€383 billion. This is the amount of investment the World Bank believes is required to reconstruct Ukraine over a 10-year period. Ukraine’s own government puts the post-war reconstruction bill at about €679 billion over 10 years. The European Bank for Reconstruction and Development puts the figure at €250 billion for 5 years, and the European Investment Bank even estimates an eye-watering figure of about €1 trillion is needed. The truth of the matter, however, is that no one can precisely gauge how much financial assistance will be needed by Ukraine over the coming years.

European leaders have already kick-started their efforts to support Ukraine’s economy and people over the coming decade. Three major pledging conferences in Berlin, London and Lugano have resulted in the creation of a funding and political framework for Ukraine’s reconstruction. In particular, the 2022 Lugano Declaration set out the terms for support including a need to link investments with reform, transparency, democratic participation and sustainability, among other benchmarks. 

In particular, the European Union has dedicated approximately €53 billion in humanitarian, financial and military support to Ukraine so far. Around €15 billion of this amount has come in the form of military support, including through the European Peace Facility (EPF). Additionally, the European Commission has proposed that the European Union develop a new €50 billion Ukraine Facility for the country’s recovery and reconstruction. The aim is to provide financial assistance to Kyiv until at least 2027.

Securing Ukraine’s economy is clearly a core way of achieving the country’s security. In the short term, Ukraine will need continued financial support to maintain and re-stock its military. Thus, recent reports that the EU and its Member States are looking to ensure increased and sustainable multi-year funding under the EPF is to be welcomed. If the reports are correct that the Union plans to ensure €5 billion per year in support through the EPF, this will result in consistent EU military support. Hopefully, having in place a more structured approach to support under the EPF will not mean a reluctance to move beyond the proposed new funding ceilings – it would be a shame if a multi-year EPF would restrict funding beyond the proposed €5 billion per year. As has been the case so far with the EPF, it is better to identify needs first and then adjust the financial support accordingly.

“…it would be a shame if a multi-year EPF would restrict funding beyond the proposed €5 billion per year…”

Yet, Ukraine also needs financial support to cushion the blow from inflation, which is eating into the value of the financial assistance already provided to Kyiv. Although inflation in Ukraine has come down over the past few months (in April it was 17.9% compared to 12.8% in June), it is still higher than the eurozone average of 5.5%. In this sense, support to Ukraine must be geared to economic realities on the ground, especially given that food and consumer prices will likely be adversely hit by Russia’s decision to weaponise food exports from Ukraine by terminating the Black Sea Grain Initiative. Reconstruction will need to immediately focus on the rebuilding of housing, energy infrastructure and transportation. There is a need to focus on supporting education, health and the agricultural sector too.

Any support for Ukraine must, therefore, be sizeable, effective and sustainable. It is for such reasons that some are already calling for a “Marshall Plan” for Ukraine. Others are calling for donors to learn from the post-war experiences of countries such as Afghanistan and Iraq. Some estimates have it that the United States spent $220 billion over a 10-year period in Iraq after its invasion of the country. Yet, such comparisons should be put in context. There is still instability in both of Iraq and Afghanistan and extensive funding has not dealt with structural political issues that sit at the heart of instability there. The reality is that Ukraine – like all conflict zones – is a unique experience that will require tailored responses. 

Indeed, we should not forget that Russia is likely to continue to be a threat to Ukraine and European security even after the guns have gone silent, whenever that may be. Ukraine has also received strong political signals that its destiny is within the EU and NATO, making reconstruction efforts less like other post-conflict scenarios. What is more, the line between the support needed to repel Russia and post-war reconstruction efforts is significantly blurred, not least because no one can accurately estimate when the war will end or what any post-war situation will look like in practice. 

“…Calling for a “greener and more renewable” Ukraine is convenient… but Ukraine’s needs go well beyond energy…”

There is also a risk that European leaders see Ukraine’s reconstruction needs exclusively through their own perspectives. This is why constant dialogue with the government, private sector and civil society in Ukraine is absolutely critical. Indeed, the EU has been keen to structure its longer-term support for Ukraine around areas that it is also currently engaged in. Calling for a “greener and more renewable” Ukraine is convenient messaging, and while there can be no doubt that Ukraine’s energy sector needs reform and independence from Russia, Ukraine’s needs clearly go well beyond energy. 

For example, Ukraine will need major support with de-mining large parts of the country and then there are less quantifiable needs such as how to support post-war trauma victims in the civilian population and amongst the Ukrainian armed forces. Research from other conflict zones shows how there was a higher rate of depression, anxiety, post-traumatic stress disorder and suicidality among conflict-ridden populations. Such health issues will, in turn, place even greater strain on a country’s health service. Furthermore, no amount of money can fix rule of law, transparency or corruption and so a strong popular culture and commitment to political reform is required in the country.

A major question then is how to sustainably incentivise European governments to support Ukraine over the longer-term. There are at least two incentives that are already obvious. First, to think about Ukraine’s reconstruction as an investment rather than charity. This is one of the ways to attract private capital and investment into Ukraine. Second, to view Ukraine’s reconstruction as a step towards eventual EU accession and NATO membership. European leaders have effectively opened the door to Ukraine’s entry into the EU, so having in place finances in order to aid Ukraine modernise its economy for EU accession is prudent. Investments that help reconstruct Ukraine in such a way as to ensure adherence to EU standards will be positive as far as the membership process is concerned. 

“…let us not forget that the Marshall Plan went hand-in-hand with a significant US military presence on the ground in Europe…”

However, it is advised not to lean too much into the notion of a modern day “Marshall Plan” for Ukraine. First, the original Marshall Plan was valued at about $13.3 billion (about $150 billion in today’s value), so not at the level required by Ukraine under various estimates. Second, let us not forget that the Marshall Plan went hand-in-hand with a significant US military presence on the ground in Europe. No such presence is foreseen in Ukraine. So, while the allure of the idea of a “Marshall Plan” for Ukraine will no doubt remain (there was also some enthusiasm for a Marshall Plan after the Arab Spring too), we need to be careful about making simplistic parallels between Western Europe after World War II and Ukraine today.

All of this means that the burden of ensuring defence and some level of security will fall to the Ukrainians (something Ukraine has bravely been doing for months already). The real difficulty with support for Ukraine will therefore be how to ensure investments can be successfully deployed in a relatively secure environment. To put it rather bluntly, you cannot invest in new bridges if there is a risk that Russia will blow them up. This logic also means that, should there be any form of ceasefire with Moscow, the clock will start ticking on EU and NATO membership. Without a lasting security settlement for Ukraine, whereby Russia is deterred from any future military attack on the country, post-war economic and societal reconstruction efforts will be severely undermined.

European Statecraft, 2023 – By Daniel Fiott