Ukraine Is NATO's Shield, and Its Allies Are Turning a Profit on It

His reasoning fits in one line: Putin will never agree to it. But that explanation almost always travels with a second one, said out loud less often and believed far more widely. Ukraine, the argument goes, simply cannot afford the ticket. NATO is a club of the world's leading nations, membership costs serious money, and a country living on foreign loans does not belong at that table.

It sounds sober, which is exactly why it deserves to be checked all the way through. If this really is about money, the question is not only what the ticket costs. The question is what the ticket buys. And here the answer is surprising: economically, NATO is not a rich men's club at all. It is an umbrella. The best proof comes from the alliance's least militarized member.

Iceland has been a founding member of NATO since 1949, and it is also the only member of the alliance without a standing military. No army, no navy, no air force. Since US forces left the base at Keflavík in 2006, Iceland has met its obligations by hosting allied air policing missions. The mechanics are instructive. The Icelandic Coast Guard, which reports to the Ministry of Justice, runs 4 radar stations and a control center at Keflavík. Those radars, as NATO's Allied Air Command explains, feed the air picture into the alliance's integrated air defense system. The fighter jets come from the allies. Norwegian pilots, for instance, regularly patrol Icelandic skies for 3 to 4 weeks at a time, on NATO's behalf, because Iceland has no air force of its own.

In other words, Iceland's skies are guarded by someone else's pilots flying someone else's jets. Iceland supplies the radars, the runway and, above all, its location: an island in the middle of the North Atlantic, sitting on the route Soviet submarines once used to slip into the open ocean. Its contribution to collective defense is geography. Even after the Hague summit, where the allies pledged to spend 5% of GDP on defense by 2035, Reykjavík committed only to raising security-related spending to 1.5% of GDP. Nothing toward the 3.5% earmarked for "hard" defense, because there is no one to defend with and nothing to defend with.

This is exactly how the umbrella was supposed to work. To see why it makes sense, one has to be honest about what an army is in economic terms. An army is a black hole. In peacetime it produces nothing and consumes everything. Tanks age, ammunition expires, fuel burns on exercises, salaries go out every month. Worst of all, nobody can verify whether the money was well spent until a war starts. And once a war starts, the spending becomes impossible to verify at all. Collective defense was invented precisely to avoid pouring more into that hole than necessary. It is insurance: the risk is spread across everyone, and each member pays less than it would on its own. Pay your share, and you are spared the burden of an army you could never sustain alone. That is the real luxury of NATO membership: the right not to keep a bloated military.

Except the model does not work, for a banal reason: not everyone pays for the luxury. In 2025, for the first time, every ally except Iceland met the old 2% of GDP benchmark. It sounds like a victory until you look closer. Half the alliance, 16 countries, barely cleared the bar, and according to NATO's annual report the United States still accounts for about 60% of all allied defense spending. Italy, for example, "grew" from 1.52% to 2.01% of GDP in a single year, and nobody had time to notice those extra 50% turning into new brigades. Spain went further. As recently as 2024 it spent 1.24% of GDP on defense. Ahead of The Hague, Prime Minister Pedro Sánchez struck a deal with NATO exempting Spain from the 5% target and promised to hold at 2.1%. He then assured everyone that Spain's weight and legitimacy within the alliance remained intact.

The diagnosis, remarkably, was delivered by Marco Rubio himself. In an interview with Fox News, he said the only thing jeopardizing NATO is allies who barely have militaries, because they spent 40 years spending nothing on them. So the club has long been full of members who never paid for their ticket. Nobody throws them out.

And this is the trap the free riders fail to notice. Refusing to pay for the umbrella is, in the end, refusing to do your own country a favor. Why? Because an umbrella held up by one hand eventually comes down. Washington stands up and says: hold it yourselves. That is where the Hague 5% target came from. Its logic is no longer insurance. Its logic is that every country maintains its own army. Those who skimped on their dues are themselves pushing the alliance toward a world where each nation once again pours money into its own black hole. Spain saves 3% of GDP today. And what does security cost a country with no umbrella at all? Europe has a precise answer.

Ukraine spends UAH 2.8 trillion on defense, roughly $68 billion. That is 27.2% of GDP and almost 60% of all government spending. The budget deficit is set at 18.4% of GDP. 42.3% of all 2026 expenditures are to be covered by foreign money, and public and publicly guaranteed debt, according to the Kyiv-based Centre for Economic Strategy, is expected to exceed annual GDP and reach 106%. This is what an army without an umbrella looks like once the enemy has already arrived. Not 2%, not 3.5%, not even 5%. A quarter of everything the country produces, and most of its budget. Ukraine today is a living invoice that ought to be laid on the table in Madrid: this is what your security would cost if the umbrella were actually folded.

But the main point lies elsewhere. A Ukraine spending 27% of GDP, much of it borrowed from or granted by its allies, is more profitable for the alliance than a Ukraine inside it. The arithmetic is simple. Imagine Ukraine were admitted. Article 5, NATO's collective defense clause, kicks in, and the war with Russia becomes the alliance's war. The bill for defense passes to NATO, and it is paid not only in money but in soldiers. Now look at how things work today. The Russian army is being ground down against Ukrainians, not Poles or Lithuanians. The allies cover part of the cost with grants and part with loans. Ukraine's 2026 budget, for instance, was rewritten around €45 billion from the EU, of which €31.8 billion goes to security and defense. That money is part of a €90 billion loan for 2026-2027, and here precision matters. The EU Council wrote it down plainly: Ukraine repays only after Russia pays war reparations, and the EU budget covers the interest. In practice, it is a grant. But the rest of the debt has not gone anywhere, which is why it exceeds the country's annual output. Meanwhile, the alliance receives the experience of modern warfare practically for free. According to Euromaidan Press, Ukraine produced at least 4 million drones in 2025, while the United States makes just 100,000 combat drones a year.

So who actually pays for Europe's security? The Ukrainian taxpayer. Today in blood, tomorrow in debt that is already larger than everything the country produces in a year. It is the same logic I call the economics of losses: risk is shifted onto the taxpayer, while the gains stay with someone else. Only this time the risk has been shifted onto a foreign taxpayer, and it was done not by a government but by an entire club of states.

And the gains here are concrete enough to count. Start with Washington. After Donald Trump returned to the White House, direct American aid to Ukraine effectively stopped. In its place came a scheme called PURL, the Prioritized Ukraine Requirements List: Europeans and Canadians buy American weapons and hand them to Ukraine. The United States no longer gives; it sells. In 2025, as Bloomberg reported, Ukraine received $4.3 billion through the scheme, and Kyiv puts its 2026 needs at $15 billion. NATO Secretary General Mark Rutte expects contributions to reach at least $1 billion a month by the end of 2026. Every one of those billions is an order for the American defense industry, paid for by the European taxpayer. Tellingly, France stays out of the scheme. Paris believes European money should go to European factories, not to the United States. The allies are now openly arguing among themselves over who gets to make money on Ukraine's war.

Europe's arms makers are not losing out either. At the end of 2021, before the full-scale invasion, Germany's Rheinmetall had an order backlog of €24.5 billion. By the end of 2025 it had hit a record €63.8 billion, and among the main drivers of demand, as Yahoo Finance reports, the company itself cites the war in Ukraine. That is 2.6 times more orders in 4 years. Of course, it is not only Ukraine: Europe is rearming across the board. But the war in Ukraine is the reason for that rearmament, and Ukraine's battlefield experience is the engineers' specification sheet.

And finally, the subsoil. The minerals deal Kyiv signed with Washington in spring 2025, after months of pressure from Trump, channels 50% of revenue from new licenses for oil, gas and critical minerals into a joint US-Ukrainian fund. The fund's money is invested inside Ukraine, but the two sides will share the profits, and the Americans get preferential access to new deposits. The Trump administration sold the deal as a way for the United States to start recouping its aid. So the shield does not merely stand on the border at its own expense; it also pays for its own defense with its future mineral wealth.

Which brings us to the most interesting paradox. Everyone values Ukraine. Its experience is studied, its drones are counted, its army is called the most combat-ready in Europe. Yet nobody believes this asset is worth fighting for. Look at the "coalition of the willing." In July, British Prime Minister Keir Starmer announced that more than 25 countries were ready to deploy forces to Ukraine within days. But only after a ceasefire. Ready to guard the peace, then, but not to defend the country before peace arrives. German Chancellor Friedrich Merz specified that German troops could help monitor a truce, but from neighboring territory. And Washington signaled that its role would most likely involve air power rather than ground troops.

Why? Because what the allies value is Ukraine's function, not the country itself. Ukraine is valued the way a shield is valued. A shield is precious as long as it stands in front of you. But nobody fights for a shield; you hold it. The moment Ukraine joins NATO, it stops being a shield and becomes territory the allies must defend themselves. The asset instantly turns into a liability. And that is precisely what nobody wants.

Seen in this light, Mr. Rubio's "Putin will never agree" sounds different. It is the logic of an insurance company: you do not sell fire insurance to a house that is already burning. Iceland got its policy in 1949, when nobody was planning to attack it. The Baltic states got theirs in 2004, when Moscow was weak. Finland was admitted in 2023 despite a border with Russia stretching more than 1,300 kilometers, but Finland was not at war. So the problem is not that Ukraine has a specific enemy. The problem is that Ukraine is on fire. And at the same time it is the very firewall keeping the flames from the neighbors' houses. The neighbors do pay for that firewall. But a good share of the money flows back to their own factories, and for the rest the burning house pays with debt and with its mineral wealth.

So the honest translation of "unrealistic" from diplomatic into economic language is "unprofitable." The issue is not that Ukraine cannot buy the ticket: it already pays more than 5 times the Hague target, which most allies will reach, if at all, by 2035. The issue is that membership would turn the alliance's cheapest shield, one its allies are even making money on, into its most expensive obligation. And until that calculation changes, Ukraine will keep financing, on credit, the security of a club where Iceland is protected by geography and Spain by 2.1% of GDP and someone else's umbrella.

If you enjoyed this piece, you might also be interested in my books: The Economics of Losses, available in English and in Ukrainian, and The Russian Myth, available in English and in Ukrainian.