The Ministry of Defence has confirmed that an RAF Typhoon fired countermeasures to jam a Russian air defence radar in international airspace over the Baltic Sea, marking a sharp escalation in the cat-and-mouse game between NATO and the Kremlin. The incident occurred on Tuesday when a Russian Su-35 fighter approached a British reconnaissance aircraft without warning, prompting the Typhoon escort to deploy electronic warfare systems. The move effectively blinded the Russian radar, forcing the Su-35 to break off its intercept.
This is not a game of chicken. It is a calculated test of NATO’s resolve, and the RAF passed. But the cost of these games is mounting. The Typhoon sortie came just hours after President Putin threatened retaliation against any nation providing long-range missiles to Ukraine, a threat he later backed with a show of nuclear sabre-rattling.
For the markets, this is noise. The FTSE 100 barely flinched, and gilt yields remained stable. The City is accustomed to Putin’s brinkmanship. But beneath the surface, capital flight from emerging markets accelerated, with Russian assets now trading at distressed levels. The rouble hit a 16-month low on Wednesday, despite the central bank hiking rates to 12 per cent. This is the cost of aggression: capital seeks safety, and it finds it in dollar-denominated assets.
The more pressing concern for investors is the fiscal backlash. The government’s defence budget is already stretched thin, with the Treasury facing a £20 billion black hole in public finances. Every Typhoon sortie, every missile sent to Ukraine, every sanction imposed on Moscow is a line item that must be funded by borrowing or taxation. The Bank of England may keep rates high for longer, but it cannot print confidence.
Meanwhile, inflation remains stubbornly above target, and the yield curve continues to warn of recession ahead. The 10-year gilt yield is hovering near 4.4 per cent, a level that historically spells trouble for indebted governments. The market is asking: can Britain afford to be Europe’s policeman?
The answer, for now, is yes. But not without cost. The Treasury will need to sell more gilts, and those buyers will demand higher returns. That means higher mortgage rates, lower business investment, and a weaker pound. The pound fell 0.3 per cent against the dollar on Wednesday, a small move but part of a broader trend.
Putin understands this calculus. He knows that Western economies are fragile, that voters are weary of supporting Ukraine, and that the UK’s defence commitments are a political tightrope. But he also knows that the RAF has the tools to respond. Electronic warfare is the new front line, and for now, the UK is ahead.
The real question is: for how long? The MOD’s electronic warfare capabilities are classified, but the RAF has been investing heavily in countermeasures since the 2018 Salisbury poisonings. The Typhoon’s ability to jam Russian radar is no accident; it is the result of years of intelligence and procurement. The question is whether the Treasury will continue to fund these advances when the public’s attention shifts to the next domestic crisis.
For now, the markets are watching. They see a government that is spending heavily on defence while borrowing to cover day-to-day costs. They see a central bank struggling to tame inflation. And they see a world where geopolitical risk is rising, but the fiscal space to respond is shrinking.
This is the bottom line: every pound spent on jamming Russian radar is a pound not spent on schools, hospitals, or tax cuts. The City will forgive a defence splurge if it is temporary, but if it becomes permanent, the bond markets will have their say.
Putin knows it. The Treasury knows it. And the RAF knows it. The only question is: who blinks first?
