Global Defense Budgets Continue Rising as Protraction of Russia-Ukraine Conflict Appears Inevitable

US efforts to aid Ukraine’s war effort have been boosted by another $2.6 billion in equipment and weaponry. The vast majority of that sum is represented by new contracts. America is depending less on its drained stockpiles of munitions and preparing for supplies to be delivered directly to Ukraine from defense manufacturers. While those deliveries may take quite a while, key members of the US military’s command structure see no end to the war in 2023.

Given recent trends in US military spending, a trillion dollar defense budget is not hard to imagine within the next couple of years. European military spending is also on the rise, likely in preparation for a fraught future with an aggressive Russia on its eastern frontier. France’s newly-debuted defense strategy will see 2017 levels of spending doubled by the end of the decade. 

Related ETF: SPDR S&P Aerospace & Defense ETF (XAR)

Following yesterday’s newly-announced package of support for Ukraine’s war effort, worth $2.6 billion, the United States has committed about $35.1 billion in military aid to the country since February 24, 2022. American efforts to bolster Ukraine have resulted in more than 35 drawdowns of equipment from Department of Defense (DoD) inventories and an array of new orders with various defense contractors. That total is up from $28.9 billion in our last update on February 21.

The latest pledge will include $500 million of equipment and weapons from US stockpiles and a much larger $2.1 billion spend on new orders with defense contractors via the DoD’s Ukraine Security Assistance Initiative (USAI). DefenseNews notes that direct commercial sales of military equipment ― from contractors to governments ― grew rapidly in 2022, reaching $153.7 billion, up 48.6% from $103.4 billion the year before. The buildup of defense orders was largely spurred on by the Russo-Ukrainian war and the international response. A continuation of this growth trend would not be surprising in 2023, considering Ukraine and the alliance of 40 countries backing its defense, are not likely to prevail in the conflict this year. That’s according to General Mark Milley, Chairman of the US Joint Chiefs of Staff, who doubled down on previous comments from November 2022, when he noted that the probability Ukraine would achieve their goals by retaking Russian-occupied land in the Donbas and Crimea by expelling all Russian forces “is not high” in the near-term.

Recently, sources cited by the Associated Press have been monitoring the potential for a Ukrainian offensive in the southern Zaporizhzhia Oblast, where Russia made some marginal gains in January and have been digging new trenches. Per Ukrainian military analyst Oleh Zhdanov, Ukrainian forces will look to break through the land corridor between Russia and the annexed Crimean peninsula, moving south from…