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Important people gather at the Ukraine Recovery Conference in Lugano, Switzerland.
What will it take to rebuild Ukraine?
How does one calculate the cost of war? Is it the number of lives lost? Homes flattened? Industries decimated or dreams dashed?
It is hard to put a monetary value on such devastation, but Ukraine’s Prime Minister Denys Shmyhal is having a go at it.
At a European conference this week in the picture-perfect Swiss city of Lugano, Shmyhal said his country would need a staggering $750 billion to rebuild after the Russian onslaught.
Crucially, the summit was not a pledging event but focused on setting the parameters for what rebuilding Ukraine might require in the months and years ahead.
What do the Ukrainians want? In short, they want to go big. Shmyhal says Russia has caused more than $100 billion of damages in infrastructure – well short of the 750 figure – but that there’s other stuff the Ukrainians need to get done: “[The rebuilding] is not just to restore glass and concrete but to build a new country,” he said. Delivering a TED-style speech clad in a tight black tee, Ukraine’s deputy PM Mykhailo Fedorov took to the stage in Lugano and said part of the rebuilding effort would focus on unleashing Ukraine’s entrepreneurial spirit and turning it into a mecca for tech investment.
Still, Kyiv’s strategy here is long-term, says Zach Witlin, a senior analyst at Eurasia Group.
“Based on what Ukraine presented [in Lugano], Kyiv is thinking of reconstruction as a multiphase effort. In the first two phases, they hope to restore basic utilities and logistics, and then facilities and services, respectively,” he explains.
Witlin says “there seems to be widespread recognition that the humanitarian needs and security situation are dominating short-term reconstruction needs.”
European Ukraine fatigue sets in. Though they’d scarcely admit it, many European heads of state are likely pleased much of the regional conversation has shifted from focusing on arming Ukraine to rebuilding it.
As the European economy continues to reel from acute oil and gas shortages and a cost-of-living crisis – with the Euro falling to a 20-year low against the US dollar on Tuesday – the threshold for pain in many European countries may be waning. (The European Union is not a monolith, and anti-Russia hawks like Poland and the Baltic states want to inflict maximum pain on the Kremlin and bolster Ukraine, whatever the cost.)
Indeed, politicians will play politics … and seasoned statesmen like German Chancellor Olaf Scholz and French President Emmanuel Macron say they will continue to back Ukraine’s war effort. Period. But it’s also clear these leaders have developed sympathies for the war-weary contingencies within their respective electorates.
And there’s certainly reason for Ukrainians to worry. Eurasia Group Vice Chairman Gerry Butts recently told GZERO that “the Germans are going to be sorely tested by the energy situation this winter” and that it’s hard to guess how Germany will respond until “the Russians cut off the gas in the dead of winter.” At that point, Butts says, many Germans may be asking themselves: “‘Why do we care so much about the Ukrainians when we can’t heat our homes?’”
So what are the Europeans offering? The European Union has said it'll cough up around $100 billion to aid Ukraine’s rebuilding effort. In a comparable scheme to its COVID recovery response, Brussels will use the European Investment Bank, its lending arm – along with other Western development banks – as a guarantor to encourage investment in post-war Ukraine. The baseline, roughly $20 billion, would come from EU states and the EU budget in the form of loans and grants.
The Americans, for their part, have doled out more than $7 billion in financial aid over the past five months.
European leverage. After recently backing Ukraine's bid to become an EU member candidate, Brussels has a lot of sway over Kyiv, which has long been vying to join the bloc. Now, the EU has indicated that reconstruction aid and investment could partly be conditioned on Ukraine meeting some key political and economic reforms needed to join the 27-member Union.
Indeed, from Brussels’ perspective that’s fair game: Before the war, democratic institutions in Ukraine were in shambles and the country ranked 122 out of 180 on the Corruption Perception Index. How can it encourage investment without a demonstrated commitment to reform?
Ukraine, while not opposed to implementing reforms required to join the bloc at some stage, thinks it should have earned the bloc’s respect and good faith for holding the line against Russia in recent months: “[Rebuilding] is a common task of the whole democratic world,” President Volodymyr Zelensky said this week at the conference via video, adding that “reconstruction of Ukraine is the biggest contribution to the support of global peace.” (Many people, however, disagree with Zelensky’s premise that the war in Ukraine is indeed a fight for democracy itself.)
The Russia of it all. Importantly, it is extremely unlikely anyone will give Ukraine a stash of money to rebuild if the war continues to rage on. Who is going to pay to rebuild roads or hospitals that could once again be obliterated by Russian fire?
To start the rebuilding effort, will Kyiv have to begin talking about a negotiated settlement with the Russians in the Donbas region, much of which is already under Russian control?
Witlin thinks this is unlikely and that the EU won't pressure Kyiv to come to the settlement table. “Ukraine simply is not ready to give up. Public support for the war effort is still high, while support for ceding territory as part of any settlement is very low,” he says.
What’s more, Witlin adds, “at this point, Ukraine would view a cease-fire as an opportunity for Russia to regroup. That is not a risk they are ready to take,” and there’s little indication Brussels or Washington would force them to do so.
For now, reconstruction talks will linger alongside the brutal war in Ukraine, now five months in and showing no signs of abating.