For both Russia and Ukraine, the war has become an attritional grind with little end in sight. While analyzing who controls what village is useful for determining whether Putin can achieve his minimum war aims of capturing Donbas, it does little to illuminate the war’s longer trajectory. A major under-examined factor is how Ukraine has relied on the European Union to fund its massive budget gaps in the short term while integrating its weapons development architecture into the EU.
In the short term, Ukraine appears to hold the strategic initiative. Yet it still faces long-term challenges in managing its fiscal balance sheet without significant European support and in planning for a war of attrition that could last for years. Core gaps remain in how its strategy of attrition will hold up in such a prolonged scenario.
Territorial Changes
So far, the Russian army’s territorial progress from 1 January to mid-May 2026 has more in common with the grinding fighting around Avdiivka in 2024 than with the rapid advances across the entire Donbas from January to April 2025. Russian forces have pushed forward only a few kilometers in northern Donetsk Oblast, with other sectors of the front seeing even less movement. This stands in sharp contrast to the significant changes across hundreds of miles of front line that occurred in 2025. Although the figures cannot be independently verified, Ukrainian officials’ monthly claims of Russian killed and wounded point to intensely bloody fighting, with Russia suffering some 30,000 casualties in January alone.
Fighting in Donetsk Oblast has centered on an approximately 50-kilometer front from Kostyantynivka to the Donets River. Russian forces are driving directly toward the fortress cities of Slovyansk and Kramatorsk. Ukrainian sources report that, from early January to the end of April, Russian troops advanced 5−10 kilometers along this sector. Progress has been uneven—advances in some places, stalemate in others. The forward Russian elements now sit roughly 15 kilometers from the city limits of Slovyansk and Kramatorsk.
Both Russian and Ukrainian sources note a rise in FPV-drone activity near these «fortress» cities as the line of contact creeps forward. The Finnish Blackbird Group has documented multilayered defenses on the outskirts of both Kramatorsk and Slovyansk which, even if not fully manned, create multiple strongpoints that Russian forces must suppress or seize. These cities are therefore more likely to face months of sustained bombardment, including intensified FPV-drone strikes as more Russian systems come into range. Without neutralizing or displacing Ukraine’s drone teams inside them, Russia will be unable to advance. An actual storming of Kramatorsk and Slovyansk would be prohibitively costly for both sides yet remains necessary if Putin is to meet his absolute minimum political goal of seizing Donetsk Oblast. Predicting Russian casualties in such an operation is impossible.
This northern Donetsk momentum is simply an extension of Russia’s seizure of Siversk in December 2025; it does not constitute a «Spring Offensive.» Given Ukraine’s deliberate strategy of turning every Donbas settlement into a Stalingrad-in-miniature, Russia will have to keep recruiting tens of thousands more men each month. Official statements from Belousov placed 2025 contract recruitment at around 410,000—roughly 34,000 new soldiers per month. Russia will need to sustain those numbers in 2026 simply to replenish existing units. Medvedev claimed on 30 April that Russia had signed 127,000 new contract soldiers in 2026 so far and 450,000 in 2025. All such numbers should be treated with skepticism.
Independent estimates from Mediazona and Meduza put Russian deaths at 352,000 so far. Figures for wounded and missing are far less reliable because of the absence of verifiable data, yet the scale of missing soldiers alone is staggering. One Vkontakte page for families searching for missing troops, Poisk SVO, has over 260,000 participants. Ukrainian losses are even harder to quantify. The UA Losses project records 98,000 confirmed dead and another 95,000 unaccounted for; the BBC’s similar methodology estimates around 200,000 Ukrainian dead.
Elsewhere along the front in southern Donetsk and Zaporizhzhia Oblasts, territorial control has barely shifted. Russian forces continue to probe forward a kilometer here or there. Ukrainian forces have announced «counter-offensives» in Dnipropetrovsk and Zaporizhzhia Oblasts in 2026, but these appear to target isolated, weakened Russian units in gray-zone areas where neither side holds firm control.
While Russian activity has been relatively muted in many sectors, Moscow has stepped up operations in Sumy Oblast. Putin has framed the effort, misleadingly, as the creation of a buffer zone. The Finnish open-source project Blackbird Group documents a notable incursion along an approximately 37-kilometer-wide front in northeast Sumy Oblast. Though impressive on paper, the ground involved consists mainly of border villages. Russia has opened similar fronts in Sumy and Kharkiv Oblasts in previous years. It remains to be seen which units are committed and how far the operation will succeed.
The overall trend remains small Russian gains purchased at massive personnel cost—if early reports are even partially accurate. Even accepting Ukrainian and NATO claims of 25,000−30,000 Russian killed and wounded per month, Moscow has so far been able to replenish its units and maintain pressure. The tradeoff is that this approach leaves little room to staff formations with properly trained soldiers.
Faced with acute labor shortages and heavy casualties, Russian authorities are trying to attract recruits in the tightest labor market in modern Russian history. Whether new, inflationary financial incentives will generate enough volunteers to offset losses over the long term is uncertain. Even a fresh mobilization of 300,000 men, as in September 2022, would raise the question of which economic sectors those men would come from. Given the growing centrality of drones and the absence of systemic improvements in training or command restraint, Russia may be forced to concentrate on Donetsk Oblast alone rather than attempt the broad advances of 2024 and 2025.
Ukraine’s War Chest
In the short-term Ukraine is surviving, but its deeper structural problems persist. With the Hungarian elections over, EU financing for Ukraine’s 2026 budget now faces fewer obstacles. The € 90 million previously blocked by the prior Hungarian government is essential for fiscal solvency. Yet this stopgap only underscores Ukraine’s reliance on external support to finance a large standing army over the long haul.
Ukraine’s budget remains extremely dependent on foreign financing. Analysts estimated that 42.3 percent of the draft 2026 budget would have to be covered by borrowing. The projected deficit for 2026—18 percent of GDP—is unsustainable without external transfers. IMF data show gross government debt at 122 percent of GDP, with interest payments consuming 3.98 percent of GDP.
The bulk of this financing comes from the European Union, with smaller contributions from the United States. Unlike Russia, which can draw on resource revenues and domestic deficits, Ukraine’s war funding hinges on Western political will. Russia is mortgaging its economic future in the belief that resource income and taxes will eventually prove more sustainable; Ukraine has no such cushion.
Domestic taxes cover only 57.7 percent of budgetary expenses—simply not enough. Economic activity has collapsed as millions have emigrated. Value-added taxes on imports (35.7 billion hryvnia) and domestic production (22.5 billion hryvnia) were the main revenue sources in 2023; both are highly sensitive to internal demand, which is precisely why Russia targets energy and civilian infrastructure. In 2025 the Kyiv School of Economics reported that tax collections fell 4.8 percent short of target because of reduced activity caused by Russia’s winter strikes.
Despite enormous military spending, Ukraine has continued funding social programs and pensions only because of EU transfers. These programs keep vulnerable citizens economically active. The budget also reveals how the promise of incoming foreign support has allowed the state to expand its (non-consolidated) defense budget year after year: 2 trillion hryvnia (52 percent of spending) in 2023, 2.3 trillion (51 percent) in 2024, and 3 trillion (56 percent) in 2025. Even after hryvnia depreciation, the trend shows simultaneous growth in military and social spending.
For 2026 the planned defense budget is 2.8 trillion hryvnia—roughly 60 percent of GDP. The drop in both nominal size and GDP share reflects the cumulative impact of Russian strikes on infrastructure and uncertainty over foreign aid. Domestic tax revenue is projected to rise by an extra 400 billion hryvnia compared with 2025. That increase will strain the weakened economy but suggests it has not yet reached a breaking point in the short term.
The overall 2026 budget deficit is projected at 2.07 trillion hryvnia (about € 40 billion at current conversion rates)—nearly half the total budget and almost exactly matched by anticipated direct EU funding. The money arrives at a critical moment: Ukraine had already spent 334 billion hryvnia, or 12 percent of its allocated defense budget, in January and February 2026 alone.
Foreign Financing
In April 2026 the European Commission moved forward with € 90 billion in loans to Ukraine for 2026−2027. The package had been delayed by Viktor Orbán’s government; once Hungarian elections concluded, the EU advanced the plan. It is structured as € 45 billion per year, with € 60 billion earmarked to «support Ukraine’s capacity to invest in defense industrial capacities, including procurement of defense products.» The text explicitly covers systems produced inside the EU—an area where Ukraine has already built an extensive network of joint development and manufacturing.
Much of the support flows through the «Ukraine Facility,» which channels reconstruction and modernization funds directly to Ukraine’s budget office. Of the April 2026 loan, € 30 billion will use this mechanism for general budgetary support.
Complementing EU money are the ERA Loans, backed by the G7 and funded by revenues from frozen Russian Central Bank assets. The mechanism was agreed at the June 2024 G7 summit. Continued political consensus on frozen assets will be essential to keeping this funding stream open.
Unresolved Issues in Ukrainian Strategy
In the short-term Ukraine’s plan—to bleed the Russian army of hundreds of thousands of casualties while fighting for the rest of Donetsk Oblast—appears to be working. Orbán’s electoral defeat has unlocked vital funds for social programs and allowed even larger nominal defense allocations. At the same time, Ukraine has aggressively relocated weapons production into the European Union, weaving itself more deeply into EU and NATO defense structures with remarkably little Russian interference.
Yet the strategy leaves crucial long-term questions unanswered—none more important than personnel recruitment and management. Desertion rates are significant: in the first ten months of 2025 alone, Ukrainian courts handled more than 290,000 cases of troops who deserted or abandoned their units without permission. Exhaustion from extended front-line rotations and friction with commanders are the main drivers. While the problem has not yet produced a military or political crisis, the underlying dynamics are understudied and could erupt at a critical moment.
For domestic political reasons Ukraine long shielded young men from mobilization. That stance is shifting. As of 2025 the military has begun offering contracts to 18−24-year-olds outside the traditional demographic. These contracts come with generous benefits and the right to choose one’s unit. The new recruitment website features a young man with a drone, clearly signaling that new recruits may serve farther from the front lines.
Equally contentious is «busification”—the practice by Territorial Recruitment Centers (TCC) of seizing fighting-age men at traffic stops or on the street and sending them directly to the front. The approach is deeply unpopular. This spring in Odesa residents have physically protected deserters from police; in another incident TCC officials were charged with extorting money by threatening to assign victims to assault units. These episodes reveal growing fractures between society and the mobilization system.
Secrecy around defense-budget line items makes a full picture of spending difficult. The Ministry of Defense states that 70 percent of the budget services personnel and 20 percent goes to weapons procurement. The personnel figure is plausible given army size and incentives, but the procurement number is almost certainly understated because much of it is bundled into classified loans and bilateral programs. Real weapons spending is therefore higher than reported.
Further complicating assessment are the growing number of joint weapons-development deals with EU partners. In May the Ukrainian presidential office hosted Germany and Lithuania for new production talks, following a major April agreement with Germany that included € 300 million for long-range missiles or drones.
These joint-production arrangements—allowing Ukraine to manufacture weapons on NATO soil—have become a major sore point for Moscow that it has so far failed to address. In April the Russian Ministry of Defense publicly threatened some of these facilities. Short of air or cyber strikes, however, Russia’s options appear limited.
The lack of a stronger Russian response is striking, given its constant rhetoric about NATO involvement. In March British-manufactured cruise missiles heavily damaged a Russian military-electronics plant in Bryansk. Ukrainian strikes have since hit other high-value targets deep inside European Russia, including the VNIIR-Progress plant in early May. Attacks on the ports of Tuapse, Ust-Luga, and Novorossiysk follow the same logic: degrade Russia’s ability to finance the war. Where sanctions once applied pressure, physical destruction now supplements them. Ukrainian officials see this combination as more decisive. Yet it remains unclear whether these strikes can inflict enough damage on Russian finances or production to force serious negotiations. Energy markets remain volatile; Russia may still reap windfall revenues longer than Ukraine can keep the infrastructure offline. Ukraine’s own experience demonstrates that infrastructure strikes alone have not compelled an opponent to the negotiating table.
Conclusions
Ukraine needs Europe more than ever. Without direct European loans and grants, its domestic economy would likely collapse, cascading into a further contraction of the tax base on which it depends. Without European cooperation it could neither sustain nor expand its air campaign against Russian economic and military targets. The EU’s enormous assistance and deepening coordination have enabled Ukraine not only to keep its military machine running but to develop into a regional military power it could never have become on its own.
Going forward, the operative questions for analysts and policymakers are straightforward: Where is the threshold? What level of pressure is required to bring Russia to serious negotiations? How resilient is the Western political coalition to counter-pressure, and what does any erosion mean for long-term stability in Europe?
