Ukraine should be rebuilt without Russian money

Russia's invasion of Ukraine continues, in Mykolaiv
People and rescuers gather near a destroyed part of a Ukrainian government administration building following a bombing, as Russia’s invasion of Ukraine continues, in Mykolaiv, Ukraine, March 29, 2022. REUTERS/Nacho Doce

LONDON, April 6 (Reuters Breakingviews) - Natural justice would seem to dictate that Russia be asked to pay reparations for the massive damage inflicted on its neighbour. Political and practical reasons make that impossible, and even undesirable.

It’s hard to put a number on the ultimate cost of the destruction. Ukrainian government estimates range from $110 billion read more , based on destroyed infrastructure, to $500 billion, if potential losses like missed foreign investment are added to the physical tally.

A rough estimate leads to a number somewhere in the middle, based on the current state of things. Economists reckon Ukraine’s ratio of invested capital to economic output is around 5. That means its capital stock is around $1 trillion, based on the International Monetary Fund’s pre-war estimates of this year’s GDP at $204 billion. If 20% of the economy’s potential is destroyed, reconstruction will thus cost $200 billion. And the figure rises with each week of the war. It already dwarfs the $135 billion present-day value of the U.S.-led Marshall Plan that helped rebuild Europe after World War Two. It also amounts to about 12% of Russia’s 2021 GDP.

Only a truce – for now distant – can lay the foundations for long-term stability. International bodies such as the European Bank for Reconstruction and Development (EBRD) and World Bank will then assume central fundraising and organising roles, supported by national governments and the European Union. Private investors will follow in the official sector’s wake.

Barring a shock regime change, Russia is unlikely to agree to pay for the damage it has inflicted. In any case, its money will not be welcome. As with West Germany in the late 1940s, one of the central ambitions of reconstruction will be to anchor Ukraine more firmly in Europe, with which it already has a free trade agreement. Russian investment must be kept out for Ukraine to stay in.

If only to assuage public opinion, Western leaders will still want to hold President Vladimir Putin accountable. That’s one of the many reasons why sanctions are here to stay.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)


- European leaders decided on March 25 to set up a Ukraine Solidarity Trust Fund designed to “provide ... once the Russian onslaught has ceased, for the reconstruction of a democratic Ukraine”. They called for an international conference to be organised “in due time” to raise funding for the new body.

- More than $100 billion of infrastructure, buildings and other physical assets have already been destroyed since the beginning of the Russian invasion, top Ukrainian government economic adviser Oleg Ustenko said on March 10.

- The European Bank for Reconstruction and Development (EBRD) said on March 31 that Ukraine’s GDP would contract by 20% this year, assuming the destruction remained at the current level.

Editing by Ed Cropley and Oliver Taslic

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