Ukraine’s recovery depends on security guarantees

NATO membership may be off the table, but long-term investment will only come with effective deterrence against future Russian aggression, writes John Lough.

The World Today
4 minute READ

There is no shortage of creative thinking in Kyiv and western capitals about how Ukraine should rebuild itself when Russia’s war ends. The first international conference on Ukraine’s recovery in Lugano last July emphasized the possibilities for new approaches, including digital transformation and a move to green energy as part of a process to modernize society providing for gender equality and respect for human rights.

Private investors will finance much of the post-conflict reconstruction, likely to last more than a decade

This year’s Ukraine Recovery Conference in London, on June 21 and 22, is taking a shorter-term approach, focusing on mobilizing support for public and private investment in reconstruction.

Ultimately, it will be private investors who will finance much of the post-conflict reconstruction, likely to last more than a decade. This will include the rebuilding of critical infrastructure, the creation of new transport systems, the clearing of mines from vast areas of agricultural land and the establishment of new industries.

Reducing corruption

Western governments have rightly drawn attention to the need for Ukraine to improve its standards of integrity, transparency and accountability if it is to attract investment. In plain language, this means reducing the space for corrupt practices that have plagued Ukraine for 30 years. Since the Revolution of Dignity in 2014, Ukraine has made considerable progress in addressing some of these problems even if it still has far to go to uproot deeply embedded clientelism and establish a culture of rule of law.

With no end to the war in sight, Ukraine’s western allies now recognize the urgent need to sustain its economy in the short term. While a $15 billion IMF package is set to unlock large-scale financing from international donors to stabilize public finances, western governments are focused on finding ways of channelling investment to Ukraine to support its immediate reconstruction needs by creating political risk insurance mechanisms. The challenge is to provide coverage of wartime risks.

The World Bank, together with the European Commission and the Ukraine government, has calculated that the country needs an extra $11 billion in 2023 beyond its own commitments to invest in critical reconstruction projects. They estimate the cost of Ukraine’s recovery from the first year of the war at over $400 billion, more than double the country’s gross domestic product in 2021.

Although the western allies are focused on Ukraine’s short-term needs, there is a lack of thinking about the mid- to long-term recovery process. The reason for this is that there is no shared vision of how the war will end and the extent of the destruction and damage that will be caused.

Will Ukraine re-establish control of all its territory inside its 1991 borders, or will it have to compromise for something less? Will a smouldering conflict continue akin to the situation that arose in 2014-15 after the signing of the Minsk agreements? Assuming the war does not continue indefinitely, how much of Ukraine will require rebuilding? How many of its citizens will have left the country and how many will return? What condition will its social capital be left in?

The need for guaranteed security

While there can be no immediate answers to these questions, the prerequisite for Ukraine’s reconstruction and recovery is guaranteed security.

Leading NATO countries are keen to avoid this discussion for the moment because it inevitably concerns Ukraine’s membership of the alliance. Although NATO stated in 2008 that Ukraine would join the alliance, even if there was no indication of timing, there is a widespread belief among member states that fast-tracking Ukraine’s membership at this stage of the war could have unpredictable consequences and become a divisive issue within the alliance. France and Germany were notably reticent on the issue when President Volodymyr Zelenskyy visited Berlin and Paris in May.

A Membership Action Plan for Ukraine will remain off the table at the NATO summit in July

The NATO summit in July is expected to kick the can down the road and re-confirm its open-door policy, although Poland and the Baltic states are lobbying for an immediate commitment to provide security for Ukraine. However, a Membership Action Plan, effectively an invitation to start the accession process, will remain off the table.

As the scale of the rebuilding challenge becomes clearer, it is going to be harder for the West to ignore the question of security guarantees for Ukraine. Non-binding security assurances such as those given to Kyiv in 1994 by the US, Russia and Britain after Ukraine voluntarily gave up its share of the Soviet nuclear arsenal proved worthless and cannot underpin successful long-term reconstruction. Without effective deterrence against Russian aggression, investment will not reach Ukraine at the levels required.

The lesson of history

History points to the role of external security in safeguarding a country’s post-war recovery. West Germany’s economic miracle after the Second World War was the result of several factors, including the secure environment created by Allied forces on its territory before 1955 when it joined NATO and after. The accession of the Czech Republic, Hungary and Poland to NATO after the Cold War led to a sharp increase in foreign direct investment in Central Europe.

The perception that Ukraine is fighting a war that is protecting western interests will weigh heavily on western capitals

In the short term, it is likely NATO will agree practical steps to bring Ukraine closer to the alliance, and it is possible that Ukraine may later receive interim security guarantees from some NATO members. The steady expansion of western arms deliveries to Ukraine suggests that NATO allies are gradually becoming bolder in their support and less concerned about the risks of Russian escalation. The critical factor will be the position of a future US administration on NATO membership.

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It will not be difficult to make the argument to European publics that Ukraine has earned the right to become a NATO member thanks to the bravery and sacrifice of its people in the face of Russia’s aggression. At the G7 Ukraine Recovery Conference in Berlin last October, German Chancellor Olaf Scholz and Ursula von der Leyen, the EU Commission President, noted that Ukraine was not only fighting for its own sovereignty and territorial integrity, but defending the international rules-based order.

A dramatic reshaping of Europe 

This perception that Ukraine is fighting a war that is protecting broader western interests will weigh heavily on western capitals when they eventually confront the issue of NATO membership. A modernizing Ukraine anchored as an integrated member of the Euro-Atlantic Community will be a powerful force in a historical process that can contribute to the re-constellation of Russia as a country with a post-imperial identity, a different balance of relations between its centre and its regions and a security policy that requires neither undermining the independence of its neighbours, nor a confrontational relationship with the West.

Russia’s war on Ukraine has created the possibility for a dramatic reshaping of Europe to the advantage of the western world and with implications that extend far beyond it. Bold decisions will be needed to seize this historic opportunity.