Even as Ukraine resists Russia’s year-old war of aggression, its leaders want to make a start on the gargantuan task of rebuilding the country.
“Some of our partners in Europe said that it is not so obvious that [we] should start the reconstruction now — but for us, it’s obvious that it should start during this year,” Deputy Prime Minister Yulia Svydyrenko told POLITICO during a visit to Brussels on Wednesday.
Russia’s war on Ukraine has inflicted an least $138 billion in damage to homes and infrastructure, according to one recent estimate. And rebuilding the country could cost more than $1 trillion, President Volodymyr Zelenskyy has said.
“It’s going to be the biggest reconstruction [since] World War II,” Svydyrenko said in an interview. “We need to start now.”
First, Ukraine will need to take out insurance to cover war risks to build new schools, bridges or buses, in case Russian attacks inflict new damage.
This is “vital” because the first question companies would ask is, “how we can [insure] our assets?” Svydyrenko said, and insurance companies need governmental backing.
Svydyrenko, who is also minister for economic development and trade, said Ukraine was already in advanced talks with the U.S., as well as in discussions with the U.K. and EU, on how to conduct proper risk assessments and provide wartime insurance.
Kyiv is also in discussions with the World Bank’s Multilateral Investment Guarantee Agency (MIGA) and the U.S. International Development Finance Corporation (DFC), which have agreed to provide insurance tools for companies to cover up to 90 percent of their assets.
Ukraine is speaking with the U.K. Export Finance agency, which Svydyrenko said was ready to insure projects on a case-by-case basis, and with France’s Bpifrance public bank.
Kyiv is keen for EU countries’ export credit agencies to chip in on reconstruction and enlarge credit limits for projects, Svydyrenko said, adding that it’s a topic Ukrainian government officials broached with EU commissioners during their visit to Kyiv earlier this month.
Even if physical reconstruction has to wait for political stability, Ukraine wants the works already “in the pipeline” so they don’t start on victory day, but are “already pending,” said Deputy Economy Minister Taras Kachka, who was also visiting Brussels.
With this kind of insurance in place, the start of reconstruction does “not depend on war and peace,” said Kachka.
Ukraine’s economic output hit $200 billion in 2021 — a record since independence from the Soviet Union in 1991. But in 2022, the economy shrank by more than 30 percent. Millions fled the war or were internally displaced, driving down consumption, while Russia’s sustained aerial bombardment of industry crushed production.
What Ukraine needs now is “to return Ukrainians back and to start the restoring of the economy,” said Svyrydenko. “We really appreciate all this financial support that [comes] from [our] partners’ side, but we definitely should already want to operate by ourselves.”
Moving up the food chain
The government has a plan to rebuild Ukraine’s economy by moving up the value chain — starting with farming.
Ukraine’s economic strategy will be focused on agricultural development and processing, said Svydyrenko. “The situation with the blocked seaports [shows] us perfectly that the world depends on us. And we need to prove that we still are a core food exporter,” she said.
In peacetime, Ukraine’s food exports, the bulk of which were shipped through its Black Sea ports, provided enough calories to feed 400 million people. Its farmers supplied a tenth of the wheat and half of the sunflower oil on world markets.
Russia’s invasion and blockade of the Black Sea saw shipments plummet to zero in March 2022. Since July, a U.N.-brokered deal has allowed Ukrainian food exports across the Black Sea to resume, but, up for renewal next month, its future hangs in the balance.
Ukraine has previously had ambitions to develop its processing industry, but Russia’s blockade of its seaports has been “a trigger,” said Svydyrenko.
Ukraine cannot afford to reduce the volume of agricultural goods produced, making it dependent on exporting vast amounts including through the grain deal. “So that’s why we need to go deeply into processing,” she explained, adding the government was currently trying to set up grants for the sector to make this happen.
The EU’s role in helping Ukrainian businesses in this endeavor, and in enabling European firms to enter Ukraine, will be part of the discussions in Brussels this week, said Svydyrenko. She also called on the bloc to strengthen sanctions against Russia by targeting its nuclear industry.
“It’s our accession to [the] EU market and the EU accession to [the] Ukrainian market as well. So it’s also … pre-conditional steps before the full integration,” she said.
The EU accorded Ukraine candidate status last June but, at the recent Kyiv summit, the bloc’s leaders declined to set a timeline for completing talks, mindful that the country’s vast agrarian economy would stretch its farm subsidy budget to breaking point.
