Cracks Appear in Russia’s Defense Industry as Its Largest Firms Sue for Lack of Payment
Cracks are now widening inside Russia’s defense-industrial complex, as some of the country’s largest military manufacturers take the government to court over unpaid debts.
On July 9, 2025, Magnitogorsk Iron and Steel Works (MMK) filed its third lawsuit in two months against Uralvagonzavod (UVZ), the state-owned producer of the T-90M tank, demanding 105 million rubles ($1.1 million) for undelivered payments. The case was filed in the Chelyabinsk Arbitration Court and adds to a growing series of legal actions stemming from Russia’s deteriorating war economy.
UVZ—based in Nizhny Tagil and central to the Kremlin’s armored vehicle production—has become a bellwether for the wider unraveling. In total, UVZ now faces over 160 million rubles in court claims from suppliers, with earlier suits filed in April and June. The company’s financial instability dates back years, with local reports noting debts exceeding 880 million rubles as early as 2020. Since the invasion of Ukraine, Western sanctions have further constrained operations by cutting off access to key components and export markets.
Production has slumped. While state-aligned sources once touted a target of 1,000 T-90M tanks per year, the International Institute for Strategic Studies estimates only 300 units were produced in 2024. A Military Watch Magazine report from September 2024 cites both parts shortages and financial strain as major causes.
But the trouble goes far beyond UVZ. Aircraft manufacturer Tupolev—builder of the Tu-160 and Tu-95MS bombers—is now battling a 1 billion ruble ($10.5 million) lawsuit. The Khrunichev State Research and Production Space Center, which produces Russia’s ICBMs, faces claims exceeding 211 million rubles. Together, these cases point to a systemic liquidity crisis across the entire defense sector.
The Kremlin’s own numbers help explain the squeeze. Military spending for 2025 has ballooned to $145 billion (6.3% of GDP), but Russia’s national reserves have shrunk from $91 billion in 2022 to $51 billion by late 2024, according to Bloomberg. The civilian economy is also in sharp decline: car sales are down 25%, clothing by 30–35%, and inflation has exceeded 15%, per EL PAÍS English and independent monitors.
Moscow is reportedly considering drastic measures—such as nationalizing suppliers or printing money—to maintain output. But as analysts warn, either path risks deepening inflation and fueling internal instability. Public discontent is rising, as noted in a recent Chatham House assessment, which ties economic fatigue and defense sector strain to broader shifts in public support.
On the battlefield, the effects are visible. Dozens of T-90M tanks have been confirmed destroyed in Ukraine via open-source documentation, highlighting the costs of reduced production and delayed delivery. Meanwhile, The Conversation reports that the economic strain is beginning to seep into political discourse, challenging the Kremlin’s ability to maintain both war momentum and domestic control.
For now, Russia’s defense industry remains operational—but the legal battles unfolding in arbitration courts across the country tell a deeper story:
The Kremlin is falling behind on payments, its war machine is overextended, and the contractors building its tanks, missiles, and bombers are demanding cash in court. The cracks are widening.
