Putin's new strategy: technocrat Belousov to lead Russian defence

Andrey Belousov has never served in the army. He was exempt from mandatory military service as a student of the Economics Department at Lomonosov Moscow State University and later at the Central Economic-Mathematical Institute of the USSR Academy of Sciences. Instead, he focused on mathematics, physics, and finance, particularly economic forecasting.

He inherited his interest in economics from his father, Rem, who worked on the famous economic reform of the USSR. This reform expanded the independence of enterprises and limited the Central Committee's central control of the economy. Initially, Andrey kept his distance from politics, focusing on academic work.

This changed only in 1999, when he became a board member of the Ministry of Economic Development of the Russian Federation. Since then, he started getting involved in politics. By 2006, he was the Deputy Minister of Economic Development and Trade, later the head of this ministry, and since 2020, additionally the First Deputy Prime Minister.

Why did a man who had nothing to do with the army become the head of the most important ministry in Russia today?

Vladimir Putin, starting his next presidential term, announced a new deal and a change of priorities in the internal and external policies of the Federation. This "new" at the Ministry of Defence meant a change in leadership. Putin's dark horse became Andrey Belousov.

Belousov is against militarising the industry and increasing defence spending. He does not want a repeat of the USSR era when excessive militarisation led to the economic collapse of the entire state. On the other hand, he is a strong supporter of state interventionism and imposing strict regulations by the state.

As a resource management specialist, his primary task is to organise the defence industry and partially shift the civilian industry to a wartime footing. Additionally, given his excellent economic contacts, he will likely need to clear trade channels through which the defence industry can receive necessary products. This is currently a significant problem.

The Russians have lost nearly 30% of their tank reserves at the start of the war, with more than 50% being frontline machines. Vehicle production cannot keep up with the needs. For example, production of T-90Ms and modernisation of T-72s barely cover combat losses, and these machines leave factories with limited combat capabilities. This is because they lack sufficient electronic equipment and fire control systems. These were previously imported from abroad, but that source has dried up.

Vehicles labelled as "modernised" are ones pulled from deep reserves and those repaired after frontline damage. In both cases, these are vehicles in very poor technical condition.

Here, Belousov will have a large field to prove himself. However, he will have to learn to balance the front's needs with a budget stretched to the limit. For now, the minister is trying to win the favour of soldiers. He announced additional financial benefits and improved housing conditions.

"I believe it is scandalous when participants of a special military operation, who return on leave, are sent from civilian medical facilities to hospitals that are often simply overcrowded. This problem must be resolved," said Belousov in his inaugural speech.

Belousov overreached: for now, he will have to hold off on implementing his announcements because the budget does not ensure the appropriate funds. However, billions of rubles continue to flow into industry and the army. In 2023, Russia's defence spending increased by 36% compared to 2022. Russia allocated over 6% of its GDP to defence. The Kremlin last spent this much during the arms race in the 1970s.

Thanks to colossal spending, it was possible to significantly increase arms production, although still not sufficiently. Kremlin news agency TASS reported that the defence conglomerate Rostec increased tank production sevenfold last year and the production of infantry fighting vehicles and wheeled transporters by 4.5 times. These numbers will further increase as the industry is almost fully transitioning to wartime mode.

Next year, the Kremlin plans to spend £104 billion on army modernisation, building new defence factories, and weapon production. By comparison, the entire budget for the Polish Ministry of Defence this year is £24 billion.

Putin has long announced that the Russian economy must be "mobilised" as the war has reached a stalemate. The Kremlin believes that a war of attrition can only be won on the home front. Russia has a much more developed defence industry, vast energy resources, and a large pool of manpower that it can utilise freely. The only question is whether it can produce new missiles and repair damaged equipment. If the Russians can do this, they can wage war for years.

Estonian intelligence reports that, according to Putin's estimates, ravaging Ukraine and "overloading" the war production of Western economies will eventually force Kyiv and its allies to negotiate. The future of the war thus plays out far from the front. And that is precisely why Belousov replaced Shoigu. In a war of economic attrition, an economist is a better head of the defence ministry than a soldier.