Defense firms are busy — but high inflation and interest rates past 20% have left them struggling. AdvertisementIn Russia's defense sector, demand is surging — but its companies are struggling all the same. Rising interest rates and export bans were eroding Russian defense companies' profits across the board, they said, making the Russian state the only guarantor of revenues. Sheremeta described the situation as a "death spiral," where war spending begets more inflation, which requires more war spending. "If some defense companies cannot fulfill their obligations, the Kremlin can simply nationalize them," Sheremeta said.

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Persons: —, Sergei Chemezov, Roman Sheremeta, Sheremeta, Daniel Treisman, Korhonen, Julian Cooper, Konstantin Sonin, Sonin Organizations: Service, Rostec, Weatherhead School of Management, Case Western Reserve University, Bloomberg, University of California, National Bureau of Economic Research, Central Bank, Bank of Finland Institute, Emerging, Centre for Russian, East European Studies, University of Birmingham, University of Chicago Harris School of Public, Project Syndicate Locations: Russia, Ukraine, Russian, Los Angeles