Ukraine's allies confront a massive reconstruction task
October 30, 2022
It isn't easy to estimate the cost of rebuilding post-war Ukraine. Denys Shmyhal, Ukraine's prime minister, said in July it would cost $750 billion. The World Bank and European Commission lowered that figure to $349 billion in September. With the war still raging and no end in sight, neither estimate is all that reliable.
Russia's invasion has destroyed many as 130,000 buildings, 2,400 schools, and 400 commercial properties, according to Ukraine's economy ministry. Then there is road and rail infrastructure to take into account. Russian forces have also been targeting gas and water utilities more specifically in the last few weeks.
'Marshall Plan' for Ukraine
All of that comes to one-third of Ukraine's infrastructure, Ukrainian President Volodymyr Zelenskyy said via video link at a two-day conference in Berlin earlier this week. Germany, which currently chairs the G7, a collection of the world's richest democracies, hosted the event, which also included the European Commission and German business groups.
Chancellor Olaf Scholz defined the gathering not as a donor conference but rather as an opportunity to "create an institutional framework that's necessary to rebuild Ukraine."
Scholz and European Commission President Ursula von der Leyen framed Ukraine's reconstruction in thecontext of the legendary American Marshall Plan, which was a massive financing program in the years immediately following the Second World War to rebuild western Europe, solidify American strategic interests, and hold back Soviet influence.
It is also a boon for the European Union, Scholz noted, given Ukraine's recent application to join the bloc. Reconstruction would therefore ensure that Ukraine, as a future member, would have compatible and interoperable logistics, transport, and infrastructure with the rest of the single market.
Wartime present vs. peaceful future
Of course, these goals are still a long way away. Economic output is down 30%, Ukraine's Economy Minister, Yulia Svyrydenko, told the conference via video from Kyiv. Inflation is at 26% and one-third of the country is out of work.
Still, production in Ukraine is ongoing, even if curtailed. Despite air-raid warnings and other war-related interruptions, Michael Kraus' materials company is one of many that keeps operating its facilities in western Ukraine. More recent Russian attacks on infrastructure have made the German company's management "once again very pensive," he said.
"When drones and grenades go off near the factory it is a dramatic escalation," Kraus said.
The Ukrainian government needs at least $3 billion every month to keep covering costs like pensions, according to international estimates. Even with a recent decision to sell hundreds of publicly owned companies, Ukraine has trouble making ends meet. The country faces a deficit of around $38 billion.
The EU is sending $1.5 billion every month, von der Leyen said, with the expectation that the US and International Monetary Fund lend a similar hand. In all, western countries have spent about $93 billion so far on Ukraine, with no end to the war in sight.
Aside from the war, one of the biggest obstacles to deeper western economic cooperation remains corruption and lack of transparency in Ukraine. Ukrainian officials say assuaging their partners' concerns about how money gets spent and resources used is a top priority.
Weeding out corruption, and aligning its practices and oversight capabilities with western expectations, are an integral part of Ukraine's EU membership hopes. At the Berlin conference, Ukraine's leadership said they are undertaking that task, even as Russian bombs keep falling on their cities.
This article was originally written in German.
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