Ammunition, Drones and the New Economics of Warfare

Wars that once depended on decisive manoeuvre now resemble industrial contests of endurance. In this environment, factories, logistics networks and supply chains have become as strategically important as soldiers and commanders. The lesson is not new. It was written in the production statistics of the Second World War, when the outcome was decided as much on the factory floor as on the battlefield. What is new in 2026 is how completely that lesson had been forgotten by the Western defence establishment, and how rapidly and painfully it has been relearned at the cost of Ukrainian lives and Western strategic credibility.

The war in Ukraine has demonstrated the transformation of modern warfare with stark and unambiguous clarity. At the height of the conflict, artillery exchanges reached levels not seen in Europe since 1945. Thousands of shells were fired daily along front lines stretching hundreds of kilometres, consuming ammunition stockpiles that NATO had allowed to atrophy across three decades of post-Cold War complacency. The assumption underlying that atrophy was explicit: future wars would be relatively short, technologically decisive and structurally unlike the prolonged attritional conflicts of the twentieth century. Precision weapons would substitute for volume. Sophisticated platforms would substitute for mass. That assumption has been comprehensively falsified.

High-intensity combat consumes even the most advanced arsenals at rates that outpace any peacetime production model. According to NATO intelligence estimates cited by senior alliance officials, Russia was producing approximately 250,000 artillery rounds per month in 2024, rising to an estimated 350,000 per month by 2025, a figure representing roughly four times the combined annual output of all NATO member states at the time those estimates were made. NATO Secretary General Mark Rutte stated publicly and repeatedly in 2025 that Russia was producing in three months what the entire alliance produced in a year. That ratio, more than any battlefield development, defines the strategic situation in Eastern Europe. Ukraine was consuming up to 200,000 shells per month during major operations, yet Western allies could provide only a fraction of that requirement. The result was a sustained firing deficit that directly constrained Ukrainian military options across the entire front.

The scale of the Western production shortfall is significant enough to have altered the strategic calculus of the conflict in ways that diplomatic and military analysis has only partially acknowledged. At the United States Army plant in Scranton, Pennsylvania, monthly production had fallen to fewer than 3,000 shells per month in the early 2010s, reflecting three decades of post-Cold War demobilisation. By 2024 that figure had been raised to approximately 40,000 shells per month, a more than tenfold increase achieved under wartime urgency, yet still less than one-fifth of Russia's monthly output. Europe faced an even starker reckoning. Rheinmetall, one of the continent's largest ammunition producers, was producing fewer than 100,000 shells annually before Russia's invasion. Its 2025 capacity target of 700,000 shells per year represents a genuine industrial achievement, but measured against Russian output it remains insufficient. The structural conclusion is unavoidable: NATO's ammunition industrial base was designed for deterrence, not for war, and the two requirements are different in ways that decades of procurement planning failed to adequately address.

While the ammunition crisis exposed Western industrial unpreparedness, the concurrent revolution in drone warfare has demonstrated something more hopeful: that under sufficient pressure, a determined industrial ecosystem can achieve remarkable rates of production growth in a very short period of time. Ukraine's drone industry is the most compelling case study in wartime industrial mobilisation since the Second World War, and it is unfolding in real time.

In January 2024, Ukrainian manufacturers were producing approximately 20,000 FPV drones per month, a figure that would have seemed remarkable to any peacetime defence planner yet proved wholly inadequate to battlefield demand. By December 2024, monthly output had reached 200,000 units, a tenfold increase within a single calendar year. By early 2025, Ukraine was on track to produce between 2.5 and 4 million drones annually, with President Zelensky targeting 4 million for the year. According to Ukraine's Ministry of Digital Transformation, approximately 500 drone manufacturers were operating in Ukraine by 2025, compared to just seven before the full-scale invasion in 2022. The country had transformed from 100 per cent import dependence to 96 per cent domestic component sourcing within three years of conflict, a supply chain achievement that contradicts every assumption about the minimum time required to build a defence industrial base from scratch.

The economic logic of drones on the modern battlefield is now well established and carries implications that extend far beyond Ukraine. A single FPV kamikaze drone costing between $500 and $1,000 can destroy a tank worth several million dollars. According to NATO estimates, drones account for approximately 65 per cent of destroyed Russian tanks in Ukraine. During Operation Spiderweb on 1 June 2025, 117 FPV drones deployed by Ukraine's Security Service damaged or destroyed an estimated 41 Russian strategic bomber aircraft worth an aggregate of $7 billion, achieving a cost-exchange ratio of roughly 6,000 to one in favour of the attacker. These figures are not merely tactical curiosities. They represent a structural repricing of military capability that has implications for every defence budget in the world.

Production alone does not win wars. Weapons must be transported, stored, maintained and delivered to the front lines through logistics networks that are themselves targets of enemy action. Fuel, spare parts and replacement systems must move continuously across vast distances under conditions of aerial surveillance and drone interdiction that have fundamentally changed the logistics calculus of contemporary warfare. A failure in logistics can cripple even the most technologically advanced military force. Vehicles cannot operate without fuel. Artillery cannot fire without shells. Drones cannot fly without replacement batteries and electronics. The supply chain is not merely the background to the battle. At the level of sustained operations, it is the battle.

Ukraine's distributed drone production model has proved its logistical wisdom as well as its economic logic. By dispersing assembly across hundreds of small workshops rather than concentrating output in large, identifiable facilities, Ukraine has created a production architecture that is highly resilient to Russian strikes on manufacturing infrastructure. A precision missile attack on a single large factory might eliminate a significant share of centralised production capacity. The same attack on a distributed network of 500 workshops achieves almost nothing. The lesson is structural and will influence defence industrial planning across multiple countries for a generation: in an era of precision long-range fires, distributed production is not a second-best option forced by resource constraints. It is a strategic design principle with genuine advantages over concentration.

These dynamics have produced a new and explicit economic model for warfare that defence economists are still working to fully characterise. In this model, which The Meridian Intelligence Desk terms the economics of attrition, victory is determined not by rapid battlefield breakthroughs but by the ability to sustain production and supply over time, while degrading the adversary's capacity to do the same. Armies must continuously replace lost equipment, replenish ammunition stocks and maintain operational readiness across a conflict whose duration is measured in years rather than weeks. Countries with deeper industrial bases possess a significant and compounding strategic advantage in this environment. They absorb losses more easily and sustain operations without exhausting their resources, while adversaries with shallower industrial bases face progressively more constrained options as the conflict extends.

The cost asymmetries embedded in modern drone warfare have added a new dimension to this economic model that previous attrition analyses did not contemplate. When a $700 drone can destroy a $3 million tank, or a $100,000 drone swarm can damage $7 billion worth of strategic aircraft, the traditional relationship between investment and military output breaks down. Defence industrial planning built around the assumption that sophisticated, expensive systems confer proportional military advantage is not simply out of date. It may in fact systematically favour the adversary who is willing to substitute mass for sophistication and who has the industrial base to sustain mass production at scale.

Looking ahead, the economics of warfare will continue evolving in ways that amplify rather than reduce the importance of production capacity and logistics. Artificial intelligence, autonomous drones and advanced sensor networks will transform how militaries detect and engage targets. But these technologies will not replace the underlying industrial logic that has reasserted itself in Ukraine. They will deepen its complexity. AI-guided drones require not only sophisticated software but the semiconductor supply chains, battery production capacity and component manufacturing ecosystems that translate an algorithm into a physical weapon. Autonomous systems that can operate without a human pilot still require factories, maintenance infrastructure and the logistics networks to deliver them to the front. The future battlefield may be dominated by algorithms. But behind those algorithms will still stand factories.

The growing importance of ammunition and drone production has triggered an industrial competition whose full consequences are not yet visible in either defence budgets or procurement plans. Countries across Asia, Europe and the Global South are investing in expanding their defence manufacturing sectors, funding new production lines, supporting domestic drone industries and securing access to the critical minerals required for electronics and energetics. In some regions the defence sector is becoming a primary driver of technological innovation, skilled employment and industrial investment. This trend reflects a broader and largely irreversible shift in strategic thinking: defence production is no longer seen as a wartime necessity that recedes in peacetime. It is a permanent component of national economic strategy, and the states that have begun treating it as such earliest will carry the most significant advantages into the decades ahead.