By Nina Bachkatov
As the war prolongs far beyond initial expectations, Ukraine’s reconstruction has become a prominent topic on the agendas of international meetings and summits. The Berlin Conference on Ukraine, held on June 11-12, was noteworthy not only because it coincided with a G7 meeting and an EU summit that confirmed Ukraine’s readiness to begin accession negotiations. The conference saw participation from a diverse array of stakeholders, including governments, international organisations, financial institutions, businesses, regions, municipalities, think tanks, and NGOs, all agreeing to collaborate towards the reconstruction of a free, democratic, and economically vibrant Ukraine. This marks a significant shift from the focus on military assistance, humanitarian aid, and political support against Russia that has dominated discussions since 2022.
The renaming of the “Ukraine Reform Conference” to the “Conference on Ukraine Recovery” for its fifth edition in 2024 is not merely a communication gimmick. With peace still a distant prospect and another winter of war looming, conference participants acknowledged that reconstruction must proceed despite ongoing military actions. This holistic approach to “reconstruction” aims to bolster the morale of Ukrainians, sustain their resilience, and ensure transparency and traceability, which is crucial not only for Ukrainians but also for Western supporters concerned about the proper use of their contributions.
Reconstruction has been wielded as a diplomatic tool for over a year, with Ukraine seeking to garner support against Russia and sanctions by promising involvement in the rebuilding process, even extending offers to the “Global South.” However, this strategy did not yield the anticipated support against Russia and often overlooked the unique relationships between those countries and Russia. For example, on March 31, Foreign Minister Kuleba visited India, urging a reconsideration of its “Soviet-era ties” with Moscow amid India’s protests against sanctions on Russian diamonds, which are predominantly polished in India. Nevertheless, Ukraine maintains that “after the war, Ukraine will probably become the largest construction site in the world.”
Multi-tasked
Reconstruction encompasses much more than rebuilding infrastructure, economic bases, and housing. The estimated costs are enormous and continue to rise as the war drags on. In March, UN agencies estimated the cost of infrastructure damage at 383 billion euros, twice Ukraine’s GDP for 2022, with some estimates exceeding 500 billion euros. The task will span years, if not decades, and requires more than financial resources and timelines—it necessitates a clear vision and model.
Ukrainian leaders are mindful of the risk that their citizens, weary from years of suffering, may resist having their destroyed country turned into a playground for social experimentation by outsiders. Rebuilding entire cities with the latest technical and environmental standards is a rare opportunity. Although President Zelensky and some ministers have voiced aspirations of turning Ukraine into a model of EU Green standards, there are grandiose plans from international developers and architects to build new cities from scratch. Ukrainian leaders emphasise that residents are best positioned to determine their needs. What may appear as kitsch Soviet and post-Soviet buildings to outsiders are familiar environments that have fostered social relations and emotional security for Ukrainians. The challenge of maintaining cultural identity is even more pronounced when reconstructing entire villages and rural landscapes.
Ownership
In these challenging wartime conditions, reconstruction hinges on implementing reforms long delayed due to their political sensitivity. Addressing corruption, a chronic issue flagged by the EU, US, and lately NATO, is crucial for establishing clear rules on ownership and the rule of law, essential for attracting investment and securing international support. Kyiv must balance the demands of donors with the competition among Ukrainian and foreign investors, both private and public. Many Ukrainian businesses have financially supported the war effort and expect fair returns on their investments. Sectors such as energy, agriculture, and defense industries, including high-tech, are poised for competition, not simply aiming to eliminate Russian influence.
Legal ownership of businesses and financial institutions nationalised, or confiscated from Russian owners or Ukrainians accused of aiding the enemy is another concern. Additionally, many companies, small enterprises, and farms have gone bankrupt due to the war, leaving unresolved the issue of compensation and ownership. The same can be said of reclaiming properties in the eastern territories that seceded in 2014.
Budget reconstruction
Ukraine’s budgetary situation, precarious even before Zelensky’s election, has worsened. The war’s costs extend beyond military operations, stripping Kyiv of export revenues, taxes, and other traditional income sources. The debt has become an international concern, with Ukraine’s finance ministry spending more on debt servicing than on weapons. In August, a two-year moratorium on payments of a $20 billion debt is set to expire. Zelensky is urging investors to accept a haircut, hoping political pressure will influence private lenders. Debt restructuring is vital for securing an IMF bailout and restoring private funding for reconstruction. Kyiv aims to avoid alternatives like accumulating massive interest or defaulting, which would be unpalatable for its allies.
Meanwhile, the State Property Fund announced plans to auction around 20 state-owned companies starting this summer, aligning with EU and other international demands. However, there are already complaints about the starting prices, set at around $100 million, highlighting the need for transparency, rule of law, and clear ownership.