PARIS — Russia’s defense spending in 2025 rose at the slowest pace since the start of its full-scale invasion of Ukraine four years ago, impacted by financial reforms at the Ministry of Defence and a struggling economy in the face of Western sanctions, according to the International Institute for Strategic Studies.
Defense spending by Russia rose by 3% last year in real terms, after a 57% jump in 2024, according to the annual IISS Military Balance report published on Tuesday. Russia spent a record $186 billion on defense last year, compared with $44.4 billion for Ukraine, the IISS data showed.
Russian defense spending could potentially fall this year from “a very, very high point,” said Fenella McGerthy, senior fellow for defense economics at the IISS, at a press briefing in London. After “significantly” raising defense spending over the past four years, Russia now faces stagnating growth, a widening deficit and falling revenues due to Western sanctions, according to McGerthy.
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“There’s been financial, fiscal reform throughout the Russian MoD in order to find efficiency savings to more effectively discharge spending,” McGerthy said. “But also a recognition of that difficult economic environment and the inability to sustain such high levels of increases.”
Russia has tripled its defense spending since 2021, according to the think tank. Both Russia and Ukraine increased the share of their economy spent on defense in 2025 in their fourth year of war.
Marginal territorial gains by Russia have come at the cost of heavy casualties, though the country has been able to sustain the size of its deployed forces, the IISS said. There is “little indication” that Russia’s ability to fight its war against Ukraine for a fifth year has diminished, and the country’s threat to Europe is growing, IISS director-general Bastian Giegerich said.
Russia suffered higher loss rates at the end of last year and into 2026, partly as it pursued a more aggressive offensive stance, according to Henry Boyd, IISS senior fellow for military capability. Should the trend continue, Russia will face pressure on its current operational posture, though the armed forces can scale back offensive activity as a counterbalance, he said.
“Russia does have as an ultimate fallback option the ability to conduct a wider mobilization of the Russian state and the Russian people, should it really, really feel the need to bolster personnel resources for this war,” Boyd said. “As we’ve seen in the past, Russian loss rates tend to provoke a change in operational approach more than a kind of an abandonment of front-line operations altogether.”
Russia’s defense spending amounted to 7.3% of gross domestic production in 2025, from 6.7% a year earlier, IISS data show. Ukraine dedicated 21% of its GDP to defense, from 15% a year earlier.
European countries have been increasing their own defense spending in response to the perceived threat from Russia on NATO’s eastern flank, with European NATO members on average spending 2.16% of GDP on defense last year, according to Giegerich.
“Further spending growth in Europe will depend on sustained political and public support amid significant fiscal pressures,” Giegerich said. “Fiscally constrained allies will struggle to meet the new target of 3.5% of GDP for core defense capabilities by 2035.”
Europe now accounts for 21% of global defense spending from 17% in 2022, with Germany and Poland accounting for much of the growth, according to the IISS report. Belgium, the Nordic countries and Spain also saw “significant budget uplifts” in 2025.
For Europe, addressing shortfalls in air and missile defense remains a priority, while limited industrial capabilities and challenges in scaling production continue to be constraints on European rearmament, according to the IISS.
European countries have started to address some of the air-defense gaps, ordering $18 billion worth of short and very-short range air defense systems since 2022, compared to investments of $7.5 billion in all types of ground-based air defense in the preceding four years, according to Giegerich.
Global defense spending rose by 2.5% as Europe, the Middle East and Asia continued to expand and modernize their armed forces. The pace of growth slowed from 7.4% in 2024 and 6.5% in 2023 as the United States, the world’s biggest military spender, reduced defense expenditure last year.
Whereas the U.S. still outspent the 14 next-biggest countries in 2023, those nations combined outpaced American spending by more than $200 billion last year, the IISS data show. U.S. plans to boost defense spending to more than $1 trillion in 2026 will contribute to growing global defense spending this year, according to Giegerich.
As the world rearms, defense spending as a share of global GDP reached 2.01% from 1.89% a year earlier, and compared to 1.59% in 2022. That’s the highest level of spending since the 2000s, according to McGerthy.
In Asia, China’s share of regional defense spending continues to increase, accounting for around 44% of the regional total in 2025, from an average 37% in the 2010-2020 period, according to the London-based think tank.
Rudy Ruitenberg is a Europe correspondent for Defense News. He started his career at Bloomberg News and has experience reporting on technology, commodity markets and politics.
