Russia’s Drone Powerhouse AO Kronstadt Faces Collapse as Debts, Sanctions, and Strikes Mount

Moscow — AO Kronstadt, one of Russia’s biggest drone manufacturers and the producer of the Orion and Inokhodets systems, is now on the verge of bankruptcy after months of financial turmoil, lawsuits, and battlefield setbacks.

Mounting Debt and Legal Battles

Since early summer, the company has faced over 40 lawsuits from contractors and suppliers, with claims exceeding 600 million rubles (around $7–8 million). Major cases include demands of 151.1 million rubles from Innovative Technologies and Materials, and 220.6 million rubles from the Research Institute of Modern Telecommunications Technologies.
By May 2025, total claims against Kronstadt had already crossed 1 billion rubles, signaling severe financial strain.

Industry insiders say subcontractors are rushing to file claims early, fearing the company’s likely bankruptcy.

Loss of Investor Support

Kronstadt’s troubles can be traced back to 2022, when its main investor, AFK Sistema, pulled out. Without that financial backing, the company’s debt ballooned, while it struggled to keep pace with increasing production demands.

Sanctions and Supply Chain Problems

Western sanctions, imposed by the United States and the European Union, have blocked access to key foreign-made components. This forced Kronstadt to rely on harder-to-source alternatives, driving up costs and slowing production.

Ukrainian Strikes Add to the Crisis

In addition to financial woes, Kronstadt’s facilities have been targeted by Ukrainian drone strikes, including its major production plant in Dubna near Moscow. These attacks further disrupted output at a time when Russia is heavily dependent on drones for the war in Ukraine.

Strategic Importance at Risk

Kronstadt was considered central to Russia’s efforts to field homegrown long-endurance drones. Its Orion and Inokhodets UAVs were often compared to the U.S. MQ-9 Reaper, designed for surveillance and precision strikes.

Losing Kronstadt would represent a major setback for Russia’s defense industry and its military operations, which increasingly rely on unmanned aerial systems.

Financial Fragility Long Before the War

Even before wartime pressure, the company’s finances were shaky. In 2020, Kronstadt reported revenues of about 2 billion rubles (approx. $25 million) but suffered losses of more than 3.5 billion rubles. The current crisis has only magnified these long-standing weaknesses.

Experts Warn of Inevitable Bankruptcy

Analysts, including Russian drone industry figures, warn that Kronstadt may not survive. Many expect the company to go into formal bankruptcy proceedings soon, unless the Kremlin intervenes with restructuring or forces its absorption into another state defense conglomerate.

At a Glance: Kronstadt’s Crisis

• Debt: Over 1 billion rubles in claims by mid-2025

• Investor Exit: AFK Sistema pulled out in 2022

• Sanctions: Blocked access to key foreign components

• Strikes: Ukrainian attacks damaged major facilities

• Strategic Loss: Orion & Inokhodets drone production threatened

• Outlook: Bankruptcy seen as almost unavoidable

Once seen as the future of Russian drone warfare, AO Kronstadt is now battling for survival. A mix of financial mismanagement, investor withdrawal, sanctions, war damage, and mounting lawsuits has brought the company to its weakest point since its founding.

Whether Moscow rescues Kronstadt or allows its collapse will shape the future of Russia’s ability to produce advanced combat drones.