Ukraine fights for money, reform to survive 'forever war'

By Peter Apps

LONDON, Nov 14 (Reuters) - Ever since mid-2024, residents and Ukrainian officials have been stripping everything of value from the frontline town of Pokrovsk: library books, hospital beds, industrial equipment, everything that once supported a bustling settlement of more than 60,000 people at the heart of Ukraine’s eastern, mainly Russian-speaking Donbas region.

This week, with thick fog apparently frustrating Ukraine’s efforts to use unmanned drones to slow the advance of Russian forces, pro-Kremlin social media feeds showed what appeared to be several hundred-strong Kremlin forces entering the town, many on motorcycles and in battered trucks.

For President Volodymyr Zelenskiy's government, the likely fall of the first major Ukrainian city since nearby Bakhmut in 2023 comes at a challenging time, as winter looms and Russian missiles and drones once again target Ukraine’s energy infrastructure.

It is not all bad news for Kyiv. This year has seen Ukraine’s economy exceed its pre-invasion size despite its loss of territory and significant contraction in almost every area of the economy and industry outside the defence sector.

For now, though, with Russia advancing – albeit very slowly, and with enormous casualties – few see much prospect of a peace deal before the fourth anniversary of Vladimir Putin’s full-scale invasion comes round in February 2026. If anything, both sides seem to be attempting to prepare their citizens and economies for perhaps years more of "forever war".

Zelenskiy's government is also facing rising domestic political headwinds, including a still growing corruption crisis, an ongoing backlash over mass conscription, and - perhaps most significant of all - a massive budget shortfall of tens of billions of dollars over the next few years.

"If the war ends in a month, we will spend this money on recovery," Zelenskiy said two weeks ago as he argued that without further financial support, his nation could not endure.

"If it does not end, then we will spend it on weapons. We simply have no choice," he said.

Against that backdrop, Ukraine is hoping to retool its military to allow some of those who have spent the war so far in combat to re-enter the mainstream economy, while expanding its weapons manufacturing not only to defend itself for the duration of the conflict but to become a major player in the rearmament of Europe when the war finally ends.

Whether European governments would truly welcome that competition is another question.

With Russia’s economy, political and media establishment now firmly reoriented behind ongoing war, eastern and central European nations are very worried any ceasefire in Ukraine might simply open the door to further Russian military rebuilding as a precursor to an attack against one or more eastern NATO nations.

But European nations have also quietly shown a preference for either buying U.S. weapons to maintain relations with the Trump administration or using Ukraine weapons purchases to build their own domestic arms industries, rather than funnelling funds to Ukraine to buttress its own arms production.

That brings another frustration to Ukraine – while its armaments industry can increasingly turn out more weapons than its European counterparts, particularly when it comes to unmanned drones, Ukrainian companies are attracting considerably lower funding.

But it is still on the increase: while 2024 saw total estimated foreign investment in Ukrainian arms firms at only $40 million, estimates for this year from industry insiders run as high as $100 million. That is expected to rise significantly more in 2026, something that will be absolutely critical if Ukraine is to continue to hold ground with fewer troops.

INDUSTRIAL AND HUMAN FIGHT

Industry insiders say Ukraine now has as many as several hundred armaments firms of widely varying sizes, some with an equally broad variety of links with foreign companies.

Estimates of the total number of drones alone produced in 2025 run as high as 4 million, but some analysts say that number could be doubled with sufficient outside funds.

As Chatham House Ukraine fellow Jaroslava Barbieri put it, the unending nature of the conflict means many in Ukraine now see recruitment into military service as a "one-way ticket to the front", with commanders unwilling to release experienced personnel even after many years.

Last year, military chiefs effectively vetoed calls from Ukraine's parliament to limit military contracts to three years: until now, those conscripted and all who volunteered since the invasion have signed open-ended contracts that might last for the duration of the war.

Those are now set to be replaced by contracts for both, with new personnel expected to serve mostly for five years, including a provision that once released, soldiers cannot be drafted back into military service for at least a year, potentially longer.

Whether Ukraine’s military can truly make those numbers work is another question: so far, its efforts to fill the gap by investing much more in drones have not proved quite enough.

According to some estimates, the number of Russian forces thrown at the most recent battle for Pokrovsk has sometimes exceeded the Ukrainian defenders by as much as nine to one.

Those Russian attackers have paid a high price for their achingly slow advance: according to some Ukrainian experts, the Russian death toll in October 2025 may have been as high as 25,000 personnel, the highest monthly total since the weeks after the February 2022 invasion.

But Ukraine has also seen an increase in young men leaving the country after it amended regulations that had previously stopped young men aged 18 to 22 from crossing its borders. That appears to have seen tens of thousands leave the country, perhaps not to return – just as the Kremlin is taking steps to shore up its supply of recruits.

Earlier this month, Putin signed a decree switching Russia’s twice-yearly system of conscription to a continuous year-round process, something that may make it easier for Russia to fill its army ranks.

Technically, Russian conscripts should not be deployed outside the nation’s borders – but such rules appeared routinely breached in the early days of the invasion, while the Kremlin’s claim that four contested regions of Ukraine are now part of Russia further blurs those rules.

Separately, Russia has also begun using its part-time military reservists to protect critical national infrastructure not just along its border regions already heavily struck by Ukrainian drones and missiles but now deep inside Russia itself.

EUROPE FACES CRITICAL MOMENT

That, however, has coincided with more challenging politics within Ukraine itself.

This week saw the resignation of Ukrainian Justice Minister German Galushchenko and Energy Minister Svitlana Hrynchuk – as part of a probe into what Ukrainian anti-corruption officials say was an effort to embezzle as much as $100 million.

That scandal – which has been brewing for several months – represents perhaps the greatest single threat to Zelenskiy’s authority since the invasion, threatening to ignite pre-existing frustrations over postponed elections and perceived unfairness enforcing military recruiting.

Both of those problems may get worse if Ukraine is seen losing on the ground.

The Russian capture of Pokrovsk would deprive Ukraine of a critical logistics hub that will severely complicate the defence of the remainder of the Ukraine-held Donbas region. Putin and his top officials made clear to the U.S. earlier this autumn that they wanted the whole Donbas as part of any peace deal, something Ukraine refuses to consider.

On other fronts, though, Ukraine is making progress.

Next month will see European Union ministers meet for the first time in Lviv in western Ukraine to discuss a path to membership, something the Zelenskiy government would like to see by 2030.

But that also requires Ukraine’s economy and businesses to align themselves with EU rules, no small matter in the middle of a war – and with an ongoing risk that Hungary or potentially other member states may end up vetoing Kyiv's accession.

In another reminder of how the face of European politics may be moving against the government in Kyiv, the right-wing government of the Czech Republic this month removed the Ukrainian flag that had flown in its parliament.

However, the EU is broadly moving to increase support for Ukraine, including possibly freeing up currently frozen Russian assets for Kyiv to use, an idea that has been around since early in the war and now under serious consideration by the bloc.

On Thursday, EU finance ministers backed a European Commission proposal to help fund Ukraine with a reparations loan worth 140 billion euros ($163.27 billion) based on the immobilised Russian assets. Kyiv would repay the loan in the event that it ever extracted reparations from the Kremlin.

That might be enough to keep Ukraine’s fight going, if member states finally approve the cash. If they cannot, the coming year could be the hardest of the war so far.

($1 = 0.8575 euros)