In Kryvyi Rih, Ukraine’s industrial heartland, the furnaces have fallen silent. The mining enterprises of international steelmaker ArcelorMittal stand idle, and other large businesses operate at a fraction of their prewar capacity. Falling tax receipts are forcing the city to cut spending. Next year, the priority will be keeping basic services functioning.

The city offers a glimpse of a larger danger facing Ukraine: a growing gap between the ability to continue the fight against the invading Russian army and sustaining the country’s economy behind the front lines. In September, Ukraine went an entire week without producing steel—the first such interruption in a century. Before the full-scale invasion, ferrous metals generated roughly $14 billion in annual export earnings. Industrial shutdowns now threaten foreign-currency income, employment, and the tax base that supports the war.

While Ukraine’s energy facilities are better protected ahead of the winter than last year, Russia has adapted and expanded its bombing campaign. The introduction of jet-powered drones allows Moscow to target fuel distribution, warehouses, data centers, and transport links. Repeated attacks on Kyiv’s bridges illustrate the logic: A bridge need not collapse to become a liability. Interrupting traffic can disrupt a city’s daily life and the movement of supplies at relatively modest cost to the attacker.

Kyiv’s own heavily publicized drone strike campaigns were designed to turn a temporary technological advantage into leverage for potential talks with Moscow. They imposed real costs on the Russian economy (for example, Moscow’s efforts to divert grain exports from the Black Sea have fallen short), but Ukraine’s ability to inflict damage does not mean it can withstand the resulting exchange.

Each industrial shutdown imposed by Russian attacks reduces Ukraine’s revenues and requires repairs and support. Ukraine’s 2027 draft budget reveals the scale of the country’s pain. It provides for a security and defense envelope of 4.89 trillion hryvnia ($104 billion at the budget’s projected exchange rate), which is 43.8 percent of projected GDP and roughly two-thirds of total budget spending.

Even this is not the military’s full estimate of what the fighting will cost. According to Deputy Finance Minister Roman Yermolychev, the Defense Ministry will need $175 billion in 2027, up from $155 billion this year.

At the same time, Russia plans to allocate 17.1 trillion rubles ($203 billion) to defense in 2027, a record amount since the full-scale invasion. Even though dollar totals are imperfect measures of military capacity, Moscow’s spending underlines the pressure on Kyiv. Ukraine must sustain its war effort against an adversary expanding its own financial commitment.

The draft budget puts Ukraine’s deficit at 1.67 trillion hryvnia, or 15 percent of GDP. The government estimates its external financing needs for budget support and military assistance in 2027 at $78.1 billion. The EU institutions now broadly agree on this requirement, which comes on top of the existing €90 billion package for 2026–2027.

However, these estimates will change as intensified Russian strikes inflict more damage. The draft assumes 1.3 percent GDP growth and an 8.7 percent increase in nominal budget revenue. But Russian attacks on factories, ports, and logistics threaten the profits, wages, and trade flows from which taxes are collected, while increasing demands for defense, repairs, and other support.

Every additional 100 billion hryvnia in lost revenue (or added spending) adds about 0.9 percentage points to the deficit ratio, even before any reduction in nominal GDP. This means the coming winter will be about preserving the productive economy as well as keeping electricity and heating functioning.

Ukraine’s parliamentary budget committee has already challenged some of the assumptions behind revenue estimates. These include receipts dependent on tax legislation that has not yet been passed and 64.9 billion hryvnia from expected improvements to customs collection. Some of the money needed to balance the draft budget therefore depends on contested legislation and administrative improvements. 

In the final analysis, Russia’s destruction is increasing the bill, while Kyiv’s spending choices and revenue assumptions make it harder to establish how much is genuinely needed—and how much Europe will ultimately be asked to provide.

The EU’s €90 billion ($101.4 billion) Ukraine Support Loan was designed to cover 2026 and 2027, with €60 billion indicatively assigned to defense procurement and €30 billion to budget assistance. Bringing payments forward will ease an immediate shortfall but reduce the resources available later. The IMF estimates the shortfall in commitments for financing the budget deficit for 2027 to be between $30 billion and $35 billion (this does not include off-budget military needs), $17 billion in 2028, and $2 billion in 2029. Thus, the EU will need to find at least €70 billion in new funding. 

Brussels aims to accelerate future payments under the Ukraine Support Loan, but that means agreeing larger payments as France approaches presidential elections and Spain, Italy, and Poland face parliamentary elections. In other words, Ukraine’s growing needs will compete with domestic spending pressures and electoral arguments over the cost of continued support. Russia’s infrastructure campaign thus threatens to widen two gaps simultaneously: between Ukraine’s military resistance and its economic capacity, and between Europe’s commitments and the resources needed to sustain them.

Kyiv’s growing financial dependence gives Brussels greater leverage to demand institutional safeguards, just as the presidential administration’s confrontation with anti-corruption agencies makes those safeguards more politically threatening. Around €20 billion in EU funding this year is tied to the implementation of reforms, including anti-corruption measures and revenue-raising legislation. Kyiv is thus being asked to strengthen oversight and collect more taxes while Russian attacks erode businesses’ capacity to generate income.

The paradox is that greater financial need may deepen institutional conflict. Securing funds for resistance requires reforms that would constrain presidential control and empower anti-corruption agencies Zelensky’s team regards as unwelcome checks on wartime presidential powers. The adoption of certain requirements, like the abolition of the VAT exemption for low-value imported parcels, are unpopular with the Ukrainian public and may fuel tensions within the already fragile parliamentary majority. As a result, measures intended to sustain the state could destabilize the political arrangements through which it is governed.

Brussels faces a corresponding dilemma: Relaxing conditions may undermine institutions it has spent years supporting, while withholding payments could deepen Ukraine’s economic crisis. Negotiations over fresh funding will bring this tension into European electoral politics, where the cost of support will sharpen demands for accountability. As Ukraine’s economic foundations are undermined, the conditions attached to external financing become more consequential for the balance of power in Kyiv.

The approaching winter will be a reality check for both Ukraine and Europe. Ukraine may well hold the front while losing its economic capacity. Preventing that outcome will require fresh European funding and political reforms that Zelensky may regard as a threat to his political dominance. At stake is the preservation of a functioning Ukrainian state.