Beyond Ukraine’s stunning recent battlefield successes, eight months of war have rendered the country a physical, financial and economic basket case. Millions of refugees have fled, the country’s gross domestic product has shrunk by about one-third, and the government, its budget depleted by the war, runs monthly deficits of $4 billion or more — mainly financed by Western grants, a lifeline for teachers, retirees living on pensions and millions of others.
Even if Russia were to withdraw now, Ukraine would remain enfeebled for years. Before Russian President Vladimir Putin rained missiles on Ukrainian power plants and other facilities this month, the cost of repairing damage to the country’s critical infrastructure had already been estimated at nearly $200 billion, according to a study by the Kyiv School of Economics. And that is just a fraction of the overall wreckage wrought by Moscow’s indiscriminate attacks.
Rebuilding the country, among Europe’s biggest by population and area, will be a generational undertaking. “It’s not every day that you rebuild a whole country,” said Vlad Rashkovan, a former deputy governor of the Ukrainian central bank who now represents the country on the International Monetary Fund’s executive board.
One question — the $1 trillion question, in the estimate of some economists — is who will pay for it. The United States and Europe, along with international banks and development institutions, must take leading and shared roles.
For Ukraine to succeed, it must also be reformed and broadly reinvented as a viable candidate for admission into the European Union, which can wield the leverage to effect those reforms. That means the reconstruction of Ukraine will depend on more than cash and concrete, although heroic quantities of both are needed. Ultimately its fate will turn on a transformation of mind-set and governance in a nation notorious for oligarchs and endemic corruption. Even before the shooting stops, the country must launch a durable, ironclad, transparent project to transform ministries, markets, courts, businesses and institutions, raising them to Western democratic and free-market standards.
Easier said than done, of course. Prewar Ukraine aspired to join the E.U., in the sense that a C student aspires to admission to the Ivy League. Transparency International ranks it as Europe’s third-most-corrupt country, behind only Russia and Azerbaijan. When a top advocate for reform in Ukraine was asked recently how corruption was faring in the country after months of war, he responded dryly: “The good thing is, there’s no money.”
Ukrainian President Volodymyr Zelensky, rightly lionized as an inspirational wartime leader, was ineffective at best during his first three years in office in rolling back graft, the very promise that got him elected in 2019. His second prime minister, dismissed in 2020, said Mr. Zelensky fired him because the government’s own anti-corruption efforts were threatening wealthy power brokers close to the president. Hundreds of millions of dollars in government funds and foreign aid have been siphoned off in recent years by oligarchs, who have used Ukraine’s several thousand state-run companies as ATMs, with the government’s connivance.
Reforms need to start even as rebuilding and humanitarian efforts accelerate in shattered towns and cities from which Russian troops have withdrawn. They are key not only to launch Ukraine on what will be a long path toward E.U. membership — an exceptionally rigorous process — but also to signal to Western governments and multilateral institutions that their aid dollars will not be leached away by oligarchs and kleptocrats.
Ukraine has begun an impressive reconstruction planning effort — thousands of officials and multiple working groups are hammering out blueprints to rebuild housing, roads, transportation hubs, factories, communications towers, and water and sewer systems. Its own full-court press should be matched by an intensified international focus on Ukraine’s long-range needs, even as the West rushes funds, arms and materiel to help fight an existential war against Russia.
Western leaders cannot drag their feet on determining who will oversee and coordinate the hundreds of billions of dollars that will be required over time. Among the plausible candidates are the Group of Seven, the World Bank, the European Bank for Reconstruction and Development and the E.U. itself. Someone needs to be in charge, and soon. A good place to start on that question is Berlin, where an international conference on Ukraine’s reconstruction was held Tuesday.
At the same time, Ukraine should be on notice that Western aid will be heavily conditioned, and that the tsunami of grants and soft loans that officials in Kyiv hope for is likely to ramp up gradually. That will disappoint some Ukrainians. But it is realistic, given the political and economic pressures in donor countries grappling with energy inflation, nationalism and war fatigue. Pledges for Afghanistan’s reconstruction have so far fallen short of the United Nations’ target amount. The E.U.’s own promise earlier this year of 9 billion euros to close Ukraine’s monthly budget gaps has so far yielded just a fraction of that amount.
Ukrainians understandably want the rebuilding project to tap Russian assets that have been frozen by the West, including $300 billion in Russian Central Bank deposits. No question: Moscow should pay war reparations. But legal, financial and political obstacles stand in the way. Even if some Russian assets can be seized or extracted through negotiations to help Ukraine rebuild, that will likely take years.
Other moves can and should happen faster. The West is already sending large aid packages to address immediate problems beyond the battlefields. In August, the State Department announced an $89 million grant to help disable hundreds of thousands of Russian mines scattered over an area bigger than Virginia and Maryland combined.
Another critical measure is to establish an insurance fund, backed by international financial institutions, to promote private-sector investment. Without that, businesses are unlikely to be able to insure projects they are considering in Ukraine. Corporations typically move faster than international donors; they are key to building wealth in a postwar Ukraine.
Since the Soviet collapse three decades ago set Ukraine free as an independent country, its anemic institutions, deep-rooted corruption and misgovernance were promoted and exploited by Moscow. The result has been a cataclysm.
The best course now is to rearrange Europe’s security architecture by ensuring that Ukraine is reborn as a vibrant, wholly modern country — a bulwark against an eastern neighbor that might remain brutish for the foreseeable future.
The Washington Post
