The Case for Rebuilding Ukraine

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Al Jazeera English: We begin the day planning and paying for a Ukraine that doesn’t exist yet.

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Al Jazeera English: The devastation to lives and cities has only worsened. Who’s going to pay to reconstruct the country and how?

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CNBC News: How hard will it be and how much will it cost to rebuild the country?

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DW News: Provide the people of Ukraine with the prospect of a return to a life of self-determination, peace. That road is long, but it is never too early to prepare for the time when the weapons fall silent.

When is the right time to start rebuilding Ukraine? 

It's been nineteen months since Russia launched its full-scale invasion - the bloodiest conflict in Europe since World War II. In that relatively short period of time, Ukraine has managed to repel most of the initial Russian onslaught. But with Russia’s troops now dug in for defense near Ukrainian cities, there’s no diplomatic end in sight, especially given that a fifth of Ukraine is still occupied by Russia. Moscow has also made a point of targeting Ukrainian infrastructure - to the tune of $140 billion in damage. 

There is now growing consensus among experts that Ukraine’s victory is contingent upon its economic recovery. But rebuilding Ukraine is going to be expensive. Like, historically expensive. A recent World Bank study put the expected cost of reconstruction after just one year of fighting at roughly $500 billion. The final tally could top $1 trillion.

But many argue that although the war is not over, the time for planning is now. And getting it right could send a powerful message of resilience to countries considering similar illegal invasions.

I’m Gabrielle Sierra and this is Why It Matters. Today, the case for rebuilding Ukraine. When should reconstruction begin, who pays, and how do you even start? 

Sam GREENE: Ukraine is a victim of a war of annihilation. People have called it a genocidal war, and in a lot of ways that is justified. And we like to think as Americans or Europeans or generally as progressive human beings that we stand with victims and we help them get back on their feet. 

This is Sam Greene. He’s a professor of Russian politics at King’s College London and the Director of the Democratic Resilience Program at the Center for European Policy Analysis in Washington. 

GREENE: And so to a certain extent, the answer to that is not different from why do we help somebody when they've been the victims of a flood or a hurricane or a tsunami, whether it's in our country or elsewhere. But there's a broader set of issues also. What happens in Ukraine has consequences for what happens in the rest of the world in the future and for the world that we are going to live in. 

Philip ZELIKOW: Do you want to live in the world in which big aggressor states conduct large wars, destroy neighboring countries, and wreck them, or this world in which we try to stop that and rebuild those countries so that they're healthy?

And this is Philip Zelikow. He’s a professor of history at the University of Virginia. He’s also an incoming senior fellow at the Hoover Institution, a public policy think tank housed at Stanford University.

ZELIKOW: So, you've got immediate war damage, all kinds of secondary infrastructure damage from Russian attacks, and then a profound upset inside the society, economically and socially. It's very hard to total these damages in money terms, but they certainly run into the hundreds of billions of dollars. Now, what's going on here? What's going on here is Russia had initially a strategic objective in the war. I'm going to win the war by conquering Ukraine - rapidly conquer your capital and take over the country, or much of it. That failed. So, having not been able to conquer Ukraine, what Russia is now doing is they're wrecking it. For Ukraine to win, what does victory look like? Victory looks like, ah, Ukraine recovers. It ends up developing a solid independent economy that increasingly is part of the European Union and tied to the West. That's the true strategic victory that Ukrainians see. 

For that, they’re going to need help from foreign partners. But even though American lawmakers were initially gung-ho about aid to Ukraine, enthusiasm is fading as the war drags on - more than $100 billion in taxpayer-funded spending thus far, with aid increasingly a casualty of Republican infighting. Opposition to Ukraine aid is also growing in some European donor countries. Turning off the spigot could seriously jeopardize Ukraine’s future, to disastrous international effect. 

And analysts say that Russia's likely strategy is to wait out Western support, and to prove that they can accomplish victory through attrition. This means that in many ways, a failure to support and rebuild Ukraine would mean a Russian victory. 

GREENE: A lot of people have talked about setting the right incentives and making sure that Russia loses in order to send incentives for other big powers around the world, particularly China. But there's also a question about the signals that this war and its aftermath send to smaller countries, particularly countries living in complicated neighborhoods next to aggressive states or next to bullies who might worry about whether or not they might be the next victim of aggression. And if they look and see that, in fact, we didn't stand with Ukraine, both during the war and after the war, then they might feel that they need to take steps to defend themselves in different ways. That kind of instability makes the world a more dangerous place, a world of more war and conflict and certainly more potential war and conflict. It will cut down on trade. It will shift a lot of government expenditure away from social development and human development and towards military spending. It will mean that the processes that we've seen of deglobalization are likely to pick up speed. It's going to be a world of, frankly, more conflict and less prosperity. And that's not necessarily a world that we want to live in.

Gabrielle SIERRA: So the conflict has gone on for almost two years, tell me more about the damage in Ukraine?

ZELIKOW: The destruction is enormous and of several kinds. First, there's the immediate destruction in the battle zones. Then there's destruction from Russian raids and missile strikes, which are trying to wreck the Ukrainian economy and its energy infrastructure. And then, third and much more insidious is the fundamental derangement of the Ukrainian economy.

Since Russia’s invasion, Ukraine has lost major academic institutions, all civil aviation, and a lot of its coastline. Damage to energy infrastructure throughout the country has left more than 12 million people with little to no electricity, water, and heat during the coldest months of the year. As a result, millions of Ukrainians have been displaced, almost all of them women and children. Aside from its humanitarian impact, the loss of those people has contributed to a sizable hit to Ukrainian GDP, which is a third less than it was before the war began.

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DW: Russia has unleashed a massive missile attack across Ukraine. Reports are coming in of residential buildings hit and energy infrastructure targeted in this latest barrage.

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CBS Evening News: Thousands of people are scrambling to find dry land in the southern part of the country after a major dam burst, triggering catastrophic floods.

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DW: We see Russian attacks have targeted Ukraine’s electricity network. President Volodymyr Zelenskyy urging attendees via video conference for $17 billion in fast recovery funding to help with housing, and with the energy grid in particular.

SIERRA: Look, the destruction sounds so extensive, but I'm also hearing about new destruction every week. It sounds like a lot of rebuilding needs to be done, but isn't it too early?

ZELIKOW: If someone had just wrecked your house, it's not like you're going to say, "Oh, that's bad. My house is a wreck." Sometime after the war is over, I'm going to want to come back to my house. The first thing you'll try to do if you can, is you'll try to fix your house so you can move back in. You're not going to wait until someone blows a whistle and tells you the war is over and now you can get to work rebuilding. You'll start rebuilding as soon as you can. It's hard. By the way, if you say, "Well, you know what? You can't move back home until Russia decides the war is over," then people will say, "In that case, maybe I'll never move back home." And of course, that's Russia's victory. That's how Ukraine starts to die, and their politics then will start reflecting this despair.

GREENE: I think there's at least a couple of reasons to be thinking about reconstruction and recovery for Ukraine even before the war is over. One is that there's a lot of planning that's going to have to happen. And so the decisions, it's not as simple as building what was destroyed. It is about building for whatever the Ukraine of the future is going to be. And if that waits until after the war ends to happen, then Ukraine and really the rest of us will be behind the ball on that. The reality though is that there is already a lot of rebuilding that's going on at the moment because Ukraine is being attacked on a daily basis, and yet Ukraine is trying to keep functioning. The economy is working. It's not working at the level it would like to be working obviously, and a lot of the manufacturing and agriculture and other things have been destroyed. But most Ukrainians are trying to go about their daily lives. Ukraine has been tremendously resilient throughout this war. They've been able to support each other. The schools are open. In some cases they're open in bomb shelters, but they're open. The hospitals are functioning. So this is part of what keeps Ukraine going, it's part of what people are fighting for. 

SIERRA: Okay so we get that we have to do it but how do we even start? 

GREENE: There are, I think, three elements to this reconstruction and recovery process. The first really is about understanding what the needs are. There are already processes happening now in Ukraine. A lot of this has been digitized as Ukraine has done very successfully over the years. There's opportunities for local communities to make an assessment of what's been destroyed, what they need, what they would like to see in the future, and to send that information up to Kiev where it is then collated and turned into a reconstruction program. Second question, of course, after that, once you have an idea of what the scale of the task is, is how much is it going to cost and where's the money going to come from. People are talking about this in the scale of a Marshall Plan. They're bandying about figures of anywhere from half a trillion to a trillion dollars in terms of what's going to be required to get Ukraine back on its feet again.

For context, the Marshall Plan was a massive American economic recovery program that rebuilt Europe after World War II. It brought extensive investment to the continent, leading to a resurgence of European industry. It also stimulated the U.S. economy by creating new markets for American exports. The invasion of Ukraine is the biggest land war in Europe since then, so some economists are drawing a parallel.

Of course, a major distinguishing factor here is that Russia still occupies a significant amount of Ukrainian territory - and the war isn’t over yet.

GREENE: And that gets then to the third element, which is that there's a lot of decisions that are going to have to be made. It's not just the decisions we've already talked about in terms of what's going to get built and where, but decisions about really what the future shape of Ukraine and the Ukrainian economy is going to be, how it's going to interact with the rest of the world. So is Ukraine, for example, going to be successful in its integration with the European Union? If that's the case, then that means there's an argument for building a very different kind of infrastructure, infrastructure that would move agricultural and industrial goods not from the north to the south to the Black Sea and not to the east to Russia really, but from east to west. That means building new roads and rail connectors and other things that move goods and people to the European Union. Those are policy and political decisions that will have to be made in Ukraine and in Western Europe but that will have a very real impact on the decisions that are made by governments and by businesses about investing in Ukraine's future.

ZELIKOW: Whenever wars happen and things get damaged like this, this is the process people go through. Sometimes they're able to do it and sometimes not. Sometimes it's fast and sometimes it's slow. This is a huge war. This is, by many measures, the biggest war since 1945. So, it's not like we've got a playbook of, "Oh yeah, here's how we do this." Right? But if you do go back to the aftermath of the Second World War when there was destruction all over parts of Europe and Asia, first, you see a lot of humanitarian relief right away, emergency relief just to keep people fed and sheltered. Then, after that, you begin developing a program of rebuilding and prioritizing and the role of the state government, of local governments, of businesses. If you have a foreign structure where the money's coming from foreigners, how do you organize that to minimize corruption but without too much paperwork and bureaucratic sclerosis. It's a tremendous challenge. 

For many reasons, the war in Ukraine is historic. But there’s another twist that we have not seen before...

ZELIKOW: We're in a unique circumstance in all of world history, never happened before, where a country carried out a gigantic war of aggression, and then as it carried it out, it left hundreds of billions of dollars in euros in law-abiding countries. That’s just never happened.

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Guardian News: There is a huge pot of gold to be taken and dedicated for Ukraine’s reconstruction, which is Russian assets.

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EU Chief von der Leyen: These funds should be used so that Russia pays for full compensation for the damages caused to Ukraine.

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CNBC International: Of course, if any action of this sort should be taken, it should be taken in tandem with partners such as the United States, the United Kingdom, Japan, Switzerland, and other countries.

Countries around the world hold reserves in each other’s currencies. They do this for many reasons - to protect themselves against the depreciation of their own currency, to assure investors, and sometimes because they have to in order to pay for things like imports.

ZELIKOW: So, we're in this unique situation in world history in which we're sitting on this $300 billion in Russian assets that's in our jurisdictions that we're freezing because Russia's been an outlaw, but we're not putting to any use at all because we're trying to figure out how to use it while Ukraine has these crying needs and Russia is continuing its war. And so, we have this extraordinary opportunity now to design the mechanisms, legal and financial, to mobilize this and adopt an unprecedented recovery program. That didn't happen in the Korean War or the Iraqi invasion of Kuwait. If North Korea had left huge sums of money in Japan when it invaded South Korea, oh, that's the money that would've been used to help rebuild South Korea, instead of American taxpayers. I mean, South Korea was our number one foreign aid recipient for 10-plus years after the Korean War. And there was a lot of effort to rebuild Kuwait after the Iraqi invasion of Kuwait, and the West seized Iraqi state money that had been left in the West and used it to compensate Kuwait and the other countries hurt by Iraq's unlawful invasion of Kuwait. But this is on a historically unprecedented scale. We have the largest international aggression since World War II. Yet the Russians out of arrogance, complacency, and necessity because they were trading with all these folks, left these enormous sums of money in France, Belgium, the United States, Britain - enormous sums.

And a growing number of experts think that frozen money should be seized and used for rebuilding Ukraine - putting new pressure on Russia to engage diplomatically and end the war. 

ZELIKOW: Remember, we're talking about state money here. People say, "You can't like take Russia's money." Well, actually, you kinda can. You can freeze it as a sanction. A sanction basically says, "I'm going to hold onto your money unless you quit this invasion." Well, Russia's not quitting the invasion. See, under international law, a couple of things are really clear. One, Russia has carried out an aggressive war. There's also no doubt that under international law, a country that wages aggressive war is obligated to compensate the victims of its aggression for the damages they've suffered from that aggression. The international core principles are clear, and there's a doctrine that allows state countermeasures in which states in extreme cases like this can basically take basically the outlaws money to pay the victims. 

But using frozen assets could have another benefit. In the United States and Europe, some people are getting tired of paying for aid to Ukraine. And if frozen Russian assets finance the bulk of Ukraine’s reconstruction, they might not have to. That could matter even more as dysfunction in Washington casts doubt on the future of Ukraine aid.

SIERRA: This seems mighty handy. So, you know, what's the problem? Are there any risks to using that money? Why haven't we used it already? 

GREENE: We don't want to play the game the way that Russia would play it. So there are very real concerns about the consequences of confiscating assets without due process. So at the very least, there would have to be court processes, particularly where these are privately-held assets. When it comes to sovereign assets, so the assets, for example, of the Russian Central Bank and the Russian government more broadly, again, there are some due process questions, but there are also questions about the precedent that we are setting. The global financial system is built on interdependence, and it's a system of interdependence that has worked very well for the U.S .throughout the entirety of the post World War II period, one that we would probably like to keep working. One of the pillars of that is the fact that central banks keep parts of their reserves in other countries. We do it, and everybody else does it. So if we say that, "Actually, no, we think that in certain circumstances when we're unhappy with something that you've done as a government we are going to seize these assets." If we're going to set that precedent, the likelihood is we're going to incentivize governments to begin to withdraw from that system with very unpredictable consequences, including unpredictable consequences for the strength of the dollar. And as a result, the cost of U.S. debt. So, that's something that both the economists and the lawyers are telling the politicians that they need to think very, very carefully about.

ZELIKOW: There is one other argument lurking back there, which is that we need to hold onto the Russian money as a possible leverage in diplomacy to end the war. That's not a terrible argument. It turns out though that if we'll take the steps to bring the Russian assets under our government's control, that doesn't remove your leverage in the diplomacy, it actually increases it. It establishes that we're now taking control of this money, and it says to the Russians, "This money's going to be used to compensate Ukraine. Do you want to make that part of a deal or have us just go ahead and do it?" And I think it can create a Russian interest in trying to make that part of the deal. But if you then tell the Russians, "You know what? No one will compensate Ukraine until you say it's okay." Well, then you're playing right into the hands of the Russian strategy. They'll say, "Oh, well, we'll take that under advisement and we'll let you know whether or not to help Ukraine, probably sometime in the 2030s."

GREENE: There is strong demand, a political demand, a moral demand to make sure that this money, much of course was robbed from the Russian state and Russian citizens, does go to supporting Ukraine and to helping to defray some of the costs on the West. And it would feel very unjust to people if after this war was over and all the money had been spent and was being spent on Ukraine that all of these billions and billions of dollars were allowed to go back to Russia. So there's that part of it.

Although this is a war started by Russian officials, sanctions paint with a broad brush, potentially harming citizens too. Some experts think that can actually increase grievances against the sanctioning government, encouraging the continuation of bad behavior that sanctions seek to deter. And with $300 billion at stake, those grievances could be huge.

GREENE: The second part of it is that this reconstruction is going to be incredibly expensive. And so if you've got billions and tens and in some cases hundreds of billions of dollars lying around out of a potentially trillion dollar price tag for reconstruction, that's not chump change. That could make a real dent in the issue. And again, if what we want to do is unlock the willingness of western governments and societies to pay, then there is a very important pragmatic role that accessing some of these assets can play in that.

SIERRA: How are our other allies in the EU going about efforts to rebuild Ukraine?

GREENE: Well, in a lot of ways, Europe is at the forefront of this. Of course, the issues for Europe are much more real. They're simply closer at hand. So Europe has been involved from day one and on a daily basis in helping to build the infrastructure and maintain the infrastructure that's kept Ukraine afloat. One of the other things that Europe did from the outset of the war was to give Ukraine extraordinary access to European markets. And that, again, has really helped keep Ukraine afloat, and it's come at a very real cost in terms of lost revenue for Europe, and it has had an impact on the European agricultural sector as well. Out of solidarity, they've been willing to do that, right? So the question is, how permanent is that going to be?

European patience is already wearing thin as economic costs to support Ukraine grow. Last month, Poland and Lithuania threatened to restrict Ukrainian grain exports by cutting off land transport routes, though they have since reached an agreement. In some countries, people are entirely fed-up. Slovakia has sent millions in military aid to Ukraine, but its newly elected pro-Russia Prime Minister just halted additional assistance.

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CBS News: In the coming months, the EU’s foreign policy chief wants member states to agree on some $5 billion worth of military aid for Ukraine in 2024.

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BBC News: One of Ukraine’s staunchest allies, Poland, has announced that it will no longer supply weapons to the country.

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DW News: Fico said that Slovakia has bigger problems than the war in Ukraine. During the campaign he vowed to end Slovakia’s robust military support for Kiev and criticized both NATO and the EU.

GREENE: But in December, the European Union is expected to open accession negotiations, formal accession negotiations with Ukraine, as well as with Moldova. And they will begin working through all of the aspects of how the common market works, all the regulation, all the governance, all the standards. And that will, again, really determine what the contours are of Ukraine's future trading relationship, what the Ukrainian economy is going to look like. That then tells businesses really what they are investing in and gives a lot of people a lot of certainty and clarity, which again is what investors want to see, whether they're private sector or public sector. And some of that money has already been pledged. Some of that money will come from governments, particularly from European and North American governments. Some of it will come from these international financial institutions. A lot of it will need to come from the private sector. There is a global private sector and a Ukrainian private sector that is interested in investing, but they need to know what they're investing in. So both from a financial but also from a governance standpoint, really, the European role is crucial. The U.S. is providing a lot of money, I don't want to understate that, but structurally what's really going to matter to the success or failure of Ukraine is the relationship with Europe.

And that makes sense. Right now Ukraine’s future seems pretty uncertain. And if I was the CEO of a private company I’d be pretty nervous to shell out a bunch of money to a battle-weary country. But I might feel a lot more confident if I knew that the U.S. and its allies were pursuing similar reconstruction investments worth billions of dollars on top of military aid. 

But there is also another investment risk to be wary of. 

SIERRA: How do you navigate the issue of corruption, which has historically been a challenge for Ukraine? How do we know this money won't eventually be siphoned off by oligarchs and others?

GREENE: Well, first and foremost, nobody's more frustrated by corruption in Ukraine than Ukrainians. Ukrainians are sacrificing a tremendous amount in this war, even those who are not on the front line. They want to be absolutely sure that they are fighting for a country and a system that has their back, that they're not fighting for the opportunity to line somebody's pockets. And I think that's why we do see a lot of pressure on Zelensky and on the Rada and on the Ukrainian government in general to really hold the line on corruption. Even in the course of a war, we have seen a government that's been unafraid to remove high ranking officials and ministers to prosecute them at a time when that could be seen as potentially destabilizing, but allowing the corruption to go ahead is seen as more destabilizing. I think those who do genuinely want to fight corruption in Ukraine, see this as a real opportunity to make important progress. And that progress is, I think, visible. In fact, the U.S. and the Europeans as well have been sending inspectors to Ukraine to track where aid has been going and make sure that particularly military aid has not gone astray. The reports that have come back have been really very strong and reassuring in that regard. I do find it a little bit frustrating sometimes when we hear rhetoric about, "We have to make sure that not a penny goes astray." Well, let's look at how we spend money in the U.S. or in Europe, and let's look at government procurement, whether it's in the military or any other area. And what we try to do is to minimize the number of pennies that go astray and make sure that there are credible punishments for those who end up with more pennies than they should have. But there's no excuse for trying to hold Ukraine to a higher standard and an impossible standard than we hold ourselves. So it is important that we have robust oversight mechanisms, and I think Ukrainians themselves would like to have Western powers and western civil society also involved in holding their feet to the fire and making sure that there is transparency and that best practices are upheld.

Because of that history, opponents of aid argue that corruption in Ukraine is simply too rampant for safe investment. Others argue that there will always be risk involved when investing in war-torn countries, but that present-day risks can be offset by future rewards.

SIERRA: Okay so let’s say the U.S. and other countries do foot this bill, what do we get back for our money? Do we get assurances? Do we decide where it gets to go? How it’s spent?

GREENE: The reality is that Ukrainians are not interested in trading one empire for another. They're not interested in coming out of domination from Moscow only to have all the decisions about their future made in Washington or Brussels. And they would, frankly, pull down very quickly any Ukrainian government that they saw as too subservient to anybody. But they are interested in partnership. They do understand and very clearly see their future as being in integration with Europe and with the North Atlantic community more broadly. That's both from a security and an economic perspective. And so when I talk to people at least, what I hear is an interest in greening the Ukrainian economy, for example, not because we want them to, but because they want to. And they see some opportunities to work with us in that process to take advantage of digital technologies that are being developed outside of Ukraine and where a partnership with us might help. I think they also see opportunities for them to slot into parts of western supply chains where, say, growing conflict with China might make things more difficult. So I think that there is a lot of opportunity here for mutual benefit, what we get out of investing in Ukraine's future is Ukraine's contribution to a more stable, a more secure, and a more prosperous world. And that's a world in which we will be more secure, more stable, and more prosperous.

SIERRA: Is there a danger here that powerful Western outsiders are making decisions without enough input from Ukrainians? 

ZELIKOW: In general, the problem isn't that outsiders are taking too large a role. The problem is actually that outsiders aren't taking a role that's large enough. Ukraine does not have the resources to do this rebuilding on its own. The damage is too great. It will need a lot of outside help. When there's not a lot of interest in this, here's what will happen is there'll be a fair amount of outside help. It'll be fragmented in a jillion programs, which are all bureaucratic and in different national silos and with different paperwork requirements and burdens on the Ukrainians. And from the Ukrainian point of view, it becomes a real mess and hassle to handle all the different foreign stuff in which the foreigners aren't engaging enough to actually coordinate their efforts in a really purposeful way. That's what happens when things go on bureaucratic autopilot where we're sending some money there. It's not really enough, and then it's scattered in these ways. What would be more constructive for Ukrainians is for the West to really get involved in this in a big way, but provide a lot of purposeful direction so that the Ukrainian government and governments, including local governments, have more of a one-stop shopping setup here where there are aid coordinators who are looking across all the different foreign government aid streams. You can see a new generation of people stepping into public service and public life, partly in civil society. And there's an opportunity here to really foster that and build on that change, which is full of exciting potential unless we screw it up and Ukrainians fall into despair, not so much because they're losing the war on the battlefield, but because Russia is succeeding in its deep goal of wrecking their country and they don't see how they're going to rebuild it. 

The U.S. has been involved in reconstruction efforts before. Not all have gone well. But experts agree that now - in the rebuilding of Ukraine - is the time to get it right.

GREENE: This is an opportunity to change that. This is an opportunity to say, "Look, we are not proud of that track record. We think it is systemically important that we do better this time and that we make Ukraine the turning point so that in the future we treat refugees better and we engage in wartime support and post-war reconstruction more cohesively and coherently." Now, that's a moral argument, and money's not going to follow a moral argument, unfortunately. So if you're asking whether I'm optimistic, I am cautiously not pessimistic is the way I would put it. And the reason for that is, frankly, geography. It's not fair to anybody else in the world, but Ukraine has the advantage of being right there on the European continent. And as a result, what happens matters frankly, much more to European governments and to European citizens. It has a much more direct impact. It feels closer, it feels realer, and it just feels more urgent. And I think we have seen that, frankly, in the level of clarity with which European governments have talked about the national interests and the continent-wide interest in supporting Ukraine. Macron has said that there is no European security without Ukrainian security, and that is a message that I think most Europeans take on board and one to which they will hold their leaders. Doesn't mean it's going to be easy, it doesn't mean that Ukraine is going to get everything it wants or deserves, but I think that there is a real chance that we can get this one right. 

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