Close to $150 billion,
that’s the cost of the damage to Ukraine’s infrastructure
more than a year after Russia began its full scale invasion.
Schools, homes, transport hubs and key energy networks have all been targeted
by Russian airstrikes, and there is no end in sight to this conflict.
As Ukraine attempts to chart a way forward,
how hard will it be, and how much will it cost to rebuild the country?
On February 26, two days into the war, a residential tower in Kyiv was hit by a missile.
While there were no fatalities in that particular strike,
it cost more than a million dollars and 10 months for the building to be restored.
The time and money spent to rebuild just this one tower
shows the scale of the task that Ukraine faces.
The economy contracted very sharply in 2022, the first year of the war it fell by about 30%.
What we've observed over the winter and spring
is a degree of economic stabilization and recovery,
which was a surprising outcome given the scale
of attacks on energy infrastructure In light of that
stabilization, we see a mild economic recovery but a very difficult path lies ahead.
14 months into the war and the damage to properties had reached $54 billion.
Destruction to infrastructure totaled $36 billion,
while agriculture, a very important part of the Ukrainian economy,
had suffered damage of almost $9 billion.
In June 2023, a strategically important dam in eastern Ukraine was destroyed,
causing further social, environmental and economic harm, the extent of which
could take months to calculate.
Back in September 2022, the European Commission
and the World Bank estimated the cost of reconstruction at $349 billion.
These numbers are constantly being revised upwards as the war drags on.
Other institutions have gone as far as saying they expect a 1 trillion-dollar bill.
If we decide to do this thing, we can do it successfully.
As a way of comparison, though the wars were different,
the Marshall Plan, which supported the recovery of several European economies
after the Second World War, cost the U.S. $13.3 billion.
In today’s currency terms, this would correspond to about $224 billion.
The success of a post-war recovery depends on a variety of factors.
In many cases, it can take decades.
After the second world war, Japan took 23 years
to get growth of the country’s economy back to a level had the war not happened.
In Iran, income never actually returned
to its pre-conflict trends after the Islamic Revolution
and the Iran-Iraq wars around the 1980s.
We don't not know when and how the war will be over
and how much damage will be done by then.
It depends on policy choices, how much the rebuilding will cost.
For instance, if you create conditions for foreign investment to come in,
then the economic rebound can happen fast, and in the case of Ukraine very fast.
So, unfortunately, there is no clear sum of how much it will cost.
But yes, it will be expensive.
Is there any sort of threshold when you look at previous wars,
in terms of how much more expensive rebuilding Ukraine might be versus previous conflicts?
No, there is no clear threshold.
We saw that after the Second World War, the damage in various countries of Europe
was quite unevenly distributed.
But even some of the countries with the most damage,
including Germany, did have a quite fast rebound afterwards,
even faster than the less damaged U.K.
Why? Because there are conditions in place for investment to take off.
What really matters is, after a war, do you have the institutions that support growth?
Is there a lasting ceasefire? And then do you still have
the skilled people to make use of the money that comes in?
Prior to the war, Ukraine was already grappling with an aging population
and low fertility rates.
Its labor market also faced a high unemployment rate.
This spiked to 24.5% in 2022.
And with a reported eight million refugees fleeing the nation since February 2022,
Kyiv might struggle to find the necessary human capital to rebuild its economy.
The most important development, indeed was the large exit of refugees.
At the same time, quite a few men were recruited into the army.
So they were taken out of the economy into the military forces.
So the labour market has been depleted.
In addition, unsurprisingly, people's skills have been eroded over the past year,
and also it's important to bear in mind that demographics are not great.
This was already an ageing labour force.
One would expect as the as the war tapers off, eventually comes to an end, that people
will come back and those people will come back with new skills and new ideas
so there are certainly potentially bright lights on the horizon once the war is over.
But right now, it's very challenging.
As you can tell, there’s a lot of uncertainty about the cost and the pace of reconstruction,
but another key question is: Who will foot the bill?
European officials have been looking at how to use frozen Russian assets
in the bloc to support Ukraine’s reconstruction.
I spoke to Swedish official Anders Ahnlid, who’s chairing those conversations.
We have been working since early March,
we've had five meetings, now we have confirmed data,
we know that there is more than 200 billion euros in
Russian central bank's assets in European countries.
And in addition to that, there is also around 20 billion euros of private frozen assets.
One possibility this group is studying is using the money that is generated by the
Russian central bank assets currently frozen by European states.
Legally speaking, experts say it is easier to go down that route than
using confiscated assets belonging to individuals and private firms.
We have had quite lengthy discussions on this. And we are now, I hope, in a position to soon
bring forward ideas on how to use at least the proceeds of these immobilized assets.
Ideally, 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.
One of the doubts that I have is around when will this money
potentially be available for the reconstruction of Ukraine?
Can you send those proceeds to Ukraine as soon as possible?
Or would that have to wait for the end of the war?
Well, there are many steps to be taken before money can be transferred.
So I think the intention would be that these proceeds
should be possible to use as soon as possible.
The Ukrainian government seems aware that, ultimately, making Russia pay for the damage
caused may prove to be a lengthy and complex solution.
So, officials have put a lot of emphasis in drawing in private support.
President Volodymyr Zelenskyy and BlackRock CEO Larry Fink
agreed to coordinate investment in rebuilding Ukraine, for example.
At least two international conferences have
also been organized to increase contributions to Ukraine.
In addition, Ukraine has also signed a deal with JP Morgan to help support the rebuilding efforts.
The reality is that Ukraine is nowhere near recovering
from the war, mostly because the conflict is still ongoing.
And it is difficult to put a price tag on rebuilding while the war drags on.
But the private sector and international institutions are for that.
And for Kyiv, the hope will be that plans to rebuild Ukraine in the midst
of a bloody conflict could provide a
crucial boost for morale and confidence in their future.