Russia is spending 40% more on its war effort than Ukraine and all its Western allies combined, despite the West’s overwhelming economic advantage, according to a new report from the Tony Blair Institute for Global Change.
While Russia allocates approximately $135 billion annually to destroy Ukraine, the collective support from Ukraine’s allies amounts to only $95 billion, revealing a damning reality that threatens European security.
“For Europe, this is both morally and strategically inexcusable,” writes Sanna Marin, former Prime Minister of Finland and Strategic Counsellor at the Tony Blair Institute. “A Russian victory would destabilise Europe, embolden authoritarian regimes worldwide and erode the security that generations have taken for granted.”
The report’s conclusions — that there is no more time for Europe to dither — are all the more urgent as Trump’s America increasingly sides with Russia. The Old World is forced to reckon at lightning speeds as the US withdraws one line of support after the other.
The good news? As little as 0.2% of Europe’s GDP would be enough to close the resource gap between Ukraine and Russia — a tiny amount compared to the spending that would be required in case of a Сold War.
Russia’s gang ten times more committed than Ukraine’s western allies
For nearly eight decades, most Europeans enjoyed what the report calls “a long peace,” where liberty, democracy, and human rights flourished. Russia’s full-scale invasion of Ukraine in February 2022 shattered this era. Yet despite the existential threat to European security, the response has been strikingly disproportionate to the West’s economic might.
The combined GDP of countries providing military aid to Ukraine was nearly $70 trillion in 2024, compared to Russia’s approximately $2 trillion – creating a 30:1 advantage in favor of Ukraine and its allies. Europe’s NATO members alone possess an economy more than ten times larger than Russia’s.
Nevertheless, Europe’s NATO members contribute just $20 billion in military support annually – less than 0.1% of their combined GDP. Two G7 countries, Italy and France, contribute even less at 0.02% and 0.04% of their GDP respectively.
The stark contrast extends to the commitment of allies on both sides. North Korea and Iran are spending approximately $4 billion supporting Russia – almost 1% of their combined GDP.
In relative terms, this makes authoritarian regimes ten times more committed allies to Russia than democratic nations are to Ukraine.
“Ukraine is the bulwark of Europe. It is Europe’s defensive wall,” Tennyson Dearing, a co-author of the report, told Euromaidan Press. “And if its military is understrength, that is a concern for Europe.”
Russia’s vulnerability
Despite outspending Ukraine and its allies, Russia displays increasing signs of military and economic strain. The report details Russia’s staggering losses: 3,734 tanks (approximately 1,300 per year) and 8,000 other armored vehicles since the beginning of the full-scale invasion, according to the defense-analysis website Oryx.
Russian production capacity falls far short of replacing these losses. Forbes reports that Russia might only be producing 390 tanks annually – less than 30% of its yearly losses. Similarly, The Economist reported that by July 2024, Russia had swapped out 4,800 artillery barrels, implying an annual attrition rate of approximately 2,000.
Russia’s macro-economic indicators further highlight its fragility: 10% inflation, 21% interest rates, and a twofold increase in labor shortages over the past two years. Ukrainian strikes on Russian oil infrastructure add additional pressure to an already strained economy.
This combination of mounting losses – estimated at approximately 800,000 troops since the start of the full-scale war – and economic decline suggests that Russia will find it increasingly difficult to sustain its current effort in Ukraine, especially if Western support increases.
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Peace cheaper than new Cold War
An additional $40 billion in annual military aid to Ukraine would match Russia’s spending and potentially give Ukraine the upper hand on the battlefield within 12-24 months. This amount represents just 0.2% of European NATO members’ combined GDP.
“Investing in Ukraine’s defense now is the cheapest insurance option that Europe can take,” according to Tennyson Dearing. “Ukraine is the bulwark of Europe. It is Europe’s defensive wall.”
To put this figure in perspective, the report compares it to recent international crisis responses. During the 2008-2009 financial crisis, North America and Europe collectively spent more than $2 trillion. The European Union’s COVID recovery plan included an $840 billion financial instrument. The US Inflation Reduction Act alone added $500 billion in government spending.
The alternative – allowing Russia to prevail – would likely lead to far higher costs in the future. During the Cold War, the UK allocated 5% of its GDP to defense, compared to NATO members’ current average of 2.1%.
A Russian victory would necessitate significantly increased defense spending across Europe while reducing global economic growth.
In an extreme scenario of a “hot” war, the costs would be exponentially higher. Ukraine currently spends around 35% of its GDP on defense while suffering a 30% economic contraction. During the Korean War, the United States allocated approximately 14% of its GDP to defense.
European defense industry overhaul
Financial commitment alone is insufficient. The report outlines three key actions needed to transform Europe’s defense capabilities:
- investing in Ukraine’s defense industry
- committing to long-term contracts
- and embracing shared procurement.
“Ukraine has shown they can scale up military production faster than almost any country in the world,” Dearing noted. “Ukraine was one of the world’s largest military producers during the Soviet Union. That capacity exists.”
This potential is currently being reaped within an initiative pioneered by Denmark, which attracts foreign funds for Ukraine’s weapons manufacturers. Now also supported by Sweden, Iceland, Norway, and Lithuania, the “Danish model” has delivered €590 million of locally manufactured weapons to Ukraine in 2024, with Ukraine planning to raise $1 billion for the initiative in 2025.
Ukraine has demonstrated remarkable agility in increasing production capacity. Ukrainian companies increased drone production by 1,000% from 2023 to 2024. Adopting the Danish model of procuring equipment directly from Ukrainian defense firms would help address urgent requirements while bolstering Ukraine’s economy.
The EU has increased ammunition output by 50%, with production of artillery shells surging by 300%. However, the EU’s commitment of 2 million shells for 2025 still falls 500,000 short of Ukraine’s requirements.
Unified European defense procurement is critical for efficiency. The EU estimates that current fragmentation costs as much as $100 billion annually. Achieving efficiencies through joint procurement alone could provide Ukraine with a decisive advantage over Russia. The report proposes a joint European defense stockpile to address the lacking unified procurement — after the war, it can serve Europe’s defense needs.
In the short term, purchasing high-demand, already stockpiled capabilities could address Ukraine’s urgent needs while Europe ramps up production. A $20 billion investment in air-defense systems, long-range rockets, and artillery could help prevent further territorial losses and influence negotiations.
“Steel, not flesh”
The report emphasizes the “steel, not flesh” doctrine adopted by the United Kingdom and the United States during World War II, which focused on overwhelming material superiority through massive industrial production. This approach was critical to winning the war while reducing casualties.
Applying this principle to Ukraine would help reduce Ukrainian casualties by providing superior equipment and lowering the risks faced by soldiers. It would also address one of Ukraine’s key challenges: equipment shortages that limit its ability to properly train and equip new troops.
Ukraine has fully mobilized about 1 million people, just 3% of its population, and has 4 million people registered on Reserve+, a platform that allows citizens to be quickly mobilized. However, of a planned ten new brigades last year, only 2.5 have been fully equipped due to material shortages.
“Our assessment is that we can fill immediate capability gaps by buying off-the-shelf kit from the US while European production ramps up,” says Dearing. “And then we can ramp up European production by investing in Ukraine.”
Funding options
Several potential funding sources exist for increased European support to Ukraine.
If all European NATO members who are not currently meeting the 2% GDP defense spending commitment did so, this alone would raise $30 billion.
Reorienting budgets towards equipment spending could provide an additional $20 billion in military hardware.
Norway’s Sovereign Wealth Fund, which has earned over $110 billion in additional oil and gas revenue since Russia’s invasion, primarily from increased exports to Europe, represents another potential source.
Europe also holds $215 billion in frozen Russian assets. While seizing these assets could lead to legal challenges, European governments could use the interest generated from these assets – estimated at $10 billion annually – to purchase Ukrainian government bonds, providing immediate financing.
The report also proposes establishing a “European Defence Bank,” a multilateral financial institution with membership extended to EU countries, Norway, the UK, and other key allies. This bank would provide financing for military equipment purchases and support investments to increase production capacity.
Conclusion
The Tony Blair Institute report presents Europe with a clear choice: invest decisively in Ukraine’s defense now or face much higher costs in the future. With Russia and its allies outspending Ukraine and the West despite their economic disadvantage, Europe must reconsider its approach to supporting Ukraine.
“No matter the outcome of negotiations in Ukraine, Europe will need to do more on defense,” states Tennyson Dearing. “Ukraine is Europe, and investing in Ukraine’s defense is an investment in Europe’s defense.”
By investing 0.2% of its GDP in Ukraine’s defense – matching Russia’s current military spending – Europe could help Ukraine achieve battlefield superiority and end the war on its own terms. The alternative is to risk a new Cold War or worse, with dramatically higher defense costs and a more insecure European continent.
The report concludes that the time for hesitation has passed. With bold, coordinated action, Europe can emerge from this crisis stronger and more secure – not just creating peace but maintaining it for generations to come.
