Ukraine counts the cost as military aid is cut back
As the bloody battle against Vladimir Putin's troops stretches into its fourth year, the toll on Ukraine is mounting. Hundreds of billions of pounds have been spent on fighting the Russian invaders, and at least 46,000 soldiers have died.
Hopes that Donald Trump would bring a prompt end to the war have all but vanished. Instead, his constant flip-flopping has made many fear that the leader of the free world has abandoned Ukraine.
For the war-torn country, this means crucial flows of US aid and weaponry could reduce to a trickle or cease completely.
'It is absolutely a risk. Ukraine is nervous about that. The strategy is to draw down as much as they can now, stockpile it for that time. There's not a lot of trust there,' says Timothy Ash, an associate fellow at Chatham House.
'It will make the fight more difficult, but they can still continue. They can sustain the war for at least six months to a year. The war grinds on without some peace process.'
Making aid stretch
For Kyiv, the uncertainty over funding means every dollar must stretch as far as possible.
'If the enemy's unmanned aerial vehicle [like a military drone] costs $50,000 [£37,000], and you hit it with a rocket that costs $1m, that's not cost-effective,' says Oleksandr Barabash, a software developer who has turned into a defence entrepreneur as a result of the war. 'You need to hit it with something cheaper, like we do with radio-controlled drones.
'The prices really make a difference, because all devices are being destroyed on a daily basis. You cannot spend hundreds of thousands of dollars a month on something that will be destroyed in a week or maybe in days.'
The company Barabash co-founded with other volunteers, called Falcons, is just one example of Ukraine's rapidly growing and sprawling defence sector. The industry can now produce many essential types of military equipment for far less than European and American firms.
The push to find ways to make the war less costly – both in terms of human and financial losses – is more acute than ever.
'We have enough commitments till the end of this year, mostly from the EU. But there is significant uncertainty for the next year,' says Yurii Haidai, a senior economist at the Centre for Economic Strategy in Kyiv.
'There are still no commitments that would ensure we can make it through the next year.'
'Paying a fair share'
The threat to financing does not just come from the White House. Viktor Orban, the Hungarian prime minister, has several times tried to block support for Ukraine. He may well try again this summer, says Ash.
Ukraine is well financed for now – thanks in part to the Biden administration rushing through £22.5bn in the final months of last year. But Kyiv cannot rely on a similar windfall arriving after that runs out.
'There is an austerity approach visible,' says Haidai. 'The ministry of finance is very conservative now, focusing on financial resources to be used as wisely as possible to make them stretch as far as possible this year and probably into next year.'
Volodymyr Zelensky's government funds half of the Ukrainian budget from taxpayer revenues, with the remainder coming from foreign grants and loans.
Most of the funding is spent on the war effort. This comes in the form of manufacturing weapons and artillery shells, paying the salaries of 1m soldiers and compensating the families of those killed in battle.
'They are taking measures to collect as much as is feasible from the war-impacted economy,' Haidai says. 'So tax revenues in real terms are growing despite limitations like [the fact] that there are 5m people who fled the war and electricity is limited.'
This means Ukraine's workers and private sector businesses must still keep paying the taxman while living under air raids, daily blackouts and inflation.
'Business and people of Ukraine pay their fair share to support this war effort and the defence. We would very much expect that the West would step in with their share,' Haidai says.
Sprawling defence industry
Boosting the domestic defence industry, which dates back to Soviet times, is crucial to making the money and military aid stretch further.
'After the dissolution of the Soviet Union, Ukraine was left with a big chunk of the Soviet arms industry. But back then maintaining the arms industry was not a priority given that it was just after the Cold War. So there was a decline,' says Lorenzo Scarazzato, of the Stockholm International Peace Research Institute.
Putin's annexation of Crimea in 2014 and then the full-scale invasion of Ukraine in 2022 have sparked a revival. Ukraine's defence industry now supplies around 30pc of the munitions for the war and has been fuelled by start-ups and entrepreneurs like Barabash.
'After the full scale invasion, I tried to be drafted,' he says. 'But they never called me back, and I had no previous experience with combat. So I started to look how can I help. We connected with other volunteers and started to develop things that soldiers require on battlefield.'
His company specialises in sensors that can transmit from the battlefield despite Putin's forces scrambling GPS signals, making it possible to quickly identity and take out incoming threats.
'We lack everything. So we were asked: can you produce this, because the cheapest one costs more than $100,000 a device? We came up with this first device with a sensor that cost 10 times less than the cheapest solution [on the] Ukrainian market, and 1,000 times less than any device from European on US market,' Barabash says.
Slow international response
Such ingenuity has not been driven only by Russian aggression. Ukraine has also learnt from delays in the international response, says Serhii Kuzan, a former adviser to Ukraine's ministry of defence.
'The several-month delay in the decision to provide American assistance and the EU's delays in the second half of 2022 after the successful counteroffensive by the defence forces in Kharkiv and Kherson regions, and a nine-month delay in aid in late 2023 early 2024, cost Ukraine dearly,' Kuzan says, who is now the chairman of Ukrainian Security and Cooperation Centre.
'These delays not only hampered the Ukrainian Defence Forces' capabilities, but also gave Russia a chance to recover from its defeats and mobilise its own armed forces. Therefore, Ukraine has prioritised the development of the defence industry.'
Even still, there is only so much Ukraine can do. Experts warn there are some types of equipment the country could not replace if going at alone without US backing, such as some fighter jets. Losing equipment like this is a greater worry than running out of money.
Kyiv's best hope may be to convince European leaders that investing in Ukraine is not just throwing money into a never-ending conflict: it is an investment in the future of the Continent's treatment efforts.
'The main obstacle is the lack of funding,' says Kuzan. 'Overcoming fear and making a decision to direct these funds to Ukrainian weapons production will allow Europe to both gain time and receive very specific dividends for itself – cheap and effective weapons for itself in the future.'
It is an attractive proposition. But there is no guarantee leaders will buy in. For now, Kyiv is left to make every cent stretch as far as it can as Russia's assault on Ukraine grinds on.
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