Why the Ukraine Recovery Conference Was a Success

Thanks in no small part to the European Union, the Ukraine Recovery Conference (URC) turned out to be a remarkable success. So huge was the package of Ukraine aid that EU Commission President Ursula von der Leyen presented in London—$55 billion—that all other pledges, though significant, paled in comparison. The most remarkable feature of the commitment was not its size, however, but its duration through 2027. Add multiyear commitments by several other countries and IFIs (international financial institutions) to encourage investment and reduce investment risks emanating from war, and URC 2023 marks the transition from ad hoc to structured aid, from short-term to long-term assistance, and from charity to inclusion in the Western system of planning and finance.

The recognition of Ukraine aid as a long-term priority for Western countries represents significant progress when compared with the outcomes of a similar conference last year in Lugano, Switzerland. There, lofty principles for reconstruction and strong statements of solidarity marked the outer bounds of commitment. The new approach has four advantages: first, it establishes a floor of aid upon which improvements can be made over time; second, it allows Ukraine to plan and make commitments itself; third, it is fully in line with the emerging structure of security aid based on longer-term security guarantees rather than the current hand-to-mouth approach; fourth, it sends a signal to Russian President Vladimir Putin that aiming to outlast the West is a risky bet.

The British government had designed the conference to be all about private investment. In his opening statement, Foreign Secretary James Cleverly even announced a “private-sector-led reconstruction”. More than 500 companies signed a “Ukraine business compact”, and Secretary Cleverly proudly announced that the market capitalization of these companies added up to $5 trillion. Yet, the compact itself is only a letter of interest to invest in Ukraine—sometime in the future. CEOs of international blue-chip companies did not show up in force to sign contracts. Yes, there was some interest in investing in Ukraine, mostly from small and medium-sized companies, but many of the major investors were remarkably guarded. Even if war risks could be reduced through publicly funded “war insurance”—which became more likely through new instruments and policies introduced at the conference—“money men” remain reluctant to invest as long as bombs are falling in Ukraine.

That the British government wanted to get the private sector involved in Ukraine’s reconstruction as soon as possible was an understandable, even necessary ambition. But to some investors it sounded as if governments, after having nearly exhausted the reserves within their treasuries, had started to shift responsibility to the private sector. Understood this way, the conference in London appears to have gotten caught in a chicken or egg situation: The public sector was looking to the private sector to lead while the private sector was looking to the public sector to create the appropriate conditions first. And both were looking at Russia's frozen sovereign assets as the honey jar that would solve their investment and funding problems.

Throughout the conference, speakers referred to Russia’s frozen central bank assets, which total roughly $300 billion. The consensus view in London, voiced by American and European speakers alike, was that Russia should pay for its aggression and its war crimes. Yet, little progress was reported on Russian assets. Words remain tougher than actions. It paid to listen to the nuances: Russia was supposed to pay “in legal ways”, speakers insisted. And some talked about the “use” of these assets, not their “seizure”, referring to a proposal currently under discussion in EU countries that would temporarily invest frozen Russian assets with the proceeds dedicated to rebuilding Ukraine. To fully seize these assets, Ukraine’s allies will need to overcome significant legal and political obstacles. Concerns focus on the compatibility of asset seizure with international law, the dangerous nature of the precedent this would set, the unpredictable consequences for financial market stability and the potential of a falling-out within the pro-Ukraine alliance. One thing is clear: It will take more time for a solution to emerge, even after 16 months of war.

The consensus view in London, voiced by American and European speakers alike, was that Russia should pay for its aggression and its war crimes. Yet, little progress was reported on Russian assets. Words remain tougher than actions.

Another remarkable aspect of London’s Ukraine Conference was that the United States was on the scene. This is worth mentioning because thus far, Washington had played the role of the missing major participant—in Lugano as well as at a similar gathering in Berlin. It had sent observers, at best. The United States had kept a low profile in discussions about Ukraine’s rebuilding. Previously, a deputy national security adviser had been the highest-ranking US participant, and neither he nor any other administration official ever spoke during one of these international gatherings, acting only in the background.

This time, everything was different. Secretary of State Antony Blinken attended and brought with him a commitment of additional aid to the tune of $1.3 billion. Blinken explained that President Biden’s commitment to support Ukraine “as long as it takes” would extend to the reconstruction of the country. That was precisely what participants needed to hear. That Europe, in the end, will pay the lion’s share of the rebuilding, seemed evident. But without the United States, albeit less financially engaged, an international reconstruction alliance would have been difficult to build.

In the end, the Ukraine Recovery Conference was a success because the public sector in most (if not all) Western countries keep ploughing ahead. “Ukraine fatigue” may be inevitable, but we are not yet at that point.

Looking to read more about URC? Read Thomas' mid-conference update. You can also read Thomas' latest reports on reconstruction efforts in Ukraine: Toward a New Marshall Plan and Designing Ukraine's Recovery in the Spirit of the Marshall Plan.