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Putin's arms madness: economic growth at the expense of peace!
Russia's economy is growing thanks to high military spending, while the Ukraine war is weighing on the global economy. What does that mean?
Putin's arms madness: economic growth at the expense of peace!
On May 25, 2025, peace talks between Ukraine and Russia ended again unsuccessfully, with the only notable progress remaining a prisoner exchange. As the conflict continues, prospects for a ceasefire are dim. The military activities of both countries influence not only their respective economies, but also the global economy.
The war economy is flourishing in Russia, which contributes to stability in the country. According to a recent report by fr.de, Russia's gross domestic product (GDP) rose by about four percent in 2024, supported by a significant increase in military spending. That spending rose 41.9 percent to an estimated $145.9 billion, accounting for about 6.7 percent of GDP. Janis Kluge from the Science and Politics Foundation describes these high expenditures as an “economic stimulus package” for the Russian economy.
Economic challenges of Russia
Marc DeVore and Alexander Mertens analyze that high military spending boosts employment and growth in the short term, but is seen as unsustainable in the long term. Political scientist Pavel Luzin explains that the Russian leadership has maneuvered itself into a dead end with a large military budget. This approach requires an aggressive foreign policy and has the potential to be destabilizing, especially if the war ends and many veterans and defense employees become unemployed.
An end to the war could have a severe impact on the Russian economy. Historical examples show that the return of many demobilized soldiers and unemployment among defense workers could cause political instability. In addition, the country's civilian economy is shrinking as high salaries in the defense industry attract demand for labor and neglect other sectors.
Global impact of the conflict
However, the impact of Russia's war on Ukraine is not limited to Russia. The global economy, especially Germany, is suffering significantly from increased energy prices, high inflation and grain shortages. The rise in prices was accelerated by the war and the associated supply bottlenecks, which led to a decline in consumption and investment in Germany. Inflation is rising and people are being forced to save money.
The conflict has also caused the EU's energy imports from Russia to fall significantly, putting a further strain on the European economy. Western European countries have experienced drastic price increases due to a stop in the supply of natural gas from Russia, some of which have declined but have often not been passed on to consumers. Uncertainty about investments has led many companies to curb spending.
Despite these challenges, Ukraine receives extensive financial support from the West, with the US being the largest supporter, followed by the EU. This assistance is critical to maintaining Ukrainian economic stability during the ongoing conflict.