address this issue effectively.

Many Western observers have assumed high levels of corruption and resulting inefficiencies within Russia's defense industry. However, according to analysis cited by the British think tank RUSI, corruption has not prevented Russian industry from achieving its production targets. While in 2022 Russia produced approximately 250,000 units of 152 mm artillery shells, by 2023 that number rose to one million. For 2024, production was projected at 1.325 million shells, and Russia successfully delivered slightly more than 1.3 million shells.

Additionally, Russia aimed to manufacture 800,000 units of 122 mm artillery shells in 2024 and successfully reached this target. Production growth is expected to continue through 2025, particularly in the second half of the year, when new specialized chemical factories will reduce bottlenecks in the supply of explosives and propellants necessary for shell production.

In 2023, Russian industry managed to produce 420 Kh-101 cruise missiles (against a target of 460), with output rising to over 500 missiles in 2024. Production of 9M723 ballistic missiles increased significantly from approximately 250 in 2023 to over 700 in 2024. Drone development is also expanding; by the end of 2024, production of Geran-2 attack drones reached 30 units per day. Production of armored vehicles, including artillery vehicles, has remained steady at approximately 2,000 tanks and 3,000 other armored combat vehicles annually, although only about 10–15 percent of these are entirely new.

At the same time, Russia is rapidly acquiring new manufacturing equipment and expanding production lines to boost output of new armored vehicles, the British think tank warns.

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Russia’s extensive military-industrial mobilization places its economy at increasing risk of instability over time. If sustained, this will lead to significant and long-term negative consequences for Russian society. In the medium term, however, Russia's defense-industrial policy enables a substantial increase in military equipment production. Because a large portion of defense funding has already been directed toward expanding production capacity, high levels of output can continue in the future even with reduced financial input.

Therefore, according to RUSI, unless political instability escalates, Russia is likely to maintain large-scale military production for an extended period, even if it necessitates forced adjustments to the broader economy.

According to the RUSI report, European countries have faced systemic difficulties in translating capital and intentions into actual production capacity. Europe's initial funding decisions were relatively straightforward and followed two paths: replenishing stocks donated to Ukraine and acquiring new platforms critical to NATO’s conventional deterrence capability, such as F-35 fighter jets. However, for most European nations, several key challenges emerged regarding the funding of Ukraine’s long-term resistance.

The first challenge was simply a matter of timing. Although national stockpile levels are not publicly disclosed, Watling and Danylyk estimate that Western European countries possessed artillery ammunition reserves sufficient for only a few weeks. The core problem was that even though nations could sign contracts to expand production capacity, their existing stockpiles were insufficient to bridge the gap until newly produced supplies reached military units.

In the spring of 2022, European governments prioritized procuring ammunition from the international market, as this offered immediate benefits to Ukraine and allowed for more reliable short-term planning. Shorter delivery times were also politically attractive.

However, most European countries were only prepared to place orders either to replenish their own stockpiles or to make large one-time orders that existing production capacities could not fulfill. These orders also lacked the sustained duration required to justify expanding manufacturing capacity. 

Consequently, companies began adding these new orders incrementally into their existing production schedules. While governments increased their contracting somewhat, this ultimately only extended delivery times. Companies also lacked long-term assurances from governments about continued orders, further discouraging expansion of production capacity.

Secondly, the core requirements of Ukraine's military did not necessarily align with those of NATO forces, creating concerns about opportunity costs. Increasing production specifically for Ukraine was perceived as potentially compromising NATO’s own modernization efforts. Third, many countries worried about the long-term competitiveness of their national defense industries.

In the United Kingdom, for instance, there were fears that even if ammunition production were scaled up, the UK might still produce fewer shells—and likely at a higher cost—compared to Germany. Politicians were not attracted by the prospect of investing significant resources in expanding manufacturing capacity, only to subsidize inefficient production lines in the long term, especially if NATO eventually faced oversupply and declining demand. As a result, many governments were cautious about placing substantial orders.

Watling and Danylyk also provide a detailed explanation for the failure of Estonia's "one million shells" initiative. Although Estonian diplomacy successfully raised political awareness of the importance of revitalizing defense industry capacities, the initiative ultimately failed to solve industrial bottlenecks due to factors beyond Estonia’s control.

The European Union signed framework agreements with defense industry companies to produce ammunition at a fixed price, allowing member states to place individual orders within this structure. The goal was to consolidate many smaller orders into one large contract. However, the companies still lacked clarity on the most crucial detail—how much ammunition would actually be ordered. As a compromise, the price was set at €4,000 per shell, a cost that many member states found excessively high, leading them to continue pursuing direct contracts with manufacturers.

Consequently, of the promised one million shells, the EU managed to order only 40,000 newly produced shells from its industry in the first year and another 40,000 the following year. Although the EU announced it had delivered 500,000 shells within a year, this figure actually reflected ammunition supplied to Ukraine, most of which was procured from the international market rather than resulting from new contracts placed with European defense manufacturers.

According to RUSI analysts, European Union member states were politically sensitive to ammunition prices and therefore avoided using framework contracts established by the European Defence Agency. At the same time, their confidence in direct contracts with manufacturers was also limited. Early in the conflict, arms manufacturers claimed that with modest investments, ammunition production could be significantly increased. However, upon closer examination, it became clear that the speed of expanding production was much slower than initially assumed.

To understand the situation, it is necessary to describe the ammunition production process. First, the shell casing must be manufactured, filled with explosives, and fitted with a fuse. Generally, scaling up the production of casings and fuses is relatively straightforward. However, the filling process is more complex. Shells must be filled with explosives in a controlled temperature environment, where the temperature is gradually lowered to ensure uniform solidification of explosives across the entire batch.

When Russia launched its full-scale invasion of Ukraine, most shell-filling factories were not operating at full capacity. However, different types of ammunition utilize the same filling infrastructure. As a result, when companies responded to government inquiries, they provided figures reflecting their total theoretical production capacity. In practice, orders for 155 mm, 105 mm, 122 mm, or 152 mm howitzer shells; 120 mm or 125 mm tank shells; and 120 mm, 81 mm, or 82 mm mortar rounds quickly consumed existing filling capacities, leaving less room for other orders.

Once filling capacity reached its limit, regulations became the primary obstacle to expanding production, as additional sites had to be certified for handling explosives. While defense ministries recognized the urgency of the situation, other governmental bodies did not always share this perception. Nevertheless, even this regulatory hurdle was not the most significant problem.

For decades, demand for highly enriched nitrocellulose—the primary ingredient used in ammunition propellants—was limited. Suddenly, demand surged, vastly outstripping supply, causing several significant consequences.

The price of explosives rose dramatically, sharply increasing the cost of individual shells. Before Russia’s full-scale invasion of Ukraine, the price of 155 mm artillery shells ranged from $800 to $3,000 each (the higher price reflecting framework agreements where companies maintained production lines in readiness for governments). During the conflict, shell prices climbed to between $6,000 and $8,000 per unit. Meanwhile, Russia stabilized the cost of domestically produced 152 mm ammunition at roughly $1,000 per shell.

Additionally, although some nitrocellulose was available on the market—allowing companies to estimate potential production volumes—the separate, uncoordinated contracts signed by European governments with domestic manufacturers led European firms to compete against each other for the same limited stocks. Beyond merely driving up prices, this meant that when one European defense firm succeeded in increasing production, it often came at the expense of another European company.

As a result, despite significant government investment across Europe in ammunition production, actual output remained notably below initial industry projections and far beneath Ukraine's real needs.

One of the most substantial obstacles to significantly scaling ammunition production was the relocation of critical production processes—particularly nitrocellulose enrichment—to China. Consequently, Western firms lacked not only the necessary production facilities and equipment but also the skilled workforce required to initiate manufacturing. 

In the explosives manufacturing sector, where hiring new employees requires thorough background checks and high-level government clearance, private companies faced a challenging scenario: they were being asked to invest heavily in a sector where government demand might only be temporary, yet bureaucratic processes were slow and cumbersome.

According to RUSI, NATO member states' reflexive secrecy—particularly regarding ammunition production capabilities—has resulted in politicians facing little public accountability for the sector’s deterioration. This secrecy has also limited allies' ability to coordinate production effectively. Second, NATO governments lack sufficient awareness of how supply chains function and of how their additional funding decisions impact those supply chains.

A chronic desire to protect domestic industries has intensified competition among allies, diminishing the overall effectiveness of investments instead of fostering cooperation and streamlining production across the continent. Fourth, the preference for managing the defense industry strictly on free-market principles—without price controls but within a heavily regulated environment—has increased investor risks while simultaneously raising costs for governments.

Watling and Danylyk specifically highlight evidence suggesting that the actual shelf life of most Western ammunition significantly exceeds current regulatory limits. Countries do not uniformly certify weapon lifespans, yet there is no clear evidence indicating that nations adopting longer expiration periods have experienced substantial safety issues. Across NATO, there is ample evidence to support extending the shelf life of many ammunition stocks. Additionally, expired ammunition can often be repurposed or recalibrated for use on different platforms.

For instance, missiles originally designed for aircraft, even after surpassing their official expiration dates, may still be suitable for use under less demanding conditions. Many air-to-ground or air-to-air missiles could potentially be adapted for ground-based launchers. Thus, Europe's ammunition reserves could be effectively expanded and their useful lifespan extended by reassessing and revising existing regulations.

Issues related to obsolescence and limited stockpiles are not confined solely to ammunition. For example, the United Kingdom initially provided Ukraine with just 14 Challenger 2 tanks out of its total fleet of 227, even though it planned to upgrade only 148 tanks to the Challenger 3 standard. One reason for the small donation was the lack of sufficient spare parts kits; supplying a larger number of tanks would have rapidly depleted operational availability both for Ukraine and the UK itself. Many necessary spare parts were no longer in production, requiring their manufacturing to be restarted.

Efforts to expand production were also hindered by export controls and intellectual property concerns. Investments in any particular 155 mm artillery system would have advantaged some countries at the expense of others, granting certain manufacturers economies of scale and long-term competitive benefits. Furthermore, expanding production capacity for specific weapon systems structurally favored manufacturers supplying compatible ammunition.

Although restarting the production of spare parts was sometimes economically impractical due to obsolescence, manufacturers were still reluctant to share technical drawings or other intellectual property with Ukraine, whose repair facilities could have produced these necessary parts. While specific intellectual property disputes and equipment release permissions were individually complex, their combined effect was more critical. When Europe urgently needed to ramp up supplies to Ukraine and increase the production of support systems, these complexities slowed the process and added uncertainty to planning, significantly harming timely and cost-effective delivery.

The development of UAVs (drones) and air-defense systems has become one of the fastest-growing areas of the conflict, creating enormous demand for drones in both Ukraine and Russia. Given Europe’s extensive aviation industry, prior experience in drone production, and access to necessary components, Europe should have been ideally positioned in early 2022. In practice, however, most UAV development has occurred within Ukraine itself, primarily due to lower costs and fewer regulatory barriers. Most European countries maintain strict airspace regulations, requiring drone approval by civilian and military aviation authorities.

Strict Western regulations have forced manufacturers to design drones and then maintain production capacities and engineering teams throughout lengthy testing and evaluation periods, often without any guarantee of receiving a contract. Even when contracts materialize, they're typically for small quantities of platforms, because European militaries neither use nor lose drones at a comparable scale to Ukraine. Furthermore, drones produced specifically for Ukraine often don't meet NATO’s stricter standards, meaning substantial redesigns are necessary before these platforms can be sold to European militaries, significantly driving up costs.

It’s not uncommon for a drone that costs £2,500 when manufactured for Ukraine to cost between £8,000 and £16,000 when produced for the British military. Consequently, European governments' investments aimed at supporting Ukraine have not resulted in parallel large-scale modernization for their own armed forces. While policymakers in Europe clearly see this price disparity, changing regulations and market incentives requires considerable time and political will.

Europe's recent additional investments have predominantly focused on finished products rather than on foundational aspects of supply chains. As a result, competition has intensified primarily at higher stages of the supply chain, driving up costs without significantly increasing overall production volumes.

Russia's competitive advantage, aside from lower personnel costs and the extensive use of older weapon systems that can be cheaply modernized, also lies in its lax regulations regarding ammunition storage, working conditions, and quality control. However, this laxness has likely caused accidents, reducing the overall efficiency of Russia's defense industry.

In Ukraine, the ability to test equipment under actual battlefield conditions, along with straightforward access to training areas, has accelerated defense-related research and development both for Ukraine itself and for European defense industries.

In Europe, the overall regulatory approach has been unfriendly toward growth in defense production. According to RUSI, limited access to testing and evaluation facilities has resulted in many manufactured systems failing to meet requirements, with deficiencies often discovered only at late stages. For effective systems, companies have had to bear significant financial risks prior to certification, sharply increasing their costs.

Planning permissions and other bureaucratic procedures have also raised costs and slowed down opportunities for defense industry expansion.

The most significant difference highlighted by the RUSI report between the relatively successful military-industrial policies of Russia and Ukraine and Europe's struggling defense industry is that in the former, production is centrally coordinated by a single authority. In contrast, European countries are individually too small, and there is no effective supranational coordination. Member states have resisted allowing the European Union to assume such a coordinating role, and NATO, according to experts, lacks the necessary authority and information.

European defense companies compete with one another and operate secretively, which prevents the collection of crucial data and authority needed for streamlining production processes. Thus, RUSI emphasizes the critical need to establish a central authority responsible for coordinating defense production, either within NATO or the European Union framework. The first-ever EU defense industry strategy, adopted last March, represents only an initial, hesitant, and insufficient step in this direction. The continued stagnation of Western military industries would severely undermine NATO’s capability in wartime, a vulnerability that potential adversaries clearly recognize.