Postwar Planning Must Begin: What a Modern Marshall Plan for Ukraine Looks Like
In July, Ukraine and its international partners met for the first time to discuss reconstruction. Kyiv presented a plan; Western donor countries were not yet ready. On October 25, Germany’s government and the European Commission invite experts to a conference in Berlin to once again seek solutions for Ukraine’s reconstruction. Once again, the Western countries are not expected to present a concrete plan.
Germany’s Chancellor Olaf Scholz called for a “Marshall Plan” for Ukraine in June. The reference to this historical model is apt because the dimensions and strategic intentions would be comparable. What is really needed is a reverse Marshall Plan: In 1947, one nation—the United States—helped many; today, many nations want to help one country. At that time, there were almost no development institutions—they only came into being through the Marshall Plan; today, there are numerous international development and promotional banks. Coordinating them and bringing together the interests of donor countries is one of the great challenges today.
Preliminary estimates put the direct damage to Ukraine’s infrastructure alone at more than $115 billion and the World Bank recently estimated reconstruction costs at $350 billion. These huge sums seem less daunting when one considers that payments would be spread over several years, made by many countries and institutions, and include grants, loans, and guarantees. The basic planning framework should be in place as soon as possible and include financing, burden sharing, governance and institutional anchoring, accountability, and anti-corruption rules. A blueprint for this was recently presented by the German Marshall Fund.
Today, there are numerous international development and promotional banks. Coordinating them and bringing together the interests of donor countries is one of the great challenges today.
As long as Russia remains a neo-imperial state, Ukraine will have a security problem.
The most important prerequisite for Ukraine’s economic recovery is peace and security. Only then will foreign private investment flow into the country. But as long as Russia remains a neo-imperial state, Ukraine will have a security problem—even if the guns remain silent for a time. Therefore, the country will continue to rely on military support. Former NATO secretary general Anders Fogh Rasmussen and Andriy Yermak, the head of Ukraine’s Presidential Office, recently outlined what security guarantees for the country might look like in the form of a Kyiv Security Compact.
Because security and reconstruction are mutually dependent, they must be joint tasks of the West. Under no circumstances should the United States take over military aid and leave reconstruction to Europe and other donors. Experience shows that mutual criticism would begin on the first day. No, all partners must agree to be jointly responsible for security and reconstruction, even if not to the same extent.
The G7 could be the institutional anchor of the reconstruction project. Only under the umbrella of this group of Western industrialized countries can the great reconstruction alliance that is now needed be built, one that extends beyond Europe. A joint reconstruction coordinator—Mr. or Mrs. Marshall—can act as the face of reconstruction, mobilizing public support and exhorting states to disburse promised funds. Initially, this coordinating role should be performed by a globally known and influential American. This is also to ensure that the largest donor to date by far, the United States, remains on board.
The coordinator should base his or her task force at the European Commission to ensure that all investments happen in line with a European future for Ukraine. Even if the donors set conditions for their support, the prioritization of tasks remains with Ukraine’s government, which would, however, be advised to involve the country’s civil society as an engine of democratic development and as a watchdog.
Public money alone will never be enough. Western governments should offer “war insurance.”
The United States has so far pledged about $52 billion in military, financial, and humanitarian aid, much more than the EU and its member states have pledged at about $29 billion. But this will not be enough. Above all, future aid should be provided as grants because that is how a nation’s debt sustainability in war remains assured. The United States already does this for the most part; the EU has so far mainly provided loans. This must change so that the EU assumes a greater share of financial responsibility for its future member. So far, the EU states have avoided discussing this. The Berlin conference can make progress here.
But public money alone will never be enough. Western governments should offer “war insurance”—an expanded and heavily subsidized version of political risk insurance to cushion investment risks for firms.
Calls to use frozen Russian assets for reconstruction underestimate the legal hurdles and political and financial risks of seizure. This is especially true for Russian Central Bank funds, some $300 billion, which are protected by sovereign immunity. Also, the risks that this precedent would pose to the dollar-based world financial system are enormous. Since if and when these hurdles can be cleared by legislation in various states is not foreseeable, the funds could also one day become part of an eventual peace settlement. Or they could already contribute indirectly to reconstruction as a guarantee for further loans or through leveraged financial products.
Reconstruction plans for Ukraine cannot wait until the war is over. The Berlin conference can become an important milestone.
Ukraine needs rule-of-law reforms and a clear commitment to transparency in the reconstruction process.
Taxpayers in Western countries will reject financial aid in the long run if they get the impression that the money is being wasted or misused for corruption. Therefore, Ukraine needs rule-of-law reforms and a clear commitment to transparency in the reconstruction process. Both should be made a condition of reconstruction payments. An independent inspector general could monitor the aid program to investigate allegations of misconduct and publish accountability reports.
Reconstruction plans for Ukraine cannot wait until the war is over. The Berlin conference can become an important milestone. The United States and Europe are helping Ukraine win the war. They should not allow themselves to lose the peace.
This is a translation of an article published in Der Tagesspiegel on October 23, 2022 under the title “Die Nachkriegsplanung muss beginnen: Wie ein moderner Marshall-Plan für die Ukraine aussieht.”