Friday

9th Jun 2023

Opinion

Ukraine — what's been destroyed so far, and who pays?

Listen to article

Although Vladimir Putin has failed in his plan to crush Ukraine with military force, his ambition to destroy its independence is undiminished. As Russia's latest offensive falters on the outskirts of Bakhmut, the Kremlin is pivoting towards a strategy of economic attrition intended to turn Ukraine into a failed state.

By cutting it off from foreign markets, deterring inward investment and preventing the return of refugees, Putin believes he can still force Ukraine back into Russia's sphere of influence, achieving by stealth what his troops have failed to deliver on the battlefield.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

EU and US policy must now undergo an equivalent transformation. The need to support the modernisation of Ukraine's armed forces will remain but must be matched by a financial plan capable of guaranteeing the country's long-term viability.

Central to this must be the revival of Ukraine's economy and the reconstruction of its shattered infrastructure. The process of rebuilding must begin even as the fighting continues, demonstrating the will of Ukraine's international partners to stand by it.

The task is already a huge one. In addition to the loss of more than 50 percent of Ukraine's energy infrastructure, and large parts of its transport network and industrial capacity, around 150,000 residential buildings have been damaged or destroyed so far. The costs of reconstruction have been put at somewhere between $411bn to $1 trillion [€378bn to €919bn], and rising. This invites big questions about how these sums can be raised and disbursed.

No progress has been made in agreeing the structures needed to organise the reconstruction effort since 58 countries took part in the Ukraine Recovery Conference last summer.

That must change by the time the conference reconvenes in London in June. In particular, the Ukrainian government will need to yield in its desire to control the distribution of funds raised by international donors.

Hard-pressed voters in Europe and America will not consent to the provision of aid unless they have confidence that it will be spent on those who need it most. The task will need to be undertaken by an international agency in which donor countries have significant powers of oversight and influence, perhaps modelled on the European Agency for Reconstruction, which administered the EU's aid programme for Kosovo.

Securing the necessary funds to begin reconstruction will be the next challenge. The EU and others are already committed significant sums, but there are limits, both political and financial, to the assistance that is likely to be provided as many countries wrestle with their own economic problems. Private investment will provide another source finance, and this can be encouraged by accelerating Ukraine's EU accession and providing the long-term security assistance needed to build business confidence.

Most of the reconstruction costs obviously ought to be borne by Russia.

With large amounts of Russian assets currently frozen in the West, some want this to begin even without Russia's consent. The $300bn of frozen Russian central bank reserves is one option, but there are significant legal obstacles as well as concerns about the precedent of seizing sovereign property.

The position of the European Commission is that these assets could only be used for the reconstruction of Ukraine if Russia agreed as part of an eventual peace settlement, linked to the lifting of sanctions. Either way, these funds are unlikely to be available in the short-term.

The private assets of wealthy Russians frozen since the start of the war provide another potential resource. These are thought to total around $60bn in the EU, US and UK combined.

Yet even seizing these assets will require changes to the law in each jurisdiction and still be subject to challenge in court. In each case seizure will need to be linked to a specific, provable crime. The recent decision of the EU General Court to overturn sanctions on the mother of Kremlin oligarch and mercenary leader, Yevgeny Prigozhin, illustrates the difficulty.

'Repentance Fund'?

One way to speed up the flow of funds would be to seek voluntary donations from oligarchs to a 'Repentance Fund', as suggested by Davyd Arakhamia, the leader of president Volodomyr Zelensky's party in the Ukrainian parliament.

A precedent for this already exists following the UK's decision to unfreeze the $2.6bn proceeds of Roman Abramovich's sale of Chelsea Football Club on condition that it be donated to humanitarian causes in Ukraine. The conditions for a fund of this type would need to be tough to prevent pro-Kremlin oligarchs buying their way out of sanctions. All the unfrozen money would need to go to Ukraine, Putin's war would need to be unequivocally condemned and there could be no immunity for those guilty of crimes.

One way or another, funds will need to start flowing soon. The Ukraine conflict is about to enter a new phase; one in which non-military factors are set to prove decisive. Key among them will be the battle for Ukraine's economic survival. All of the support that has been given so far will have been wasted unless it's a battle we equip them to win.

Author bio

David Clark was special adviser on Europe at the UK Foreign Office (1997-2001) and now works as an independent analyst specialising in foreign policy and European affairs.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Europe is giving more aid to Ukraine than you think

'Europeans need to pull their weight in Ukraine. They should pony up more funds.' Such has been the chorus since the start of the war. The problem is the argument isn't borne out by the facts, at least not anymore.

Ukraine's military advantage? How quick it treats its wounded

There's general agreement that Ukrainian losses are about one third of Russian losses. There are several possible reasons for this discrepancy — one reason that has gone under-reported is the way in which Russia and Ukraine treat their wounded.

Abducting Ukrainian children is a deliberate Kremlin strategy

This humanitarian tragedy unfolding just outside our EU borders is not just collateral damage from the war. We must acknowledge that it is part of an intentional strategy by the Kremlin aimed at those who are the most vulnerable: children.

Letter

Right of Reply from the Hungarian government

Authors Samira Rafaela MEP and Tom Theuns present as facts the extreme views of a politically-motivated campaign in the European Parliament. By doing so, they undermine the very foundations of the European Union.

Latest News

  1. Belgian bâtonnier on Russia: 'You can have a client you don't like'
  2. EU's proposed ethics body 'toothless', say campaigners
  3. Study: 90% of Spanish inflation 'driven by corporate profits'
  4. If Spanish economy is doing well, why is Sanchez poised to lose?
  5. EU lawyers for Russia: making 'good' money?
  6. The 'BlackRock exemption' has no place in the EU's due diligence directive
  7. Europeans don't see China as a rival, but weapons to Russia is a red line
  8. Cleaning workers urge Parliament: 'Europe should lead by example'

Stakeholders' Highlights

  1. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations
  2. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  3. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  4. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  5. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  6. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics

Stakeholders' Highlights

  1. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains
  2. InformaConnecting Expert Industry-Leaders, Top Suppliers, and Inquiring Buyers all in one space - visit Battery Show Europe.
  3. EFBWWEFBWW and FIEC do not agree to any exemptions to mandatory prior notifications in construction
  4. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  5. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  6. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence

Join EUobserver

Support quality EU news

Join us