The Financial Case for Ukraine

By Jeremiah Monk

Several politicians have recently claimed that the billions of dollars the US has given to support Ukraine are wasteful. Since the Russian invasion in February 2022, the US has contributed approximately $175 billion dollars to the defense of Ukraine.[i] $175 billion is a lot of money to just give away, especially at the expense of all the domestic needs that will go unfunded.

In defense spending terms, however, $175 may actually be a strategic bargain. For comparison note that the Navy’s newest aircraft carrier, the U.S.S. Gerald R. Ford, cost $13 billion to build, and has a total program price tag of $120 billion.[ii] Including the air wing the carrier will support, the Ford makes for a suitable yardstick for a rough comparison.

One can argue production and maintenance of the Ford equates to American jobs and is therefore an investment back into America. This is true. But the same goes for the vast majority of US investment in Ukraine. HIMARS missiles are built in Camden, Arkansas. 105mm shells are produced in Scranton, Pennsylvania and F-16s are made in Greenville, South Carolina. Of the nearly $70 billion of hardware given to Ukraine, approximately 90% actually goes to American companies and American jobs.[iii] 

Surely, the security and capability promised by the U.S.S. Ford must therefore be worth such a high price, or there would be more high-stakes showdowns in Congress about its continued funding. Meanwhile, last February, the government narrowly avoided a shutdown over the question of continued funding to Ukraine. So what does the U.S., and the larger international community, get for $175 billion? With the help of Stratbot, our resident AI, Strategy Central did the math.

ANALYSIS OF INTERNATIONAL FUNDING TO UKRAINE

Of the $175 billion the US has given to Ukraine, only $107 billion directly aids the government of Ukraine. The remainder funds various ancillary US activities and other countries in the region. Of this $107B, about $3B is for humanitarian relief. This leaves a total US contribution of $103.07 billion in war materials and funding.

According to the Kiel Institute for the World Economy, as of this writing, the sum of international material and financial contributions made to Ukraine amounts to $296.5 billion (including the $103 billion from the US).[iv] For purposes of this analysis, we will use the total international contribution figure to determine the relative impact of the support effort, as it is impossible to determine the relative impact of an individual nation’s financial contribution.

On the other side of the Donbas trenches, Russia is waging a war of attrition. Historically, this is a strategy that Russians are all too familiar with. Also historically, attrition strategies have worked significantly better for Russia in the defensive application. The Ukraine war, however, is an offensive operation turned stagnant. And for Russia, it is proving extremely costly.

Since the start of the Russian assault in February 2022, the Ukrainian Ministry of Finance estimates Russian material losses to be $654.14 billion in US dollars. The Ministry also estimates 568,980 Russians killed and wounded to date. Though the Ukrainian government is widely believed to have inflated these estimates, these numbers must suffice for our analysis as they are the best available accounting of material losses (and because Russian reporting is significantly less accurate). A breakdown of Russian losses reported by the Ministry can be found in Figure 1.

RETURN ON INVESTMENT

To calculate an approximate return on investment of international aid, we can compare the dollar cost of contributions to the estimated cost of losses. Looking only at the $654.14B of destroyed Russian hardware to the $296.5B of aid to Ukraine, we get a ratio of $2.2 worth of damage for every $1 spent. This ratio alone presents a rate of return unrivaled in most (Western) defense spending programs.

Battlefield losses, however, are only one aspect of the overall financial cost of the invasion. International sanctions have crippled the Russian economy. Russia’s GDP fell 2.1% in 2022, equating to a loss of approximately $30 billion, and estimates for 2023 fall around 1.35%, for another $22 billion.[vi] Russian trade has been significantly reduced as well. Although with the help of China, Iran, and others, Russia is finding opportunities for legal and illicit export, the country is largely cut off from most of the international market, equating to around a $104 billion annual loss. Restrictions on the maximum price of Russian oil have resulted in an annual $36.5 billion loss of revenue. Furthermore, the budget deficit caused by reduced revenue and increased spending adds another 2% of Russian GDP, or around $33B per year.

Adding this all up, the annual impact of international sanctions on Russia is around $225.5 billion. As Russia approaches day 900 of what was supposed to be a 3-day war, it has accumulated 2.5 years of imposed costs. That comes out to $563.75 billion since February 2022.

Adding the material and financial impact together, we can make the case that the cost of Russia’s invasion thus far has been over half a million lives and around $1.22 trillion (and counting). Not to mention all the immeasurable impacts

But the material impact on the Russian armed forces is just one of many costs that Russia must bear. Russia has lost over half a million men, which will have a devastating generational impact on a country that already suffers from a shrinking population (0.34% in 2024), exacerbated by a low and declining birth rate (11 births per 1000 people in 2024).[vii] It is impossible to convert this impact to a financial equivalence, but it is fair to say that there will be an enormous generational impact on Russia’s demography.

The United States gets all this for the measly price of $296.5 billion, of which they have contributed 36%. That comes out to about a 4.1:1 return on investment for every dollar the international community has given to Ukraine. At $120B for the U.S.S. Ford, the equivalent bar is set at 230,000 casualties and $493.7B of measurable devastation to our future adversaries to surpass this deal. That’s a tall order for a single ship.

CONCLUSION

Large, expensive gadgets may make us feel safe. They certainly look cool. But strategically speaking, a dollar spent to make a quagmire for our adversaries is a much more efficient expenditure. The next time a politician questions what value the US is getting for our investment in Ukraine, we at Strategy Central hope they will first take a critical look at these numbers and keep a keen eye on the expected value taxpayers expect to receive from the $825 billion the US spends each year on large, expensive, admittedly cool, but inefficient defense programs.

NOTES

[i] Jonathan Masters and Will Merrow, “How Much U.S. Aid Is Going to Ukraine?” Council on Foreign Relations, May 9, 2024 (accessed Jul 23, 2024) https://www.cfr.org/article/how-much-us-aid-going-ukraine#:~:text=From%20the%20total%20%24175%20billion,to%20the%20government%20of%20Ukraine.&text=Weapons%20and%20equipment%20are%20provided,and%20Foreign%20Military%20Financing%20Program.

[ii] Harrison Kass, “Is the Navy's Ford-Class Aircraft Carrier Worth Its $120 Billion Price Tag?” The National Interest, May 18, 2024 (accessed Jul 23, 2024). https://nationalinterest.org/blog/buzz/navys-ford-class-aircraft-carrier-worth-its-120-billion-price-tag%C2%A0-210032

[iii] Marc A. Thiessen, “Ukraine aid’s best-kept secret: Most of the money stays in the U.S.A.” The Washington Post, November 29, 2023 (accessed July 24, 2024). https://www.washingtonpost.com/opinions/2023/11/29/ukraine-military-aid-american-economy-boost/

[iv] Antezza A., et.al., “Ukraine Support Tracker Data (Data Set).” Kiel Institute for the World Economy, April 2024. https://www.ifw-kiel.de/publications/ukraine-support-tracker-data-20758/

[v] Ukraine Ministry of Finance, “Casualties of the Russian troops in Ukraine.” July 23, 2024. https://index.minfin.com.ua/en/russian-invading/casualties/

[vi]European Council, “Impact of Sanctions on the Russian Economy.” (accessed July 24, 2024) https://www.consilium.europa.eu/en/infographics/impact-sanctions-russian-economy/

[vii] Ukraine Ministry of Finance, “Cost of losses of the Russian troops in Ukraine.” 23 July 2024. https://index.minfin.com.ua/en/russian-invading/casualties/cost/

[viii] Macrotrends, “Russia Population” and “Birth Rate 1950-2024”(accessed Jul 24, 2024) https://www.macrotrends.net/global-metrics/countries/RUS/russia/population