Ukraine's fight for money and reform is necessary to survive the 'forever-war'

Since mid-2024, residents of Pokrovsk and Ukrainian officials have stripped the town of everything valuable: library books, beds for hospitals, industrial equipment - everything that once supported the bustling settlement with more than 60,000 inhabitants in the eastern Donbas region of Ukraine, which is mainly Russian speaking.

Pro-Kremlin feeds on social media showed that several hundred Kremlin troops were entering the town this week. Many of them appeared to be riding motorcycles or in battered trucks.

The likely fall of Bakhmut, the first major Ukrainian town since 2023, comes at a difficult time for President Volodymyr Zelenskiy's administration. Winter is approaching and Russian drones and missiles are once again targeting Ukraine's energy infrastructure.

Not all the news is bad for Kyiv. Ukraine's economy has grown this year despite the loss of territory, and a significant contraction of almost all industries and sectors outside of defence.

Now, however, few are optimistic about a possible peace agreement before the fourth anniversary in 2026 of Vladimir Putin's invasion. Both sides appear to be trying to prepare their economies and citizens for years of "forever warfare".

Zelenskiy’s government faces rising political headwinds at home, including an ever-growing corruption crisis, a backlash against mass conscription and, perhaps most importantly, a massive budget deficit of tens or hundreds of millions of dollars in the coming years.

Zelenskiy, who argued two weeks ago that his country could not survive without additional financial support, said: "If the conflict ends in a week, we will use this money to recover."

If it doesn't end, we will spend the money on weapons. "We have no other choice," he stated.

In this context, Ukraine hopes to retool their military so that those who spent the war in combat can return to the mainstream economy. They also hope to expand its weapons manufacturing, not only for its own defense but to be a major player when the war ends.

It is not clear whether European governments would welcome this competition.

As Russia's media, economic, and political establishments are now focused on the ongoing conflict, nations in eastern and central Europe are concerned that any ceasefire could simply be a prelude to further Russian military reconstruction as a preparation for an attack against one of more east NATO nations.

The European nations also have quietly expressed a preference to either buy U.S. arms to maintain their relations with the Trump Administration or to use Ukraine arms purchases to build up their own domestic arm industries rather than sending funds to Ukraine for its own weapons production.

Ukraine is also frustrated by the fact that its armaments sector can produce more weapons than European companies, especially when it comes unmanned drones. However, Ukrainian companies receive much less funding.

It is on the rise: While estimates from industry insiders for this year are as high as 100 million dollars, 2024 was a year when foreign investment into Ukrainian arms companies was only $40 million. This is expected to increase significantly in 2026. It is absolutely crucial if Ukraine wants to maintain its position with fewer soldiers.

Industrial and Human Fight

Insiders in the industry say that Ukraine has several hundred armaments companies of varying sizes and some of which have a wide variety of links to foreign companies.

Analysts estimate that the number of drones produced alone in 2025 could reach 4 million. However, they say this number could double with enough outside funding.

Jaroslava Barbieri, a fellow at Chatham House Ukraine, said that the interminable nature of the conflict has led many Ukrainians to see military service as "a one-way ticket to front", and commanders are unwilling to release veterans even after years.

Since the invasion, all conscripts and volunteers have signed contracts with an open-ended duration that could last the entire war.

These contracts will be replaced with both. New personnel are expected to serve for a minimum of five years.

It is not clear whether Ukraine's military will be able to make these numbers work. So far, the efforts made by Ukraine to close this gap have been insufficient.

Some estimates suggest that the Russian forces involved in the recent battle of Pokrovsk have outnumbered the Ukrainian defenders as much as 9 to 1.

The Russians paid a heavy price for their painfully slow advance. According to some Ukrainian specialists, the Russian death count in October 2025 could have reached 25,000, which would have been the highest total monthly since the weeks following the February 2022 invasion.

Ukraine also saw an increase in the number of young men who left after they amended its regulations which had previously prevented young men between 18 and 22 years old from crossing their borders. This has led to tens and thousands of young men leaving the country.

Putin's decree, signed earlier this month, changed the Russian system of conscription from a twice-yearly to an ongoing year-round process. This could make it easier for Russia fill its army ranks.

Technically, Russian conscripts shouldn't be deployed outside of their nation's borders. However, such rules were routinely broken in the early stages of the invasion. The Kremlin also claims that four contested areas of Ukraine now belong to Russia, further blurring the rules.

Separately, Russia is also using its part-time armed reservists in order to protect its critical national infrastructure. This includes not only the border regions that have been heavily hit by Ukrainian missiles and drones but even deep within Russia.

EUROPE FACES CRITICAL MOMENT

This has been accompanied by a more challenging political climate in Ukraine.

German Galushchenko, the Ukrainian Justice Minister and Svitlana Svitlana-Hrynchuk, the Ukrainian Energy Minister resigned this week as part of an investigation into what Ukrainian officials charged was a scheme to steal up to $100 million.

This scandal, which has been simmering for months, is perhaps the biggest threat to Zelenskiy’s authority since his invasion. It threatens to ignite existing frustrations about postponed election and perceived unfairness in the recruitment of military personnel.

These problems could get worse if Ukraine loses on the ground.

Pokrovsk's capture by Russia would deny Ukraine a vital logistical hub, which will make it difficult to defend the rest of the Ukraine-held Donbas. Putin and his top officials told the U.S. in the fall of this year that they wanted to include the entire Donbas region in any peace agreement, which Ukraine refused to do.

Ukraine, however, is progressing on other fronts.

The first meeting of European Union Ministers will take place in Lviv, western Ukraine next month to discuss the path towards membership. This is something that the Zelenskiy Government would like to achieve by 2030.

It is also important that Ukraine's businesses and economy align with EU regulations. This is no small task in the middle a war, and there's a risk that Hungary and other EU member states could end up vetoing Kyiv’s membership.

The right-wing government in the Czech Republic removed the Ukrainian flag from its parliament this month, a further reminder of how European politics could be shifting against the Kyiv government.

The EU has been considering this idea since the beginning of the war, and is now seriously considering it.

The EU Finance Ministers approved a proposal by the European Commission to fund Ukraine through a reparations credit worth 140 billion euro ($163,27 billion), based on immobilised Russian assets. Kyiv will repay the loan if it is able to extract reparations from Kremlin.

If the member states approve this cash, it could be enough to keep Ukraine fighting. The next year may be the most difficult of the war to date if they do not approve the cash. ($1 = 0.8575 euro) (Editing Gareth Jones).

(source: Reuters)