The Russian invasion of Ukraine is now in its second unending month ahead of what is already widely recognized as Europe’s biggest conflict since World War II. Nevertheless, it is important that the European Union already begins to prepare for its role as the main institutional support for Ukraine’s post-war recovery.
The reconstruction of Ukraine promises to be one of the most difficult and ambitious undertakings of the 21st century. The task ahead requires a comprehensive approach that goes far beyond financing the reconstruction of Ukraine’s devastated infrastructure and ruined cities.
Financing the reconstruction of Ukraine is a moral debt for the West. Ukrainians are fighting for their freedom but also for our values and our security. Moreover, many European countries have made a lot of money doing business with Russia and have been reluctant to sever ties with Moscow despite the Putin regime’s escalating aggression against Ukraine in the years leading up to it. the current invasion. Support for post-war Ukraine is the logical price of this earlier Kremlin cooperation.
The most famous model of a successful post-war recovery process is the US-sponsored Marshall Plan after World War II. Other examples include Myanmar, South Sudan and Serbia. All of these case studies highlight the importance of having an engaged lead sponsor. In the case of Myanmar, it was Japan, while in the case of Serbia, it was the EU.
Membership of the European Union being one of the main objectives of Ukraine’s progress after the war, I think it makes sense that the main donor should be the EU, or perhaps a group of states EU members such as Germany, France, and Poland operating in close cooperation with the G7 group of nations.
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Unfortunately, the EU is not yet ready to play a leading role in the reconstruction of Ukraine. Current EU financial support mechanisms are extremely rigid and unsuited to the Herculean task of Ukraine’s recovery. These mechanisms were designed two decades ago for emerging markets and remain almost set in stone until the current multi-year budget expires in 2027.
I expressed my concerns a year ago about the rigidity of EU financial support mechanisms when designing a decarbonisation plan for the Western Balkans. However, there was no institutional reaction at the time and no effort to implement change.
At present, the EU supports Eastern Neighborhood countries with traditional macro-financial assistance to state budgets through the Neighborhood Investment Facility (NIF). Unfortunately, the NIF model is not suitable for Ukraine’s post-war recovery, as it would mainly help international banks.
The Western Balkan region has a slightly friendlier mechanism known as the Western Balkan Investment Framework, which offers grants to countries in the region for infrastructure and renewable energy investments that cover a certain percentage of the overall investment envisaged.
Ukraine will need something along these lines, combined with a guarantee system. In particular, the percentage of the overall investment covered by the subsidies will have to be higher than it is currently in the Western Balkans.
Other important questions include who will be able to participate in tenders. While most funding is likely to come from the EU and US, Turkey could be a very competitive option for providing construction services and materials. Will tenders also be open to Chinese companies? Many would question whether China has earned the right to play a leading role, but Beijing may seek to step in as a major donor.
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The current Energy Efficiency Fund created by the European Union, Germany and Ukraine could serve as a useful model for future efforts to create the right institutional framework for Ukraine’s post-war recovery. This Fund has a governance structure composed of representatives from the EU and Ukraine. I imagine something similar would be well suited for future reconstruction efforts, with EU members holding a majority on the supervisory board. Needless to say, transparency would be vitally important to avoid any suggestion of corruption.
Several ideas on how best to organize Ukraine’s post-war recovery have begun to take shape in recent weeks. One proposal would see the creation of a Ukrainian Development Authority, which would be at least partially funded by reparations taken from the frozen assets of the Central Bank of Russia.
The Energy Community Secretariat in Vienna has opened a trust account to collect donations from EU stakeholders, with the distribution of funds to be determined by the Ukrainian authorities. Meanwhile, the EU Council discussed the idea of an unspecified Ukrainian Solidarity Trust Fund.
In Kyiv, Ukrainian Deputy Prime Minister for European and Euro-Atlantic Integration, Olha Stefanishyna, launched the idea of a resilience, recovery and renewal plan accompanied by a recovery fund. I anticipate that we will see more new ideas emerge in the coming weeks.
The Member States of the European Union must start serious discussions without delay on the future role of the EU in the reconstruction of Ukraine. This will be a strategically crucial European project that will impact the security and development of the entire continent for many years to come. It is vital to adopt an effective, flexible and transparent format that can replicate the historical success of the Marshall Plan.
Janez Kopač is the former director of the Energy Community Secretariat in Vienna.
The opinions expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the opinions of the Atlantic Council, its staff or its supporters.
the Eurasia Center mission is to strengthen transatlantic cooperation in promoting stability, democratic values and prosperity in Eurasia, from Eastern Europe and Turkey in the West to the Caucasus, Russia and the Central Asia to the East.