What Has The Economic Cost Of The Ukraine War Been?

What Has The Economic Cost Of The Ukraine War Been?

The relatively direct economic costs of the Ukraine War over the last 27 months have been roughly $2,250 billion U.S. dollars. 

This includes the economic value of deaths and physical injuries to civilians and military personnel alike, damage to civilian property, relocation costs for displaced persons, psychological care costs for war related trauma, losses of income and economic production, operational military costs, and losses of military equipment to Russia and Ukraine combined from the war and related economic sanctions. 

It also includes the cost of foreign aid that other countries have given to Ukraine in connection with the Ukraine War, and increased military spending by other European countries over the last two years that has been incurred in response to the Ukraine War and what it indicates about the threat of Russian aggression.

This estimate excludes global macroeconomic effects of the war on countries other than Russia and Ukraine, apart from the costs that governments other than Russia and Ukraine have incurred to provide foreign aid to Ukraine and to strengthen their own defenses in light of heightened Russian aggression. These macroeconomic costs are almost certainly non-zero, and almost certainly amount to many billions, tens of billions, or hundreds of billions of dollars. But the indirect global macroeconomic effects of the Ukraine War outside of Russia and Ukraine are exceedingly difficult to credibly disentangle from myriad other macroeconomic impacts on the global economy. 

Perhaps those macroeconomic impacts were $450 billion over 27 months (less than $17 billion per month), which is only a very thinly supported guess, but is in the right economic ballpark. If so, then the Ukraine War has cost the 8 billion people who live on Earth, as a whole, about $100 billion U.S. dollars a month so far, about $12.50 U.S. dollars per person per month, for everyone in the entire world.

This analysis also ignores the existential global threat to humanity's survival caused by Russia's threats to escalate the conflict into nuclear warm, and the global impacts economic and military that have flowed from Russia brining us closer to World War III.

Details regarding how this was determined in each category are summarized in the remainder of this post.

Whose Fault Is This Immense Economic Cost?

This immense cost to the world as a whole, can reasonably be considered the personal responsibility of Vladimir Putin, Russia's President, who authorized the invasion of Ukraine and has been the driving force Russia's continued prosecution of the war. 

There were no significant political factions within Russia pushing to conquer Ukraine before Putin initiated the war, and he did so with very little consultation with, or preamble directed at, the Russian general public, Russian elected officials, or Russian economic elites (the so called "oligarchs"). 

Even many key members of the inner circle of Putin's cabinet and advisors, and many senior military officials in parts of the military that weren't involved in the invasion in 2024 were kept out the loop in the process by which Russia decided to invade Ukraine.

This war is one of the clearest cases in history of an international war which was unequivocally started unilaterally by the aggression of a single country, in violation of international law, pursuant to an international law obligation which it expressly recognized in a treaty not long before the first stage of the war in year 2014, when the Russia purported to annex and took de facto control of Crimea and most of the territory in eastern Ukraine which it controls now. There had been a de facto cease fire in the wake of the 2014 stage of the Ukraine war for a decade, before Russia began a far more expansive effort to conquer the entire Ukrainian state on February 24, 2024.

The Ukraine War aptly illustrates the fact that a handful of highly culpable rogue national leaders account for an outsized share of the geopolitical threats and misery in the world. 

Yet, this seems like a problem that it wouldn't be impossible for some future international institutions to address in a manner that could gain a wide global consensus from non-rogue nations, to the enormous benefit of the world as a whole, and without fundamentally upsetting the parts of the current world order that work well enough.

Combined Russian and Ukrainian Military Losses

Neither Russia nor Ukraine disclose their own military losses in the current Ukraine war between them which started when Russia launched an all out attack on Ukraine on February 24, 2022. But they do make claims about the military losses that they have inflicted on the other side in the war. 

These may be used as upper bounds on the severity of the losses inflicted, but independently verified numbers, which are admittedly incomplete since not all losses can be verified independently, and credible third-party estimates, do suggest that each side's claims made by losses inflicted are in the right ballpark. Ukraine's claims, in particular, are close to accurate (although Ukraine words its statements about losses of Russian soldiers as if they were all were all killed, when in reality most personnel losses on both sides are injuries not mortal, soldiers captures as prisoner's of war, and desertions).

Ukraine has suffered fewer military losses than Russia, but has suffered the lion's share of civilian casualties and civilian property damage in the conflict, because Ukrainian territory has been the site of the vast majority (although not all) of the fighting, and because Ukraine has taken more care to not indiscriminately target civilians than Russia.

Combined, the combatants claims that more than 630,000 Russian and Ukrainian troops have been killed, injured, been taken prisoner, or deserted in 27 months. Of these, perhaps 90,000 troops have been killed, while 540,000 or so have been seriously injured, taken prisoner, or deserted. 

The military equipment losses of Russia and Ukraine combined in the 27 month long war include up to 27 Russian warships (including one Russian submarine) and all of Ukraine's meager pre-war navy which it destroyed to prevent its ships from begin captured, 962 warplanes, 600 military helicopters, far more than 26,992 aerial drones and cruise missiles, 1,339 anti-aircraft systems, 24,353 multiple rocket launchers and artillery systems, 38,814 tanks and armored vehicles, and 39,942 unarmored military vehicles. 

The General Staff of Ukraine's Armed Forces posts figures on Russia's troop and equipment losses as part of its daily update on Moscow's full-scale invasion of the country, which began on February 24, 2022. 

It said Russia lost 22 armored personnel vehicles in the past day, bringing the total number to 14,913. Both Moscow and Kyiv have lost significant amounts of personnel and equipment amid a recent ramped up push by Russia in Ukraine's east to seize territory. Kyiv said this month it had stabilized the situation on the front line after the Kremlin's forces kick-started an offensive in the Kharkiv region on May 10, seizing a number of villages on Ukraine's northeastern frontier. Ukrainian President Volodymyr Zelensky has claimed that Russian losses during its Kharkiv offensive were eight times higher than Ukraine's.  

The General Staff of Ukraine's Armed Forces also said Russia lost 1,160 soldiers over the past day, bringing the total to 506,260. Moscow has also lost a total of 7,710 tanks, 13,101 artillery systems, 17,849 vehicles and fuel tanks, 815 anti-aircraft warfare systems, 2,222 cruise missiles, 357 military jets, 326 helicopters, and 27 warships in the war. . . . 

A U.S. Defense Intelligence Agency assessment leaked in April 2023 said that Ukraine had suffered 124,500 to 131,000 casualties, including 15,500 to 17,500 dead.

Russia's Defense Ministry said in its latest update on Wednesday that its military has so far destroyed 605 Ukrainian aircraft, 274 helicopters, 24,770 unmanned aerial vehicles, 524 anti-aircraft missile systems, 16,191 tanks and other armored combat vehicles, 1,322 combat vehicles of multiple launch rocket systems, 9,930 pieces of field artillery and mortars, as well as 22,093 units of special military vehicles.

Via a May 30, 2024 story in Newsweek.

Valuing military lives at a fairly standard figure used in cost-benefit analyses in civilian life, of $5 million each, and other military casualties at $100,000 each, the combined loss of life and injuries to military personnel can be valued at about $500 billion U.S. dollars.

Major warships and submarines cost perhaps $1 billion each, and lesser warships cost at least $100 million each. Warplanes cost perhaps $20 million each and military helicopters cost at least $10 million each. Anti-aircraft systems, multiple rocket launcher and artillery systems, tanks, and armored vehicles each average something on the order of $1 million each. Unarmored vehicles, aerial drones, and cruise missiles average at least $100,000 each. The replacement value of the combined equipment losses in the war appears to be in the ballpark of $100 billion U.S. dollars.

Thus, Russia and Ukraine combined have suffered about $600 billion U.S. dollars of military losses in the last 27 months of the Ukraine War.

Combined Russian and Ukrainian Military Operational Costs

Russia has spent about $530 billion on fielding military forces to conduct the Ukraine War. Ukraine has spent about $150 billion on fielding military forces to conduct the Ukraine War (basically its entire military budget of $65 billion a year since its entire military is devoted more or less exclusively to fighting this war).

Thus, Russia and Ukraine combined have spent about $680 billion U.S. dollars to field military forces to conduct the Ukraine War.

Ukraine's Civilian Losses

According to Oxfam, as of 22 February 2024 (the latest data available), 10,582 civilians have been killed in the conflict and 19,875 civilians have been wounded in the conflict. Valuing civilian deaths and serious injuries on the same basis of military deaths and serious injuries set forth above, the economic value of civilian deaths and injuries in the last 27 months of the Ukraine war can be valued at $55 billion U.S. dollars.

In addition to all of these other costs, probably at least 25 million civilians (about 40% of the population of Ukraine) have suffered psychological traumas and/or minor injuries that will require at least some medical care or psychological care during their lives as a result of the war. Even valued at a modest $1,000 per person, representing a few months of psychotherapy or some urgent care treatments, the economic cost of this psychological care and treatment for minor injuries to people not classified as civilians wounded in the war, is not less than $25 billion U.S. dollars.

One of Ukraine's universities has estimated that Ukraine has suffered about $155 billion U.S. dollars of property damage in the war. 

Ukraine's GDP has taken a roughly 30% hit (i.e. $60 billion per year) as a result of the war from a prewar starting point of about $200 billion per year. For a total hit of $150 billion over 27 months.

About 10 million people have been displaced by the Ukraine War, about a third internally, and two-thirds of whom are refugees. The cost of internal displacements is probably at least $10,000 U.S. dollars per person, and the cost of fleeing the country and living abroad is probably at least $20,000 U.S. dollars per person. On this basis, the economic cost of these displacements is on the order of $150 billion U.S. dollars.

Thus, Ukraine has suffered a total of about $535 billion U.S. dollars of civilian economic harm.

Russia's Civilian Losses

As a very crude estimate, based upon the relative proportions of civilian deaths, civilian injuries, and property damages to Russia and Ukraine, Russia may have suffered $15 billion U.S. dollars of military action caused civilian deaths, injuries, and property damage in Russia itself. 

Civilian property damage in Russian annexed parts of Ukraine dating back to 2014 (mostly parts of eastern Ukraine which it controls and a lesser amount in Crimea) is probably on the order of $100 billion.

Sanctions have cost Russia about $30 billion. Other war related harm to the Russian economy has been more or less offset by increased wartime production and rising oil and gas prices. Russia's GPP has declined about 2% of a prewar $2,240 billion U.S. dollar annual GDP, which is about $50 billion U.S. dollars. But $30 billion of this amount is double counted as Russian losses due to economic sanctions.

Thus, Russia has suffered a total of about $165 billion U.S. dollars of civilian economic harm.

Economic Harm To Countries Other Than Russia And Ukraine

European governments other than Russia and Ukraine have also felt the need spend about $100 billion U.S. dollars to strengthen their own military defenses as a result of the heightened threat to their security that the conflict has made evident over the two years sine the Ukraine War started.

Ukraine has received about $170 billion U.S. dollars of foreign aid, mostly from the U.S. and Europe, during the current Ukraine War.

In both cases, I have converted Euros to U.S. dollars at about $1.10 U.S. dollars per Euro, roughly the exchange rate, at the time of this post, between these currencies. 

It appears that while Russia has sold goods to countries that support, or at least do not oppose it, in the Ukraine War, and has been able to find some countries like North Korea and Iran, who have been willing to sell weapons to it, in fair market value transactions, that it has not received any meaningful amount of foreign aid in connection with its Ukraine War effort.

Thus, the Ukraine War has caused about $270 billion U.S. dollars of direct economic harm to countries other than Russia and Ukraine.