Comparing countries' defense budgets is a serious mistake! That's why…

When we talk about defense, two phrases systematically come up in debates. The first is obviously the Latin phrase from the end of the 4th century “Si vis Pacem, Para Bellum”, inspired by Vegetius, who says that to ensure peace, one must be ready for war.

The second is a French proverb, cited by Raymond Aron in 1962 in Peace and War Between Nations, “Money is the sinews of war”, according to which the effectiveness of armies in combat depends on the sums invested.

Taken end to end, these two sentences suggest that the investment capacities granted by States, in particular ahead of wars, condition the balance of power, therefore the effectiveness of deterrence postures, and with them, the preservation of the peace.

It is therefore tempting to compare defense budgets between countries, or even between alliances, to ensure the dissuasive nature of defense tools, and by extension, to get an idea of ​​the military balance of power.

Many were quick to draw conclusions from the publication of the new SIPRI annual report, studying precisely the defense investments of all nations, as well as their respective developments. However, is defense investment an effective indicator in this area, to compare military capabilities between countries, and therefore deduce a present and future balance of power? This is far from obvious...

The SIPRI annual report is published, with, as always, its cohort of comments

« With a defense budget of $109 billion in 2023, Russia barely exceeds Ukraine's budget of $100 million, including $35 billion in American and European military aid, and without comparison with the $1 billion of NATO budget. Russia is therefore not a threat to the West.« 

Russian defense budgets
The Russian and Ukrainian defense budgets are very similar, yet they represent radically different realities.

This analysis, which seems reasonable at first glance, has reappeared in recent days, on social networks, but also in the words of journalists and certain political figures, in France, and throughout Europe, following the publication of the dlatest SIPRI report, a few days ago. The same goes for the Chinese threat, although with $290 billion, Beijing invests three times less than the United States in this area.

Each year, in fact, many such analyzes are published shortly after the Stockholm International Peace Research Institute, or SIPRI, publishes its annual report on global military spending.

Indeed, whether for political, media or commercial purposes, the temptation is great to use these elements, especially when they seem to move towards the desired demonstration, while adorning themselves with an apparent cloak of coherence. However, they are highly questionable, not to say fallacious.

Comparing defense budgets is not effective when it comes to deducing a balance of power

It is true that by the way in which the SIPRI presents its report, moreover by summarizing the presentation of the defense budgets of the States, with an overall conversion into American dollars, easily encourages this type of comparison, however particularly ineffective, and even often completely inaccurate. This type of comparison assumes, in fact, that defense investment represents a strict indicator of the military balance of power between states.

Destroyer Type 052 DL
China does not communicate on the prices at which it purchases defense equipment for its armies; However, on the export market, the Chinese ships offered are frequently 30 to 50% cheaper than their Western counterparts.

In other words, for these comparisons to make sense, it is necessary to first accept that a dollar invested in the American armies, or that a dollar converted into a ruble in Russia, into a Euro in France, or into a Yuan in China, have exactly the same resulting effectiveness in terms of military power.

We understand, thus posed, all the ineffectiveness of the approach. For many decades, macroeconomic tools have existed to compare these absolute values ​​that would otherwise be incomparable, such as Purchasing Power Parity regarding GDP. This makes it possible to compare national macroeconomic values ​​in an international context, through a correction coefficient.

Thus, for the year 2017, Russia's nominal GDP stood at $1 billion, while its PPP GDP exceeded $574 billion, i.e. a correction coefficient of 4. For China, the GDP of $000 billion was brought to $2,5 billion in PPP, exceeding that of the United States by $12 billion in 300, with a correction coefficient of 24.

In addition, very often, the scope of comparison between the budgets taken into account by SIPRI are very different from one country to another. For example, several countries have always integrated gendarmerie-type police forces or coast guard functions into the army budget, while for others, these functions fall under other budgets and are not therefore not integrated.

Finally, the conversion into a single reference currency, with a single date of writing as the reference exchange value, can lead to numerous errors of interpretation.

The calculation of an essential correction coefficient to derive relative information from defense budgets in absolute values.

The illuminating example of North Korea

An example is generally much more effective than lengthy theoretical developments. And North Korea represents the ideal example, to demonstrate the absolute ineffectiveness of the comparison by defense spending.

North Korea armies
Despite a defense budget lower than that of Estonia, North Korea fields an army of 1,3 million men, as many as the total population of Estonia, armed with vatnage of tanks and artillery systems , than all European countries have them, while possessing around fifty nuclear warheads.

In 2017, the country had a GDP of $15,7 billion, and a defense budget of $0,96 billion. Even applying purchasing power parity, the resulting GDP amounts to $47 billion, and the budget of the North Korean armies, to $3 billion. South Korea, for its part, spent $43 billion this year, and even $45 billion in PPP, or 15 times more than its northern neighbor.

However, Pyongyang is rightly seen as a major and deadly threat by South Korea. Not only does the country have nuclear weapons, but it has a conventional armed force, certainly mostly obsolete, but considerable, with 1,3 million men in active service, more than 5 tanks and more than 000 artillery systems.

We also need 28 American soldiers permanently deployed in South Korea, which also cost the Pentagon much more than $500 billion per year, to keep North Korea and its nuclear weapons in check, and thus ensure maintaining peace on the Korean peninsula.

Although identical in absolute value and Purchasing Power Parity, the defense budgets of Ukraine and Russia are very different.

We see that neither the comparison of budgets in absolute value, nor in value corrected for purchasing power parity, seems suitable for transforming defense investment into a value allowing military powers to be compared, and therefore to determine a synthetic balance of power.

Worse still, depending on the country's industrial defense production, or its dependence on imports, and the origin of these imports, the calculation of a possible correction coefficient varies considerably.

Me Bradley in Ukraine
Western equipment delivered to Ukraine makes it impossible to design a correction coefficient for defense budgets to account for the balance of power with Russia.

Thus, if Russia and Ukraine have a similar budget, expressed in USD in 2023, and if the PPP correction for the two countries is similar, around 2,5, the conversion of this investment into military power is nevertheless different . Indeed, Kyiv buys its equipment, new or used, in the United States or Europe, where Russia produces most of its own.

So a Leopard 2A6 transferred by Germany or Portugal to the Ukrainian armies, is calculated at a cost of around $10 million. According to several internal references, the Russian Army is purchasing its T-90M, the most advanced version of the T-90, and the most efficient tank in the country's armored arsenal, 318 mR, or $3,5 million. , when converted to USD.

The same goes for artillery systems, anti-aircraft systems, missiles, and even ammunition, with ratios often exceeding 5. Thus, a 152 mm shell produced in Russia is purchased for around 55 rubles, or $000, while a 600 mm shell produced in Europe or the United States, most often costs, for equal or close performance, from $155 to $4, depending on the suppliers.

In fact, while these countries have an identical budget expressed in PPP, Russia buys and maintains its equipment 3 to 6 times cheaper than Ukraine, at least, with regard to equipment imported or delivered by the Western allies.

Conclusion: the budgetary indicator is ineffective in terms of the balance of military power

This same over-correction to the PPP applies in the comparison between Russian and Chinese budgets, and Western budgets, with extremely different corrections depending on whether you are American or French, very little exposed to imports of defense equipment, British, German or Italian, exposed between 30 and 50% to imports, or Estonian, importing almost all of its equipment, from suppliers who are themselves different, and exposed to different corrections.

The army budget is strategic
The army budget is obviously a major factor in the design of a country's defense effort. However, comparing these budgets between countries, to make it an indicator of the balance of power, is totally fallacious.

Let us not forget that, in addition, personnel expenditure, and many infrastructure and army service expenditures, must however be expressed in corrected PPP.

We easily understand, in these conditions, to what extent comparing defense budgets between states, to deduce something other than the difference in investments, and nothing else, is highly ineffective, and even completely counterproductive. We can, in this respect, question the relevance of the presentation made by SIPRI each year on this subject, which invites this type of comparison, however inaccurate.

Article from April 23 in full version until May 23

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