The conflict between Russia and Ukraine has triggered huge financial flows as governments, international organisations and private actors channel resources into the war effort and the subsequent humanitarian response. The financial dimension of the conflict is as complex as its military and political aspects, with money serving as both an instrument of war and a means of reconstruction. We present the third part of our analysis, focusing on the Flows of Money: financing war and reconstruction.
On the one hand, Western countries have mobilised huge sums of money to support Ukraine's defence and sustain its economy. On the other, Russia has been forced to adapt to a new economic reality as it faces the impact of sanctions and the costs of a long-term war. The future course of financial flows in the region will depend on the outcome of the conflict, the extent of reconstruction and the long-term geopolitical direction of the parties involved.
Western financial and military aid to Ukraine
Western financial and military aid to Ukraine forms the basis of the international response to the Russian invasion. The United States and European countries have allocated billions of dollars in support to enable Ukraine to defend itself and maintain economic stability. The assistance takes various forms, including direct budgetary support, military equipment supplies and humanitarian aid. The scale of this support is unprecedented and reflects Ukraine's strategic importance in the wider geopolitical context. However, the provision of aid is also a matter of debate and controversy, particularly in terms of its effectiveness, long-term sustainability and risk of abuse.
EU aid package of €90 billion (2026-2027)
In December 2025, the European Union approved a major €90 billion ($105.5 billion) loan package for Ukraine. This package is intended to cover Ukraine's military and economic needs over the next two years and is one of the largest single aid commitments. It demonstrates the EU's long-term commitment to Ukraine, but also shows the difficulties of sustaining support. The package was agreed after overnight negotiations between EU leaders and represents a compromise between those states demanding more aid and those concerned about the financial burden.
The aid is structured as an interest-free loan so as not to increase Ukraine's already high debt burden. The funds will be raised through European Commission loans on the capital markets, with interest costs (about €3 billion per year) borne by the EU budget. The agreement also dropped the controversial plan to use frozen Russian assets as collateral and allowed exemptions for Hungary, the Czech Republic and Slovakia.
US military and economic aid
The United States is the largest single provider of military and economic assistance to Ukraine. It has committed tens of billions of dollars since the conflict began, including a wide range of military equipment from light weapons to advanced missile systems.
According to the Kiel Institute, US commitments amounted to some EUR 114.63 billion, almost double the EU contribution, of which some USD 66.9 billion went directly to military aid. This support was crucial for the defence of Ukraine, but it also caused political controversy in the US. The future of US aid is uncertain, especially after the Donald Trump administration takes office in early 2025, which is pushing for a negotiated solution to the conflict and greater involvement of European allies.
Aid mechanisms: grants, loans and arms supplies
Western aid mechanisms are complex and include a combination of grants, loans and arms deliveries. A significant proportion of aid is in the form of grants, which do not need to be repaid. However, an increasing proportion is loans. For example, the EU package of EUR 90 billion is an interest-free loan.
The U.S. provides significant economic assistance, but much of the support is in the form of military supplies from its own stockpile, which allows for rapid delivery but requires replenishment through contracts to the U.S. defense industry. Another important instrument is the European Peace Facility (EPF), through which the EU finances the supply of military and non-military equipment. The EPF has committed €11.1 billion until November 2025.
Russia's war economy and financing mechanisms
Russia's war effort is financed by a combination of state spending, economic mobilization, and exploitation of natural resources. The government has significantly increased the military budget and redirected resources from the civilian sectors to the military. Sanctions and other measures have led to a decline in foreign investment and a rise in inflation. Nevertheless, Russia was able to sustain the war effort in the short term through resource control and the ability to mobilize the economy.
State military budget and defence spending
The Russian government has allocated a significant part of its budget to finance the war. In 2025, about 40 % of federal spending went to the military and security forces, with defence spending reaching about 7.2 % of GDP. This proportion is reminiscent of the Cold War and shows the extent of the militarisation of the economy. Investment is also directed towards the modernisation of the military and new technologies. However, increased spending is limiting funding for health, education and social programmes.
The role of sanctions and economic isolation
Western sanctions have significantly affected the Russian economy. They have targeted the finance, energy and defence sectors, restricted access to technology and capital and weakened the rouble. However, Russia has partly adapted thanks to its natural resources, new export markets and willingness to bear the economic costs. For example, the two Russian arms companies in SIPRI's ranking (Rostec and United Shipbuilding Corporation) increased revenues by 23 % to $31.2 billion in 2024, showing strong domestic demand.
The future of financial flows: renewal and long-term investments
The future of financial flows will depend on the outcome of the conflict, the extent of reconstruction and the geopolitical direction of the region. Ukraine's reconstruction will require hundreds of billions of dollars. The international community has already pledged significant support, but the scale of the challenge is enormous. At the same time, it is a major opportunity for investors in areas such as agriculture, energy and technology. Ukraine's geopolitical orientation will also play a key role - joining the EU and NATO would mean an influx of Western capital, while a return to Russian influence would lead to isolation.
China's possible role in post-war reconstruction
China emerges as a potential actor in post-war reconstruction. It has considerable financial resources and experience in infrastructure projects. In March 2025, a spokesperson for the China International Development Cooperation Agency said that China is ready to provide assistance, including reconstruction. However, its role may be limited due to its ties to Russia, lack of experience in post-war reconstruction, and Western concerns about its influence.
Involvement of international financial institutions
International institutions such as the World Bank and the International Monetary Fund will play a key role in Ukraine's recovery. They have the experience and the financial capacity. The World Bank is already providing assistance and is likely to be one of the main players. The IMF is helping to stabilise the economy and support the reforms needed to attract investment. The World Bank-managed URTF has already mobilised $2 billion and disbursed $1.2 billion for various projects.
In the next episode The defence industry: profits, production and geopolitical influence.
You can read the previous part here: NATO, Russia and the struggle for influence.
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