Tanks or Trains? Russia is Bearing Down on Both

Make tanks or trains? It is a dilemma for Russian industry, as it converts on the run from civilian to military production. Russia is struggling to do both, but it is doing a poor job of it. Why?

Make tanks or trains? It is a stark dilemma for Russian industry, as it attempts to convert on the run from civilian output to military production. Russia is struggling to make both, but it is doing a poor job of it. What is its problem?

For clues, today’s post looks at UVZ, one of the giants of Soviet military industry, and once the largest tank producer in the world. The story of UVZ illustrates the complex interaction of Western sanctions with long-standing weaknesses in Russian industry and policy-making. At the center of the drama is an obscure piece of technology called a bearing. Let’s roll…

Portrait of a Soviet-era dinosaur

Nearly all Russian tanks today are produced at a single factory called Uralvagonzavod, or UVZ. UVZ is a sprawling complex located on the eastern slope of the Ural Mountains, just east of the boundary with Asia. It is a giant, employing over 30,000 people. Founded in 1936, it initially produced freight cars, but when the Nazis attacked in 1941, a Ukrainian tank factory was hastily moved east from Kharkiv and merged with UVZ. For the next forty years UVZ produced tanks, as well as airplanes and space rockets. But when the Soviet Union collapsed, military orders disappeared, and UVZ switched to civilian production, mainly freightcars.

In 2008, when Russia resumed spending on the military, UVZ was ordered to resume building tanks. However, by that time the company had gone private. The plant’s managers were reluctant to go back to making tanks. They complained that the Ministry of Defense was refusing to provide financing, and expected UVZ to invest on its own into expanding tank production. “Why should we invest our profits into something that’s unprofitable?” they grumbled. “We modernize those tanks only as a kind of social welfare program for the MoD.” By 2011 it had only “modernized” about 100 of the Soviet-era T-72 tank. Instead, making the best of a bad deal, UVZ invested in a newer tank model, the T-90M, for export to India and Myanmar. But at the same time, it continued making freightcars, which remained its core business.

              But at this point, around 2014, UVZ ran into several serious problems. In the wake of Russia’s occupation of Crimea, UVZ was sanctioned by the United States, because of its role in tank-building. This in turn barred it from doing business with foreign companies to modernize its freight car production, most of which still consisted of older Soviet-era models. This was highly awkward, because UVZ now faced a dangerous competitor inside Russia. To follow this part of the story, we need to circle back to what was going on with the global technology of railcars. This is where the sanctions come in.

              The Global Revolution in Rail Cars, and What Western Companies Brought to Russia:

              We ride on them; we roll on them; but most of us don’t even know they’re there. I’m talking about bearings, which enable the wheel of a truck or a train to turn smoothly on its axle. No bearing—no wheel—no modern railcarcar. It’s that simple.

There’s a global technological revolution going on with bearings. In recent years the technology of axle bearings, used in the manufacture of railcars, has moved from spherical “ball” bearings and first-generation cylindrical bearings to cone-shaped “tapered roller” bearings, enclosed in conveniently-mounted “cassettes.” This is a game-changer, because such tapered roller bearings (called TBU’s) enable train wheels to support much heavier loads, and they last up to three times longer, thus requiring less frequent replacement and repairs.

But Russia had mostly (you might say) missed the train. In the 1990s, along with the rest of the Soviet economy, the industry that built trains and railcars had collapsed. For some fifteen years, Russia’s rolling stock was not renewed, and by the mid-2000s it had deteriorated badly. Moreover, it had fallen a generation behind: it was still rolling on ballbearings, while the rest of the world had moved on. This was a big problem: whereas in the US freight moves by truck, in Russia, freight moves mostly by rail.

So the Russian government (which by now was enjoying strong oil revenues, and had money to spend), decided on a massive program to modernize its rolling stock. This was a mammoth undertaking: the Russian railcar fleet consists of hundreds of thousands of cars, which by now were nearly all obsolete. Russia turned to Western companies for help. In 2014, a long-established US firm, Timken, signed a joint-venture agreement with Russia’s United Wagon Company, to make modern TBUs at a new assembly plant near Saint Petersburg. A second US company, Brenco (a division of Amsted Rail), set up a joint venture with another Russian railcar producer, EPK.

Under both arrangements, components were supplied from the USA and assembled in Russia under license. The two deals were criticized in the US from the start, since they came shortly after the Obama Administration had announced sanctions against Russia following its seizure of Crimea. But bearings were not sanctioned goods, and  Timken and Brenco’s partners were not under sanctions. Therefore the deal was legal.

Timken and Brenco were not alone. To provide high-performance roller bearings for a planned high-speed passenger train, the German bearing specialist Schaeffler opened a plant in Ulyanovsk in 2014. Another foreign bearing specialist, Sweden’s SKF, opened an assembly plant in Tver to produce bearings for conventional passenger cars. All told, by 2021 four Western companies were producing modern bearings for the Russian rail system.

The Impact of the Invasion, and of Sanctions

The Russian invasion of Ukraine changed everything. On 27 February 2022, three days after the start of the invasion, Russian Railways, the owner of the Russian rail system, was sanctioned by the EU, and the next month by the UK. In March, the US banned the export of bearings to Russia. That same month, Timken announced that it was suspending sales and operations in Russia; Brenco, SKF, and Schaeffler quickly followed suit. Not only bearings, but also essential materials for them such as lubricants and sealants, could no longer be supplied, and the licenses under which production took place were also terminated. Timken’s joint venture came to an abrupt halt, although the others managed to keep producing, but at lower rates. Freightcar operators, receiving fewer new cars, were forced to cannibalize existing stock for spare parts.

              For UVZ, all this spelled disaster. As soon as the joint ventures began producing modern bearings and freightcars, they became the preferred suppliers for Russian Railroads and its various operators, and demand for UVZ’s freightcars began to shrink. UVZ made an attempt to switch to the new cassette model, using imports from Sweden, and in 2007 it went further, signing an agreement with EPK to buy modern bearings from the EPK-Brenco joint venture. But these arrangements lapsed in 2014 when Uralvagonzavod was sanctioned. UVZ was stuck with its old models, with no way forward. It continued to produce them, but they piled up unsold. Its revenues from railcars were now collapsing, leaving it without working capital to deliver its export tanks to India on schedule. By 2016, it faced penalties for nonperformance, and the specter of bankruptcy loomed.

              At this point, Putin stepped in, to save what was Russia’s only working tank manufacturer. At the end of 2016, he granted UVZ an emergency bailout, but ordered the company transferred to Rostekh, Russia’s giant defense conglomerate. UVZ is now one of several hundred companies in Rostekh’s vast empire. This has kept UVZ alive, but reportedly it continues to operate at a loss.

              These financial problems have hampered UVZ’s tank production. Much of UVZ’s work on tanks today still consists of upgrading Russia’s Soviet-era T-72 battle tank and its 1990s offshoot, the T-90M. These require advanced bearings[1] and optics, which had previously been imported. For a brief time, in the first half of last year, UVZ’s tank production stopped. But it appears that these disruptions were due less to shortages of sanctioned technologies, and rather more to disruptions in UVZ’s overall supply chain, for such items as guns and diesel engines. Reportedly replacements were soon found, and UVZ’s work of upgrading and refurbishing older tanks has resumed.

But more significantly, UVZ’s tank modernization program has suffered. Its production of the upgraded T-90M remained small for several years, partly for lack of financing and partly because the Ministry of Defense UVZ’s T-90Ms as unsatisfactory, and they were produced only for the export market. Now, since the Ukrainian war began, the situation is reversed: the Ministry is now only too happy to accept T-90M’s for the war effort. Meanwhile in an ironic turnabout, UVZ has reportedly begun repurchasing components from the tanks it previously exported to India, notably siting telescopes and cameras, for re-use in UVZ’s own tank production.

Faced with the loss of at least 2000 tanks in Ukraine since the invasion began, the Kremlin is pressing UVZ harder to produce more of them. In May former president Dmitri Medvedev, now deputy chair of the Russia Defense Council, unveiled a plan to produce 1500 tanks in 2023. Since UVZ’s annual capacity to produce new tanks is only somewhere between 150 and 200, this target implies that most of Medvedev’s target would have to be met with upgraded versions of older systems that are now in storage. Even that seems beyond reach, although UVZ gets some help from one of its subsidiaries, located in Omsk, which specializes in refurbishments. At best, they might be able to produce 300 modernized T-72s and T-90Ms in 2023, far short of Medvedev’s target.

Under extreme pressure, UVZ has now moved to three shifts, in a desperate attempt to produce tanks around the clock. But manpower is short, and there have been reports of discontent among the workers. Key skills are in short supply, and although UVZ is offering higher wages to specialists, plus an across-the-board 12% increase announced this month, the hours are long. According to satellite imagery, UVZ’s tanks and freightcars are produced in adjacent parts of the same facility, competing for scarce resources and labor.

The saga of UVZ stands as a metaphor for the dilemmas of Russian industry, as it attempts to shift from civilian back to military production. UVZ will undoubtedly produce more tanks, but whether these will be able to perform effectively on the battlefield is open to question. Meanwhile, the massive project to modernize Russia’s railroads, essential for the future of Russia’s economy, is being held back. Russia will continue to pay the price for decades to come.

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Thane Gustafson is the author and co-author of eight books on Russian affairs, including most recently Wheel of Fortune: The Battle for Oil and Power in Russia (2012), The Bridge: Natural Gas in a Redivided Europe (2020), and Klimat: Russia in the Age of Climate Change (2021), all with Harvard University Press. This series of Substack posts is part of a project for a new book, tentatively called The Devil’s Dance. I am grateful to Richard Connolly,  Tom Nichols, and Bob Otto, for their kind and helpful comments on earlier drafts, and to Gene Peterson, who had the original idea.

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[1] Tanks require a different sort of bearings than trains. The bearings used in tanks are called “wire-race bearings,” which enable a tank turret to rotate. For this use, light weight is at a premium, and tapered roller bearings are unsuitable. SKF, through its Kaydon subsidiary in the US, produces wire-race bearings, but I have seen no reports suggesting that they were ever supplied to UVZ or the Russia military.