While the Russian invasion of Ukraine is inactive not over, it is time to discuss the post-war recovery of Ukraine’s economy and build a plan for achieving it. Overall, the Ukrainian Ministry of Economy, together with the Kyiv School of Economics, estimated that as of March 2024, both direct and indirect losses, specified as GDP decline, investment cessation and the outflow of labour, had cost Ukraine between 543 and 600 billion US dollars.
The Ukrainian recovery will take years and will be an immense undertaking for Ukrainians, as well as their partners. Kyiv is already receiving crucial economical support from its western allies and its budget is highly reliant on this aid. As of September 2024 the EU provided Ukraine with 133 billion dollars in financial, military, humanitarian and exile aid, committing up to 54 billion dollars until 2027. Additionally, the G7, in cooperation with the EU, agreed to supply about 50 billion dollars that will be serviced and paid for by future flows of revenues from Russian frozen assets.
Under average circumstances, the full amount for financing the Ukrainian reconstruction programme and another forms of compensation would gotta come from Russia. This would have appeared in the form of reparations in accordance with a treaty ending the war. However, Russia’s consent to specified an agreement seems very unlikely.
Given this, it is essential to find another sources of financing. 1 of these is the frozen abroad accounts of the Central Bank of the Russian Federation, the full amount of which reaches 300 billion US dollars. Discussion concerning the transfer of these financial resources for the rebuilding of Ukraine is ongoing among both society and elder western officials.
However, it is worth noting that the transfer of confiscated Russian state accounts is simply a hard task from a legal point of view. This is especially actual given the current deficiency of legal mechanisms for confiscating Russian assets, as well as the political risks. In particular, 3rd countries may lose trust in European and American banks and even gradually retreat their assets from specified financial institutions.
In order to minimize specified risks, it is advisable to agree on a mechanics for confiscating Russian property based on the results of consultations with both western countries and another major powers.
It is essential to reassure the global community that this process will not become a common practice. Instead, it is an ad hoc mechanics for fair punishment and a informing against violating the foundations of the global order and law.
The best case script is to receive support to confiscate frozen Russian funds from the UN General Assembly. Yet, individual talks with countries specified as China, India and Turkey, who have better relations with Russia, could partially replace the request for their open support for the confiscation of Russian assets in the West.
Given the complexity of the process, it becomes apparent that it could be rather lengthy (if at all possible). As a result, the most likely origin of funds for Ukraine’s reconstruction will be its partners.
However, even with the funds that are obtained either from partners or Russian assets, there is inactive the problem of their appropriate usage by Ukraine. In the Corruption Perceptions Index published by Transparency International, out of 180 countries and territories Ukraine is ranked as 103rd. Corruption frequently impedes reconstruction as abroad companies are frequently forced to pay officials in order to gain a licence for their operations.
Additionally, Ukraine struggles to adhere to western norms, including freedom of speech, the regulation of law, and the protection and observance of human rights. Freedom home recognized Ukraine as “partly free” with a score of 49 out of 100 in 2024 (a 1 point decrease compared to 2023). At the same time, the absolute majority of countries in the European Union are “free” with advanced scores.
Considering corruption and problems with adhering to western norms, supporting the post-war recovery of Ukraine should not be done simply by transferring funds to Ukraine’s government. Instead, it would be better to establish a kind of “Organization for the Recovery of Ukraine” that would be tasked with managing and auditing funds provided for recovery. specified an organization should include representatives of all partners of Ukraine, who will straight participate in the reconstruction of the country.
The financing of the Organization should be carried out utilizing resources provided by its members. If Russia’s assets are successfully confiscated, they should be transferred to the Organization with the consent of Ukraine.
Firstly, this will reduce the burden on the budgets of the Organization’s members. Secondly, if the Organization is created, it is absolutely crucial for it to have at its disposal financial resources intended for the rebuilding of Ukraine.
It goes without saying that any assistance to Kyiv must be provided with certain conditions, namely that it should be aimed at raising standards in the fields of human rights, the regulation of law, democracy, etc. in line with EU standards.
The optimal methods of financing the reconstruction of Ukraine are grants, method assistance, investment guarantees and loans. The proposal to usage grants as the main method of finance is mentioned in the report issued by German Marshall Fund in the US. Taking into account the current state of the Ukrainian economy, there is simply a request to supply the country with the chance to invest in reconstruction, including with its own resources, and not be burdened with the repayment of excessive loans.
Technical assistance should besides become an integral part of the plan for the reconstruction of Ukraine, taking into account available cognition and practices in the West that can be adopted by Ukrainian professionals.
Investment guarantees are in turn essential to attract abroad and home capital to the rebuilding of destroyed infrastructure and industry.
It should be noted that specified an organization should become the main driver of Ukraine’s reconstruction. However, this should not regulation out the anticipation of parallel bilateral cooperation between Ukraine and its partners. Simultaneously, specified cooperation should coincide with the goals of the Organization and not make any risks that could slow down Ukraine’s Euro-Atlantic integration.
The views expressed are the author’s and not necessarily those of fresh east Europe.
Andrii Vdovychenko is an emerging expert in global security. He is pursuing a Master’s in global safety and improvement and holds a Bachelor’s from Jagiellonian University. His investigation focuses on emerging technologies and strategical studies.
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