May 24, 2024

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Ukraine’s reconstruction, the “great economic challenge” and the diplomacy of Kiev’s allies

Ukraine’s reconstruction, the “great economic challenge” and the diplomacy of Kiev’s allies

June 21 appeal from London… to support the reconstruction of Ukraine. Kyiv’s Western allies – leaders and representatives of more than 60 countries – are meeting in the UK on Wednesday and Thursday to rally corporate and private sector efforts to fix Ukraine’s crumbling economy. The country is one of the poorest countries in Europe Before the start of the conflict, it was overwhelmed by the Russian offensive for more than a year. Its GDP is projected to decline by 29.1% in 2022.

“Together with our allies, we will maintain our support for Ukraine’s defense and counteroffensive. We will stand by Ukraine until the war is won.” British Prime Minister Rishi Sunak said on Wednesday..

Key donors to Kyiv also made several announcements: the United Kingdom announced a new package; $3 billion in financial aid to Ukraine In the period 2024-2027, the United States will provide an additional $1.3 billion in aid to the Ukrainian economy. On Tuesday, Ursula van der Leyen, president of the European Commission, It has also asked EU member states for an extension of 50 billion euros In the multi-annual EU budget – negotiated in 2020 – to help Ukraine until 2027.

Volodymyr Zelensky while thanking Ukraine’s allies for “their support”. He wrote on Twitter “There will be recovery of Ukraine[it] More can be predicted by world unity and solidarity.”

These new investments aim to help the country recover economically, a major challenge according to Jean-François Robin, director of research at Natixis: “This is a major economic challenge. Many sectors need to be rebuilt: infrastructure (roads, bridges, ports, railways), housing and Non-residential buildings (schools, hospitals), metallurgical industry, agriculture etc. Almost 30% of the country was destroyeds.”

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The US and EU are the leading contributors

If Ukraine’s needs for 2023 are estimated at 14 billion dollars, the general recovery of the country’s economy will cost about 411 billion dollars in the decade 2023-2033. According to a study published on March 23 The World Bank, the UN, the European Union and the Ukrainian government.

The sectors requiring the most public and private investment are transportation ($92.1 billion), residential buildings ($68.6 billion), energy ($47 billion) and social security ($41.8 billion).

But the amount is expected to rise further as the conflict continues, as illustrated by the recent destruction of the Kagovka dam. Damage is estimated at more than $1.3 billionAccording to Ukrainian authorities.

Without waiting for the next decade, many countries are already working to restore the country: the United States is the leading contributor to Ukraine with almost $27 billion in financial aid (but almost $78 billion including military and humanitarian aid); According to the Kiel Institute, an economic research institute in Germany. They are closely followed by the European Union, which has already provided over 33 billion dollars (almost 39 billion in total aid) to Kyiv.

“The sums involved are considerable, and many countries want to participate in this reconstruction because economic opportunities will also be at stake”, notes Jean-Francois Robin.

“Russia must bear the cost of reconstruction”

International organizations are also putting their hands in their pockets: the World Bank just released Over $20 billion Loans or grants and International Monetary Fund (IMF) disbursed in March Financial Assistance 15.6 Billions of Euros For the next four years.

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The IMF program, worth $115 billion on a long-term basis, aims to “support gradual economic recovery while creating the conditions for post-conflict reconstruction and long-term growth on the path to EU accession.” to the international system.

In addition to all these financial efforts, Kyiv’s allies want to pay Russia off in the long run as well. “Let’s be clear: Russia destroyed Ukraine. And Russia will bear the cost of rebuilding Ukraine,” US Secretary of State Anthony Blinken said in London on Wednesday.

Private actors are also involved in the restructuring plan: investment fund BlackRock and First US Bank J.P. Morgan is helping the government of Ukraine specifically set up a “reconstruction bank.” [pour] “Infusing capital into reconstruction projects that could attract hundreds of billions of dollars in private investment”. According to the Financial Times.

The London Conference allowed the official launch “Small Business”. The initiative promises to “show their support for Ukraine’s recovery” while launching more than 400 platforms, including Apple, IBM Ukraine and Sanofi, from companies around the world – along with major global financial institutions.

Long term support

Talk of rebuilding Ukraine may seem premature when the country is still the scene of armed and deadly conflict. How to restore the economy in this situation?

For the diplomat Gérard Araud, a distinction must be made between the south-east of Ukraine and the rest of the country: “On the front, the destruction will continue as long as the fighting continues, so we will not go to the workers and the people. There will have to be an intensive bombardment. In the rest of the country, subject to local missile attacks, Priority can be restructured, especially those that fall under public services: water, gas, electricity distribution. . . .

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This is exactly what the US is doing by targeting immediate investments in Ukraine. The latest, announced on Wednesday, aims to rebuild the country’s energy infrastructure (which will free up $520 million) and modernize railways, ports, borders and “all essential infrastructure connecting the country to Europe”. [657 millions de dollars]”, detailed Anthony Blinken.

Beyond concrete engagement on the ground, Kyiv’s allies intend to send a message of solidarity to Moscow. “It’s a way of saying: ‘Our commitment with Ukraine is a long-term commitment’,” explains the former French ambassador to the US. “This takes two forms: reconstruction through eventual entry into the European Union, and military engagement with the possibility of Ukraine joining NATO.”

This sharing of common values ​​between Ukraine and its “partners” was underlined in a tweet from Volodymyr Zelensky on Wednesday, where he wrote “Ukraine[vait] succeeded in uniting the European Union more than ever before. This is truly a unity of values, which is reflected in many political decisions […]. Ukraine has implemented this solidarity force designed by the European Union.”

According to Gérard Araud, the involvement of the United States, the European Union or the United Kingdom can ultimately be seen as a “firm declaration and confirmation of European values ​​in public opinion and in the eyes of the world”. . And to conclude: “It is a way of saying that their support is not only military, but also human support to rebuild Ukraine.”