Ukraine and Russia are about to receive a significant “aid” package for the war. A very special shipment from the USA is expected in Kiev: $1.7 billion worth of weapons approved by the Biden administration. On the other hand, Moscow has just formalized its 2025 budget and the figures do not leave much room for speculation on defense spending. These are the numbers around which Morocco’s GDP moves.

It’s a huge expense. Russian President Vladimir Putin has approved a federal budget that boosts defense spending to record levels and allocates at least 13.5 trillion rubles ($126.8 billion) through 2025, compared to 10.8 trillion rubles in 2024. This represents 32.5% of the federal budget; This was a significant increase from 28.3% this year.

There is no doubt that the increase in military spending reflects Russia’s commitment to its military campaign against Ukraine, which will enter its fourth year in February, and reinforces the centrality of war activities in the country’s economy. To put it in perspective, spending is around the GDP of a country like Morocco (133 thousand) or exceeds that of countries like Croatia or Guatemala. In fact, it is not far from Ukraine’s GDP (164 thousand).

Impact on the Russian economy. The largest-ever budget comes in an economic context where inflationary pressures and a weakening ruble have reached 32-month lows. Inflation fueled by war activities led the Russian central bank to raise the interest rate to an all-time high of 21%. However, the central bank governor signaled that the economy may be at a “tipping point” by stating that interest rate cuts are expected as inflation decreases.

Although the Russian economy has managed to survive despite Western sanctions, dependence on military activities creates a kind of “overheating” in the stock market. In fact, analysts warn that this approach could jeopardize the sustainability of social programs that are critical to maintaining the stability of Putin’s regime in the face of mounting economic pressures.

Perspectives. Russia’s economic forecasts reflect short-term optimism; GDP growth is expected to be 3.9% in 2024 and 2.5% in 2025, but is expected to slow down to 1.9% in 2025. These figures exceed the estimates of the International Monetary Fund (IMF). A growth of 3.6% is predicted by 2024 and 1.3% by 2025. However, bank manager VTB, Andrei Kostin, admits that extraordinary war conditions and sanctions have or will leave inevitable effects on the economy.

Ukraine is finally getting help. United States Secretary of Defense Lloyd Austin announced a new military aid package worth $988 million for Ukraine this weekend, increasing last week’s total aid to $1.7 billion. This package includes additional drones and munitions for HIMARS systems critical to Ukrainian defense and is part of the Ukraine Security Assistance Initiative designed to strengthen long-term military capabilities beyond immediate impact on the battlefield.

Emergencies before Trump. Help also comes amid uncertainty. The Biden administration is accelerating the use of funds approved by Congress, considering questions about whether support for Ukraine will continue after President Donald Trump takes office. Trump, who has been critical of military aid to Ukraine and has a tumultuous relationship with Vladimir Putin, has advocated a quick end to the conflict and raised concerns about possible concessions in future negotiations.

International context and support. We said it last week. Ukraine faces an intensification of Russian aggression, and in this context, US military support is vital to prevent Ukraine from falling to Europe’s largest military power. Since the Russian invasion began in February 2022, the United States has provided more than $62 billion in military assistance.

Meanwhile, European leaders such as French President Emmanuel Macron are trying to persuade Trump to continue military support for Ukraine. In a meeting with Volodymyr Zelenskyy in Paris this weekend, Trump reiterated his focus on ending the war quickly, which could mean adverse conditions for Ukraine. Or maybe not. At this point, no one knows where Trump will point his finger to end the war “as quickly as possible.”

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