NATO Defense Spending Rises to Half of Global Total, IISS Says

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(Bloomberg) -- Russian President Vladimir Putin’s war in Ukraine helped pushed global defense spending up 9% to a record 2.2 trillion dollars, with NATO member states accounting for half the total, the International Institute for Strategic Studies said.

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The collective defense budgets of China, Russia, India and North Atlantic Treaty Organization nations make up more than 70% of global military spending, the London-based research group said in the 2024 edition of its “Military Balance,” released Tuesday. Expenditure by non-US NATO members has risen by 32% since Russia’s 2014 invasion of Crimea.

“Russia’s aggression spurred European countries to boost defense spending and has strengthened NATO, with Finland adding combat power,” the IISS said. “The pace of ammunition expenditure in the war between Russia and Ukraine has also caused a reckoning in the West that production capacities have atrophied, with countries scrambling to rectify shortcomings from years of underinvestment.”

The US and European nations have taken over from Middle Eastern and Asian ones as the key driver of the growth in global military spending, according to Fenella McGerty, a senior fellow for defense economics at the IISS. The war in Ukraine will continue to be a major driver for defense budgets globally, she said.

The IISS envisages a main short-term scenario of a stalemate in the fighting between Russia and Ukraine. Russia has lost over 2,900 main battle tanks since launching its full-scale war on Ukraine, about as many as it had in active inventory at the outset of the operation. But it has been able to replenish losses with older machinery. Moscow could potentially sustain around three more years of heavy losses and replenish tanks from stocks, IISS estimates. The rate at which Russia is pulling old tanks from stocks “may, at times, have reached 90 tanks per month,” it said.

Russia has devoted far less of its human and material capacity to the war than is potentially available, and Putin remains committed to victory rather than compromise, even if that must be achieved over years rather than days, through a steady mobilization of resources that enable Russia to outlast the West in a contest of resolve.

Both sides have made extensive use of drones and trench warfare, providing lessons for other nations. Ukraine’s use of inexpensive uninhabited maritime vehicles (UMVs) to target Russia’s Black Sea Fleet in particular has given other countries greater urgency in pursuing such equipment. This year, UMVs feature in the Military Balance for the first time.

Uninhabited aerial vehicles or UAVs are in strong demand, and defense establishments around the globe are trying to harness the speed of development of entrepreneurial startups, the IISS said.

Priorities how to allocate defense budgets have shifted as well. Whereas in 2014 NATO members spent 15% on average of their defense budget on procurement and development, in 2023 they are allocating over 30%, according to McGerty. Countries like Poland, Finland and Hungary spent half their budget on equipment, she said.

The US military, meanwhile, is in rethinking mode as it captures lessons from Russia’s war in Ukraine, according to the IISS. The US army initiated the development of a new artillery strategy with focus on long-rage precision fire and has revised its recruitment approach. Russia’s invasion of Ukraine has also prompted the US Air Force to bolster inventory numbers of key weapons after observing the high utilization rates in the war.

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