Planning for the post-war period should be centered on making the country the hub of the green transition in the continent .Foremost on the minds of Ukrainians and their friends is the need to win the war. But to delay preparations for what comes afterwards would risk losing the peace. Kyiv is aware of this, and economic plans for a postwar Ukraine are being formulated. The Ukraine recovery conference in London this month will be an opportunity for the country’s friends to buy into the plans, metaphorically and literally.
The most ambitious vision is to turn Ukraine into a leader in Europe’s green transformation. According to Rostyslav Shurma, the deputy head of Ukraine’s president’s office responsible for economic policy, carbon-free energy is a priority investment in the country’s rebuilding.
In April, he told us in Kyiv that the EU was “on the brink of the green transformation” and Ukraine offered a number advantages: geographic proximity, natural resources for renewable energies, and a nuclear industry which can be used to produce green hydrogen. Its strong metallurgy heritage and relatively cheap labour means that it can fill in a gap for manufacturing and processing, as the EU attempts to diversify away from China. Shurma cited green steel, chemicals, and lithium processing.
This vision is both strategic and economically sound for the EU, and Ukraine. It is clear that Ukraine has the relevant expertise: it has undisputed nuclear knowledge and managed to connect its electricity grid to the EU during wartime. Ukraine has returned to being a net power exporter to Europe, even after Vladimir Putin’s winter bombardment of its energy infrastructure.
The narrative and conceptual coherence needed to commit fully to Ukraine’s reconstruction would be provided by seeing Ukraine as the hub of Europe’s green transformation. After the war drama is over, which hopefully will be soon, less attention from Europe will be focused on Ukraine. This is not to mention the US who may have been tempted by isolationist tendencies or worse. The plans in Brussels to commit to a budget support agreement for four years, aimed at pressuring Washington into a similar commitment, are welcomed.
There is no political will to mobilize the additional financial assistance that will be needed for reconstruction, above and beyond budgetary aid. Private investments will not reach the necessary levels if there is no confidence that public funding will be sufficient. Shurma estimates that 70-80% of the total reconstruction expenditure — or more than 400bn according to a World Bank estimate — is private money.
As the US saw Marshall Aid as a tool to mold post-war Europe into its image and to create new markets for their booming production, Europe must now see Ukraine’s rapid recover as being essential to its own self-interest. For corporate and voter support, it is not about altruism, but rather the benefits of having a decarbonised energy supplier, a replacement for Chinese green industries supply chains, or a contributor to hydrogen economy right on the EU border, and eventually within the EU.
This would allow for a more focused planning of the reconstruction budget, as well as a better understanding between Ukraine and its donors about what they should fund. It would also help signal to the private sectors where there are investment opportunities. The German Marshall Fund and other think tanks have proposed that the Ukraine be rebuilt using the net zero compatible standards and technologies at a higher initial cost. This would give EU-based green industries a ready market in which to expand. It will also help them to reduce costs and learn faster, which in turn should allow them to catch up and keep pace with their Chinese competitors.
These plans can raise legitimate questions, like the danger of excessive dirigisme for a country trying to shed its Soviet legacy. The greater risk is a lack top-down guidance. The era in which the West left everything to the market has ended. All countries must find the correct government role to direct structural transformation.
A second question is whether the plan is too ambitious to meet Ukraine’s urgent needs. It is important to decide the direction of travel now so Kyiv may invite investors to submit projects for pre-clearance so that construction can begin as soon as safety allows. To achieve economic predictability, Kyiv needs support from everything from security guarantees to war insurance and the boosting of Ukrainian air force.
Ukraine’s military prowess and diplomatic agility, as well as the unity of support from the West have all exceeded expectations. Now, their economic statecraft should do the same.