Though ceasefire negotiations between Russia and Ukraine could go on soon, Ukraine’s economic recovery will be interrupted unless the European Union quickly tracks membership in war-torn countries and offers hundreds of billions of euros of insurance and investment, experts tell Al Jazeera.
“I think what Ukraine needs is a kind of future that builds stable and defensible borders. I think it will only come with EU membership,” historian Phillips O’Brien told Al Jazeera.
Last month, President Donald Trump’s US administration handed Ukraine and Russia a ceasefire proposal to exclude Ukraine’s future NATO membership, meet the key demands of the Kremlin and leave Ukraine without the guarantees that security demands.
“What kind of businesses actually risk participating in financially?” asked O’Brien. “If NATO is off the table, and Ukraine could be restructured and integrated into Europe, I think it must be done through a rapid EU membership.”
The European Commission began negotiations at a record time last June, and Ukraine has EU heavyweight support like France and Germany, but its membership is never guaranteed.
If Ukraine becomes a member of the EU, it will still face a catastrophic economy that requires enormous investment.
The Kyiv School of Economics (KSE) estimated that between the full-scale Russian invasion last February and the onslaught of Moscow destroyed $170 billion in infrastructure, causing the housing, transportation and energy sectors to be the most affected.
Those figures did not include the damage caused by almost a decade of war in the eastern regions of Luhansk and Donetsk since 2014, or the 29% loss of Ukraine’s gross domestic product (GDP) from the 2022 invasion.
According to Secdev, a Canadian geopolitical risk company, its territory contains almost half of the mineral wealth of Ukraine’s minors, worth an estimated $12.4 trillion.
It also does not include some types of reconstruction costs, such as chemical decontamination and mine removal.
The World Bank has forecast the cost of infrastructure damages to just $17.6 billion this year, with approximately $525 million for reconstruction and recovery over the course of 10 years.
“The Kremlin certainly plundered the occupied territory.”
Since the Donetsk and Luhansk invasion in 2014, economic wars have been part of Russia’s strategy, claiming Maximilian Hess, a risk analyst at the International Institute for Strategic Studies and Eurasian expert.
“The Kremlin certainly plundered the occupied areas, including coal, agricultural products and iron coke,” Hess told Al Jazeera.
The KSE estimates that Russia stole 500,000 tonnes of grain, included in a $19 billion damage claim to the agricultural sector.
Russia also targeted industrial hubs that were not under its control, using long-range rockets.
Ukraine inherited a series of Soviet factories, including the Khalikov Tractor Factory, Zaporia Auto Factory, Dnipro’s Pibdenum Mash Rocket Maker, and the giant steel factory.
“Everyone was targeted by the Russian army,” Hess wrote in his recent book, “The Economic War.” “The Russian attacks, of course, were primarily intended to destroy the Ukrainian economy and undermine its capabilities and battles, but they also raised costs to the West of supporting Ukraine in the conflict.
Through its occupation and targets, Russia was able to steal the prosperous metallurgical sector from Ukraine.
According to the US Geological Survey, metallurgical production fell 66.5% as a result of the war.
That’s a huge loss considering that Ukraine once produced almost a third of the iron ore of Europe, Russia and Central Eurasia, half of the manganese ore in the region and a third of titanium. It is the sole producer of uranium in Europe and an important resource in the exploration of greater energy autonomy on the continent.
The Ukrainian claim is that it built a $20 billion defence industrial base with the help of the Alliance, a rare wartime economic success story.
It can compensate for metallurgical losses, Hess said: [metallurgical activities] Kryvyi Rih, Dnipro, Zaporizhzhia, and ideally in places that were finally freed from Russian occupation, will be necessary to win peace. ”
Trump’s Mineral Trade and Other Instruments
A few weeks ago, Ukraine and the United States signed a memorandum of understanding that it intends to jointly harness Ukraine’s mineral wealth.
Ukraine has pledged to put half of its revenue from metallurgical activities into the reconstruction fund, but experts doubted the concept that mineral wealth could rebuild Ukraine.
“The project has a long release period of five to ten years,” Maxim Fedoseienko, head of strategic projects at KSE Institute, told Al Jazeera. “We need to do documenting, assessing the environmental impact. It can take three years to build this mine.”
The US and the EU may invest in such mines, Fedoseienko said. [raw] However, if the investment is fair, they will only contribute to the Ukrainian economy.
Trump has presented the mineral trade as a billion recalls in military aid.
“There’s nothing far away about it. No aid was given to be repaid,” O’Brien said.
As Fedoseienko said, “If everyone says that, it’s not fair. [by] We. ‘”
In addition to fairness, Ukraine needs money. Some of these must come in the form of insurance.
For example, the official Kyiv of the state-backed war risk insurance in 2023 reached the UK. For example, Bulk Carrier returned to Ukrainian ports and defeated Russia’s efforts to block Ukrainian grain exports.
As a result, Ukraine was on track to export 57.5 million tonnes of agricultural products from 2023 to 2024 and 77 million tonnes of its marketing year from 2024 to 2025, the Ministry of Agriculture said.
“We need a major expansion of public insurance products, particularly the need for a move to seize frozen Russian assets,” Hess said.
The seizure of roughly $300 million in Russian Central Bank money held in the EU was deemed controversial, but the measure is currently receiving support.
“The Russian state committed these war crimes, violated international law and caused this damage to Ukraine. In fact, it will be a way to help rebuild Ukraine,” O’Brien said. “[Europeans] There’s a very strong case about this, but they now lack the political will to do it. ”
Ukrainian President Volodymyr Zelenskyy has already repeatedly called on Europe to use money to defend and rebuild Ukraine.
What the Europeans have done in the meantime is moving in some way towards rebuilding Ukraine.
Approximately $300 million in payments from Russian assets are converted into reconstruction every year.
The European Commission programme provides 9.3 billion euros ($10.5 billion) of financial support designed to leverage investments from the private sector.
Financial institutions such as the European Bank for Reconstruction and Development and the European Investment Bank provide loan guarantees to the Bank of Ukraine and provide liquidity.
“Ukrainian banks can provide loans to Ukrainian companies to invest and operate in Ukraine. This is a major ecosystem to fund investment and operational needs in the Ukrainian economy,” Fedoseienko said.
KSE operates an online portal with the Ministry of Finance that provides information on the various available devices.
“Is it enough to recover the Ukrainian economy?” asked Fedoseienko. “No, but this is an important program to support Ukraine.”
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