On Wednesday, politicians and business leaders will convene 1,500 miles away from the front line in Ukraine to address a matter that holds equal importance to the battles fought on the ground. The Ukraine Recovery Conference in London, which spans two days, aims to convey clear messages: there will be a credible plan for rebuilding Ukraine post-war, the necessary funds will be provided, and the country will gradually become a safer place for investment.
The World Bank has estimated that the cost of Ukraine’s recovery and reconstruction after the first year of Russia’s war amounts to $411 billion, which is twice Ukraine’s prewar gross domestic product. This estimate was made prior to Kyiv’s counter-offensive and the destructive destruction of the Kakhovka dam. With Russia continuing to target infrastructure and adopt a “scorched earth” strategy upon retreating, the final costs may exceed $1 trillion.
While international public-sector financing will serve as the foundation for the reconstruction effort, the private sector will play a crucial role in both carrying out the work and providing funding. Mobilizing private investment of this magnitude is unprecedented. To secure the necessary funding, there are several steps that must be taken to instill confidence in an investable post-conflict Ukraine.
The first step is to clearly establish which donor countries, agencies, international financial institutions, and development bodies will be responsible for specific aspects of the reconstruction effort and where the public funding will come from. The G7 has already established a Multi-agency Donor Coordination Platform, but an institutional framework is needed to ensure that Ukrainian ownership is maintained in the selection and management of projects while also providing transparency and assurance to donors about the proper use of funds.
The second priority is to provide war risk insurance that covers losses for foreign and Ukrainian investors, which falls outside the scope of commercial insurance. This type of insurance, potentially facilitated by international financial institutions and export credit agencies, could facilitate the deployment of foreign resources even before the war ends. The estimated rebuilding needs for this year alone amount to $14 billion.
Furthermore, guarantees are needed to ensure that reforms continue to enhance Ukraine’s institutional capacity to absorb and utilize such large sums of money while addressing long-standing issues of corruption. These guarantees should be tied to Ukraine’s aspirations to join the European Union, as the EU has made Ukraine a membership candidate but set seven conditions, including reforms in the judicial system and anti-corruption measures, before formal accession talks can begin.
The EU is also working on restructuring its accession process to provide countries with increasingly deeper integration as they progress through successive stages of negotiations. This process should move at a faster pace than it did after the conflicts in the former Yugoslavia, where reconstruction efforts were more ad hoc. Closer ties with the EU played a vital role in stabilizing the region.
Lastly, security guarantees or commitments to equip Ukraine with the means to deter future Russian aggression should be discussed at the upcoming NATO summit in Vilnius. Without assurances of security, even with war insurance, private businesses will hesitate to launch significant projects if Ukraine remains in a state of “frozen” conflict where Russia could renew its attacks. Currently, the US is hesitant to provide such guarantees, but the arms and funds being provided by Western allies to help Ukraine win the war would be in vain if they allow Ukraine to lose the peace.
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