How Russia’s Defense Pie Is Divided: Chemezov, Shoigu and the Battle for Trillions

For comparison: in 2021, the security bloc accounted for only 24% of expenditures. Practically every other ruble goes either to war, or to the repressive apparatus, or to servicing the debt that this war has generated.

Over the past three years, the defense budget has nearly doubled — from 6.8 to 12.9 trillion rubles. At the same time, social spending has shrunk from 38% to 25% of the budget. In real terms, accounting for inflation exceeding 50%, this represents a sharp contraction.

But the most interesting aspect is not the numbers, but who and how distributes this enormous defense pie.

Chemezov: The Main Beneficiary of the War Economy

Sergey Chemezov is not just the head of a state corporation. He is the central figure in the system for distributing military contracts. His Rostec is effectively the distribution center for defense orders, controlling approximately 700 enterprises from aviation to electronics.

Numbers That Speak for Themselves:

Rostec in 2024:

• Revenue: 3.61 trillion rubles (~$37 billion), growth of 27%
• Net profit: 131.5 billion rubles (~$1.36 billion), growth of 119%
• Investments: 676 billion rubles (~$7 billion) — a record amount
• Up to 80% of weapons entering the war zone are produced at the corporation’s enterprises
• Portfolio of foreign orders for Rosoboronexport: over $60 billion

According to calculations by the Stockholm International Peace Research Institute (SIPRI), the combined revenue of Rostec and the United Shipbuilding Corporation from arms sales in 2024 amounted to $31.2 billion — 23% more than in 2023.

Why Is Chemezov Untouchable?

Chemezov is not just an official. He is an old comrade of Putin from Dresden, where they worked together in the KGB in the late 1980s. He is not a technocrat, but a political heavyweight with untouchable status.

His family owns offshore assets worth approximately $240 million, including:

• The 85-meter yacht Valerie worth $140 million
• A villa in Marbella, Spain
• A network of offshore companies through stepdaughter Anastasia Ignatova

Chemezov’s son Stanislav, through the offshore company Erlinglow Ltd, profits from Rostec’s construction of a fiber-optic superhighway worth $550 million. Together with the daughter of Nikolai Tokarev, he owns a number of offshore companies, including Irvin-2, which received contracts worth 8 billion rubles (~$83 million).

Other Participants in Dividing the Defense Pie

Alexey Kritsky — Air Defense Systems

The new general director of Almaz-Antey, responsible for air defense systems and missile technology. Almaz-Antey is one of the key contractors for the production of S-300, S-400, Buk, and other air defense systems.

Dmitry Shugaev and Rosoboronexport

Head of the state arms export company. Order portfolio: over $60 billion. The profit mechanism involves export contracts where the real price and the price in documents differ significantly. Money flows through a network of intermediaries in the Middle East, India, and Africa.

The Rotenberg Clan

Arkady and Boris Rotenberg — old friends of Putin from St. Petersburg judo. Their specialization is contracts for infrastructure, logistics, and construction of facilities. Under the guise of defense needs, roads, bridges, and barracks are built — all through their structures with corresponding markups.

Production Feudal Lords

Kalashnikov, shipbuilding yards, tank factories — separate feudal lords with shares of the pie. Each controls their niche, each has their share in budget flows.

The Sobchak-Chemezov Scandal: How the Authorities Punish the Disobedient

In the fall of 2022, a major scandal erupted that showed just how untouchable Chemezov is and how the system deals with those who try to touch him.

The Essence of the Case:

Three employees of journalist Ksenia Sobchak’s Telegram channels — Kirill Sukhanov (commercial director), Arian Romanovsky (editor-in-chief of Tatler and administrator of the “Turn Off the Lights” channel) and Tamerlan Bigaev (journalist) — were accused of extorting 11 million rubles (~$114,000) from Chemezov.

According to the investigation, they prepared an article for the “Turn Off the Lights” channel with compromising information about Chemezov and his associates. To prevent the article from being published, they allegedly extorted money for a year-long “negative block.”

How It Unfolded:

• October 25, 2022: Sukhanov was detained at the Regent restaurant in Moscow while receiving 800,000 rubles (the first installment) from Chemezov’s representative
• October 26: Romanovsky arrested, searches at Sobchak’s country house
• November 4: Bigaev detained
• November 15: Sobchak visited Rostec’s office, met with Chemezov
• November 17, 2022: Sobchak publicly apologized to Chemezov on her Telegram channel

Sentences:

• February 12, 2024: Moscow’s Khamovnichesky Court issued sentences:
• Kirill Sukhanov — 7.5 years in a strict regime colony
• Arian Romanovsky — 7 years in a colony
• Tamerlan Bigaev — 7 years in a colony
• September 2024: Moscow City Court softened sentences by 2 years (5.5 and 5 years respectively)

What’s Interesting:

Sobchak herself was not even called as a witness in the case, although searches were conducted at her home and her employees claimed they were following her instructions. Moreover, Rostec’s representative asked the court to soften the sentences and stated that Chemezov accepted the apologies.

The conclusion is obvious: the case was not about extorting money. The case was about showing journalists and everyone else that Chemezov is untouchable. He is one of the main war beneficiaries who put his “servants” in their place.

Shoigu and His Gang: Why Were They Removed?

On May 12, 2024, a sensation occurred: Sergey Shoigu, who headed the Ministry of Defense for 12 years, was replaced by economist Andrey Belousov. This was not just a personnel rotation — it was a change in the model of managing the military budget.

Why Was Shoigu Removed?

Let’s be blunt: Shoigu was removed not because he stole — everyone stole. He was removed because he stole inefficiently amid the growing demands of war.

What Was Discovered in 2022–2024:

• The army on paper and the army in reality are different things
• Warehouses are empty, equipment doesn’t work, the Armata exists in single units
• Money flowed but didn’t reach the front
• Classic “sawing” through contractors

Schemes of Shoigu and His Team:

Timur Ivanov (Deputy Minister):

• Arrested April 24, 2024 for receiving bribes on an especially large scale
• Specialization — construction kickbacks
• Controlled construction of military facilities through proxy contractors

Army General Dmitry Bulgakov (Deputy Minister responsible for logistics):

• Criminal case for theft in supply operations
• Schemes through fictitious suppliers of food and uniforms

Army General Pavel Popov (Deputy Minister):

• Criminal case for corruption
• Schemes in the state defense order system

Yuri Sadovenko (Head of the Minister’s Office):

• Dismissed in May 2024
• Controlled document flow and contract distribution

Scale of Purges:

According to official data, as of early December 2024, Russia’s Investigative Committee has brought 136 people to justice for corruption in the defense industry and in the execution of state defense orders.

Among those arrested:

• Lieutenant General Yuri Kuznetsov (Head of the Main Personnel Directorate)
• Colonel Vladimir Verteletsky (Head of the State Defense Order Department)
• Dozens of military commissars across the country

Spring 2024: Putin Understood the Problem

With a budget of nearly 13 trillion rubles for 2025–2026, what was needed was not a “sawyer” but an “efficient manager.” War requires real shells, not beautiful reports. That’s why:

• Belousov instead of Shoigu — this is not a fight against corruption, it’s a change of model: from “steal and report” to “steal less, produce more”
• Shoigu was sent to the Security Council — this is not a promotion, but a quiet honorary retirement
• Chemezov remained because his structure at least produces something, albeit with huge kickbacks

Who Is Belousov?

Andrey Belousov — Doctor of Economic Sciences, since 2020 First Deputy Prime Minister for economic issues. Key characteristics:

• Not a security official, but a technocrat-economist
• Considered an official untainted by corruption (although son Pavel earns from government contracts)
• His task is not to fight, but to “efficiently master” trillions
• A “hard-line statist” who believes in a “ring of enemies” around Russia

According to Dmitry Peskov, Belousov is needed to implement innovations and integrate the security bloc’s economy into the country’s economy.

The real reason: the war showed that you can’t steal EVERYTHING. You need to leave something for the war. Belousov is an attempt to bring order to theft so that at least something reaches the front.

The Mechanics of Division: How the Schemes Work

1. Government Contracts Without Competition

Rostec, Almaz-Antey, UAC (United Aircraft Corporation) receive direct orders at inflated prices. Example:

• Official profitability of state defense orders: 2%
• Real profitability through schemes: 20–30%
• The difference goes through a network of intermediaries

2. Subcontracts Through Shell Companies

Money flows through chains of intermediaries, where each takes 10–30%. The scheme:

1. Rostec receives a contract for 100 billion rubles
2. Gives a subcontract to company A for 80 billion (20% taken)
3. Company A gives to company B for 65 billion (another 15% taken)
4. Company B does the real work for 50 billion
5. The difference of 50 billion rubles is distributed among “their own”

3. Advance Payments

The state provides advances on contracts for 3–5 years ahead — these are effectively interest-free loans that are used for personal interests. Money doesn’t go to production, but into “circulation.”

4. Export Schemes

Through Rosoboronexport, weapons are sold to allies (India, China, Africa), but the real price and the price in documents are different things. The difference settles in offshore accounts.

5. Insurance Contracts

Chemezov himself owns the company Independent Insurance Group, which receives large insurance contracts in the defense sector, including contracts with Rostec. A classic “self-supplier” scheme.

Why Did Chemezov Remain While Shoigu Didn’t?

The key difference: Chemezov controls production. His structures actually produce tanks, aircraft, shells. Do they steal? Yes. But something reaches the front.

Shoigu controlled money distribution, but not production. When it became clear that warehouses were empty, equipment didn’t work, and the army existed mainly on paper — he was removed.

Second reason: Chemezov is Putin’s old friend from Dresden. Shoigu is a “technical minister” who can be replaced. Chemezov is a political heavyweight who is difficult to replace.

Third reason: Behind Chemezov stands the Rostec lobby and Viktor Zolotov (head of Rosgvardia), who long sought Shoigu’s dismissal. When corruption became too obvious, they “hit the weak spot” — and Shoigu was removed.

Political-Economic Conclusion

Russia’s defense budget is not a plan for weapons production, it’s a plan for redistributing money among security clans.

Key Theses:

1. Chemezov is the main player because he controls production. Rosoboronexport’s order portfolio is $60+ billion.
2. Shoigu left because the war showed: you can’t steal EVERYTHING, you need to leave something for the war. Belousov is an attempt to bring order to theft.
3. Other participants in the division — the Rotenbergs (infrastructure), production feudal lords (Kalashnikov, factories), exporters (Rosoboronexport).
4. Division mechanics: direct contracts at inflated prices, subcontracts through shell companies (each takes 10–30%), advance payments for years ahead, export schemes with differences between real prices and documented prices.
5. The Sobchak scandal showed: Chemezov is absolutely untouchable. He is not just an official, but a political heavyweight, one of the main war beneficiaries.
6. The system’s paradox: the longer this regime continues, the more the system is tied to war. Stopping the war exposes the void: no sources of growth, no investments, only debts and worn-out infrastructure.

The final formula: The 2026–2028 budget is not a financial document, but a plan for preserving the military regime. 30% for the army, nearly 40% together with security forces, about 10% for debt service. Development and people get what’s left.

Russia has, over several years, transformed its military budget into interest payments on military debts. This is a classic scheme: first “guns instead of butter,” then — “interest instead of both guns and butter.”