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 involves turning Ukraine into an enabler of Europe’s green transition. Carbon-free energy should be a key target for investments in the country’s reconstruction, according to Rostyslav Shurma, deputy head of the Ukrainian president’s office in charge of economic policy.
With the EU “on the cusp of the green transition”, Ukraine offers a number of advantages, he told me in Kyiv in April: geographical closeness, significant natural resources for renewable energy generation and a nuclear sector that can serve green hydrogen production. The country’s strong metallurgy tradition combined with relatively cheap labour mean it can fill a supply gap in manufacturing and processing as the EU tries to diversify from China. Shurma listed green steel, chemicals and lithium processing as examples.
This vision makes strategic and economic sense for the EU and Ukraine. The relevant competence is there: Ukraine has undoubted nuclear expertise, and it managed to link its electricity grid with the EU’s in wartime. Even after Vladimir Putin’s winter campaign to bombard its energy infrastructure, Ukraine is back to being a net exporter of power to Europe.
Seeing Ukraine as a hub for Europe’s green transition would provide the narrative and conceptual coherence required for a wholehearted commitment to the country’s reconstruction. Once the immediate drama of war is over — hopefully soon — less of Europe’s political attention will focus on Ukraine, to say nothing of a US that may be in the grip of isolationist temptations or worse. The plans afoot in Brussels for a four-year budget support commitment, intended to press Washington into something similar, are welcome.
But there is still no strong political will to mobilise the much larger financial support that reconstruction will require above ordinary budget aid. Without confidence in sufficient public funding, private investments will not be forthcoming in the required amounts. (Shurma envisages that 70-80 per cent of total reconstruction spending — more than $400bn in a World Bank-led estimate — will consist of private money.)
So, much as the US saw Marshall aid as the instrument to shape postwar Europe in its image and create new markets for its booming output, Europe today must see Ukraine’s rapid recovery as essential to its self-interest. To secure voter and corporate support for strong long-term backing of Ukraine, look not to their altruism but to their benefit from having a supplier of decarbonised energy, a substitute for Chinese green industry supply chains, and a contributor to the hydrogen economy, right on the EU’s border and eventually inside it.
This ambition would help to focus the planning and allocation of reconstruction spending, overcome divisions in Ukraine, and between the country and its donors over what to finance, and clearly signal to the private sector where the investment opportunities are. If, moreover, Ukraine is rebuilt at the admittedly higher upfront cost of the most net zero-compatible standards and technologies, as proposed by the German Marshall Fund of the US think-tank and others, EU-based green industry companies would have a ready-made market to scale up in. This should speed up learning curves and cost reductions also for their home markets, and help to keep up or catch up with Chinese competitors faster.
One can legitimately raise questions about these plans, such as the risk of excessive dirigisme in a country working to shed the remnants of its Soviet legacy. But the greater risk would be a lack of top-down direction. Even in the west, the era of leaving things to the market is over. All countries need to find the right government role in directing structural transformation.
Another question is whether this is too ambitious and long term to meet Ukraine’s more urgent needs. The more reason to agree the direction now, so Kyiv can invite investors to propose projects for pre-clearance, so as to start building as soon as security allows. Economic predictability, meanwhile, requires support ranging from war insurance to security guarantees and boosting Ukrainian air power.
Ukraine’s military prowess, its diplomatic agility and the west’s unity in its support have all outperformed expectations. Their economic statecraft must now do the same.