Cost of global arms race and rising military budgets

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The U.S. remains the top military spender at $997 billion, but China is closing the gap. While China’s nominal military budget is $314 billion, its PPP-adjusted figure is $544 billion.

Russia ranks third, spending $149 billion in 2024, or $430 billion in PPP terms. Russia’s military spending equals 7.05% of its GDP. NATO countries aim for 2% of GDP on defense, but discussions are underway to raise this to 5%.

Ukraine leads in defense spending as a share of GDP, allocating 34.5%—$65 billion nominally, or $199 billion in PPP terms. Ukraine produces $10.2 billion in weapons annually.

For context, Ukraine’s GDP is $184 billion, while Russia’s, per Rosstat, is $2.4 trillion.

“Russia’s GDP is an order of magnitude higher; it’s a larger state with more people and far more natural resources. A country fighting a much wealthier state must spend a higher GDP percentage on defense—and even that doesn’t guarantee results,” said political scientist Petro Oleshchuk.

“That’s why I believe the future lies in alliances where states recognize shared challenges. For Eastern European countries once under Russia’s influence, Russia is that challenge. They need to unite and form a military-political alliance with a combined GDP comparable to Russia’s,” he added.

“The question in planning military spending shouldn’t be ‘guns or butter’ but ‘guns and butter together,’” said military analyst Ivan Kyrychevskyi. “For example, France’s Thales makes military electronics and rail transport electronics. Despite defense tech sanctions since 1989, China leveraged access to dual-use Western technologies to become a global leader in military tech—and they’re not starving.”

“If we total all Western aid to Ukraine, we could theoretically match Russia’s resources, but we haven’t reached resource parity (where both countries spend equally -ed.). All wars are costly,” Kyrychevskyi added.

This drives the rise in military spending. Non-NATO countries, including Russia and China, account for over 60% of global defense expenditures, up from under 60% in 2004. Every percentage point matters.

“We can call the next few decades an era of militarization. It began with Russia’s 2014 aggression. Russia set a precedent for similar regimes, showing it’s possible. With no global arbiter to rely on, countries must rearm,” said political scientist Ihor Petrenko.

“For the next 5-10 years, militarization will persist. Countries are seeking allies and forming regional alliances. New organizations may emerge to address threats collectively. There’s some hope this will spark change, like a reformed UN—UN 2.0 with new rules. But that takes time,” he added.

The European Union aims to become a military alliance. EU Defense Commissioner Andrius Kubilius announced plans for a ReArm Europe defense package worth 800 billion euros ($908 billion), with 150 billion euros ($170 billion) in low-cost loans for member states to buy weapons. The EU targets 3.5% of its GDP for defense.

But finding funds, which Europe excels at, is one thing. Producing or acquiring needed military equipment is another. Empty global arsenals limit the immediate impact of money.

“The U.S. has a backlog of export orders for F-35 jets alone, stretching to 1,000 units. Wealthy Gulf states are buying turnkey fleets. Qatar, for instance, purchased powerful corvettes from Italy and an 8,000-ton multi-role ship that can serve as a landing craft, air defense platform, or even a command center,” said military analyst Ivan Kyrychevskyi.

Middle Eastern countries spend heavily on defense. Israel allocates 8.8% of GDP, Saudi Arabia 7.3%. These large economies drive massive demand for all types of weaponry.

India, with its nuclear arsenal, has a military budget of $86.1 billion, equating to $283 billion in PPP terms and 2.3% of GDP.

“Beyond conventional arms races, a nuclear arms race looms. Many states, previously silent on nuclear weapons, are now discussing it. Germany’s Chancellor Friedrich Merz speaks openly. South Korea is debating it widely. Japan too. Gulf states, especially amid Iran’s nuclear program, are also concerned,” said Petro Oleshchuk.

Iran’s 2024 military budget was $7.9 billion, or $18 billion in PPP terms, equating to 2% of GDP. Neighboring Turkiye spends 1.9% of GDP on defense—$25 billion, or $74.6 billion in PPP terms.

Poland, alarmed by Russia’s war, now spends 4.2% of GDP on defense—$38 billion, or $72.3 billion in PPP terms. Hungary, by contrast, spends 2.16% of GDP, meeting NATO’s minimum, equating to $4.7 billion or $9.8 billion in PPP terms.

Like any investment, military spending demands returns. Ivan Kyrychevskyi noted: 

“This is especially clear in Africa—colonial wars that pay off. It’s business. For Russia, wars in Africa are business. Arms supplies there are business. Same for China. It’s profitable—the classic case of guns and butter together.”

When Russia supports coups or dictatorial regimes in Africa—like in Mali, Niger, or Burkina Faso—with military aid, it expects access to local resources, ensuring a return on investment.

“Margaret Thatcher’s Britain pursued economic reforms only after the Falklands War, which lasted three months but showed the war’s high cost,” Kyrychevskyi noted.