Despite the devastating impact on Ukraine since its invasion by Russia in February 2022, the fiscal toll on Russia has been surprisingly modest, according to an analysis by The Economist.

Russia’s War Budget Estimation

Navigating the complexity of Russia’s military budget, its annual invasion cost is estimated at 5 trillion rubles ($67 billion), accounting for approximately 3% of GDP. This is quite low compared to historical war costs, where during World War II, the USSR and the United States spent up to 61% and around 50% of their GDPs, respectively.

The Underpinning Factors

Three key reasons account for Russia’s low war spending. Politically, the Russian government prefers to label the invasion as a “special military operation,” which wouldn’t justify high GDP expenditures. Economically, escalating the war effort could harm citizens through inflation, public debt, or higher taxes— a risky move for Russian President Vladimir Putin ahead of the 2024 elections. Lastly, the efficiency of modern armies has improved, requiring fewer personnel and more precise equipment, thus reducing defense costs while still maintaining military potency.

Read more at The Economist.