Russia's War Economy Sustains Combat Operations Through 2026 Despite Emerging Manpower Constraints

As the Russia-Ukraine conflict enters its fifth year, Moscow has demonstrated a remarkable capacity to sustain high-intensity military operations throughout 2026, according to the latest assessment by the International Institute for Strategic Studies. The Kremlin's transformation into a war economy, coupled with continued weapons development and tactical innovation, presents a sobering picture for Western policymakers who had anticipated growing resource constraints would force Russia toward meaningful negotiations.

The IISS report, released on February 24, 2026—marking the four-year anniversary of Russia's full-scale invasion—reveals that Moscow spent at least $186 billion on defense in 2025, representing a 3% increase in real terms and constituting 7.3% of the country's GDP. This proportion significantly exceeds the United States' defense spending relative to GDP and represents more than triple the level maintained by the United Kingdom. According to Bastian Giegerich, the IISS director general, there is "little indication" that Russia's ability to continue prosecuting the war for a fifth consecutive year has diminished.

Defense finance expert Fenella McGerty noted that while Russia's economy is experiencing a slowdown that could result in a potential decline in real-terms military spending in 2026, this must be contextualized against several years of sharp growth. "Military spending had doubled in real terms since 2021," McGerty emphasized, enabling Russia to sustain relentless ground and air assaults against Ukrainian positions while maintaining substantial recruitment and equipment procurement programs.

Despite the sustained financial commitment, Moscow is facing emerging constraints in its most critical resource: manpower. Nigel Gould Davies, a Russia expert at the IISS and former UK ambassador to Belarus, identified "growing signs that Russia's rate of recruitment has begun to fall short of its monthly losses" on the battlefield. Russian forces currently recruit an estimated 30,000 to 35,000 personnel monthly, yet recent casualty figures suggest this may prove insufficient. UK Ministry of Defence data indicates Russia incurred 35,030 casualties in December 2025 and 31,713 in January 2026, figures that align with Western intelligence assessments of nearly 40,000 monthly casualties.

The quality of Russian recruits is reportedly deteriorating as the available pool of willing volunteers diminishes. Gould Davies stated that recruiters are increasingly turning to "the alcoholics and the drug addicted, and the frankly sick" to fill the ranks. This trend, if sustained, could eventually force the Kremlin to confront a "moment of truth" requiring a second wave of involuntary mobilization—a politically risky move that triggered substantial social unrest during the September 2022 mobilization.

Moscow has proven adept at leveraging the conflict as a testing ground for military innovation. The IISS assessment highlights Russia's development of new battle tactics, missiles, and attack drones, including a modernized Shahed-136 capable of striking targets across Europe to a range of 2,000 kilometers. This extended-range variant represents a significant threat escalation, potentially enabling Russian forces to target critical infrastructure throughout NATO territory. The threat materialized in September 2025 when 21 Russian drones crossed into Poland, forcing airport closures in several locations and requiring three regions to shelter civilians indoors.

The enhanced drone threat underscores Giegerich's assessment that NATO must "increase investments in missile defence and anti-drone systems" as a matter of urgency. However, the IISS report cautioned that European NATO allies and Canada, despite pledging to increase defense budgets to 3.5% of GDP by 2035, face substantial challenges in meeting these commitments. Such increases would require "sustained and significant investments" necessitating spending cuts and trade-offs in other policy areas—commitments many governments will find politically difficult to sustain.

Moreover, Europe will require until "well into the 2030s" to reduce its military dependence on the United States, according to Giegerich. European forces remain critically reliant on Washington for military intelligence, cloud computing infrastructure, and space-based assets. This dependency creates strategic vulnerabilities given the unpredictable nature of US political leadership and diverging transatlantic threat perceptions.

The battlefield situation as of late February 2026 reflects Russian persistence rather than breakthrough success. Russian forces have seized Pokrovsk in Donetsk Oblast after nearly two years of sustained offensive operations, yet this tactical victory has failed to catalyze the broader operational advances that Kremlin officials had predicted. Despite Chief of the General Staff Valery Gerasimov's December 2025 assertion that Pokrovsk's capture was "crucial" for seizing the remainder of Donetsk Oblast, Russian forces have failed to advance significantly beyond the town. They have not even secured Hryshyne, located just two kilometers northwest of Pokrovsk.

Intelligence assessments suggest Russia is deliberately protracting negotiations to improve its battlefield position. A source within the Kremlin's domestic policy bloc told Russian opposition outlet Verstka that Moscow views negotiations as "a tool" to contain conflict escalation in ways unfavorable to Russian interests. The source noted that Russia's negotiating posture has successfully prevented Ukraine from obtaining Tomahawk missiles from the United States—a capability that would significantly threaten Russian rear-area logistics and command infrastructure.

Kremlin insider reports indicate that Russian leadership does not seriously expect the war to end in the near term. Political strategists close to the United Russia party are preparing a "military agenda" for the September 2026 State Duma elections, assuming the conflict will continue at least through that period and likely substantially beyond. A source in the Russian Foreign Ministry told Verstka that Russia's negotiating position "has not changed at all" and that Moscow "must achieve" its war goals—which continue to include Ukraine's formal recognition of Russian territorial annexations and prohibitions on NATO presence in Ukraine.

Meanwhile, Ukraine has responded by expanding its defense industrial cooperation with European partners. On February 24, four Ukrainian defense manufacturers signed joint production agreements worth up to 800 million euros with Finnish, Latvian, and Danish companies under the Build with Ukraine initiative. These agreements will facilitate co-production of unmanned aerial and ground vehicles in partner states, creating resilient supply chains less vulnerable to Russian long-range strikes. Additionally, a Ukrainian company opened its first drone production facility in the United Kingdom, while Ukraine's defense platform Brave1 and the French Defense Innovation Agency signed a letter of intent to support Ukrainian and French defense startups.

The conflict's trajectory suggests a protracted war of attrition in which Russia's economic mobilization enables continued high-intensity operations despite mounting casualties and equipment losses. Moscow's willingness to accept unsustainable casualty rates—potentially exceeding one million total casualties killed and wounded since the invasion began—reflects a strategic calculus that prioritizes territorial gains over force preservation. For Western policymakers, the IISS assessment underscores that assumptions of Russian exhaustion forcing a negotiated settlement remain premature. Instead, the conflict is likely to continue at current intensity levels throughout 2026 and potentially beyond, requiring sustained Western military assistance to Ukraine and accelerated European defense spending and capability development.

The challenge for NATO is stark: Russia has successfully transformed into a war economy capable of sustaining large-scale conventional operations indefinitely, while European defense establishments remain structured for peacetime operations with limited surge capacity. Closing this gap will require not only financial commitments but fundamental restructuring of European defense industrial bases—a transformation that will extend well into the next decade even under optimistic scenarios.