Russia Can Sustain War in Ukraine Through 2027, NATO Believes

NATO assesses Russia can sustain its current military operations in Ukraine through at least 2027, despite its military-industrial base operating at full capacity. However, recent amendments to Russia's 2025 federal budget reveal significant fiscal strain, including a nearly 25% downward revision in projected oil and gas revenues and a tripling of the budget deficit forecast to 3.8 trillion rubles ($49.4 billion). The National Wealth Fund (NWF), which has shrunk by two-thirds since 2022 to 2.8 trillion rubles ($36.4 billion) in liquid assets, is being drawn upon to cover these shortfalls, with economists warning the fund could be exhausted by 2026, posing a critical long-term financing challenge for the conflict.

Analysis

A significant divergence exists between NATO's strategic assessment of the Ukraine conflict and Russia's deteriorating fiscal reality. NATO projects that Russia can sustain its current war footing through at least 2027, yet this outlook is challenged by severe domestic economic pressures. Amendments to Russia's 2025 federal budget reveal a nearly 25% downward revision in projected oil and gas revenues, to 8.3 trillion rubles, and a tripling of the anticipated budget deficit to 3.8 trillion rubles. This fiscal gap is being plugged by the National Wealth Fund (NWF), which has seen its liquid assets shrink to 2.8 trillion rubles after its total size contracted by two-thirds since 2022. Economists warn the NWF could be fully depleted by 2026, a forecast that directly contradicts NATO's longer-term military assessment and aligns more closely with the ISW's prediction of a 12-16 month window before constraints bite. Furthermore, the assessment that Russia's military-industrial base is operating at maximum capacity suggests that while the current operational tempo is sustainable for now, a significant escalation in weapons production is likely unfeasible, imposing a ceiling on its military capabilities.

Key Decisions for Investors

• Given the tripling budget deficit and the rapid depletion of the National Wealth Fund, which could be exhausted by 2026, any remaining exposure to Russian sovereign or corporate assets faces extreme and escalating risk.
• Investors should monitor the balance of Russia's National Wealth Fund and the price of Urals crude as primary indicators of the state's fiscal health, as a forced change in spending could abruptly alter the conflict's trajectory and impact global commodity markets.
• The geopolitical assessment of a multi-year conflict supports a continued overweight allocation to the aerospace and defense sectors in NATO countries, which are likely to benefit from sustained military spending and replenishment of stockpiles.
• Consider the high degree of uncertainty created by the conflicting timelines; a Russian fiscal crisis could occur well before NATO's 2027 military projection, creating tail risk and potential for unpredictable market shocks.