Allies Pledge $65 Billion for Ukraine, Saying Putin Will Pay the Bill

At the Ukraine Recovery Conference in London, Ukraine’s allies made promises of some $65 billion for the country’s post-war recovery and further pledged to make Russia pay for its invasion. 

The first day of the conference yesterday was attended by government and business delegates from more than 60 countries, as reported in Kyiv Post. The pledges for Ukraine included:

·      $55 billion over the next four years by the European Union.

·      $3 billion in new financial guarantees from the UK for Ukraine to access World Bank loans to fund public services such as schools and hospitals, as well as an additional $306 million in direct humanitarian aid;

·      $1.75 billion in additional support of recovery efforts from the World Bank;

·      $1.3 billion in additional aid from the US;

·      $660 million in loans and grants from international donors, as mobilized by the European Bank for Reconstruction and Development (EBRD), for Ukraine’s energy security – with a third going to Ukrhydroenergo, the hydropower entity hit by the destruction of the Kakhovka dam.

·      $420 million in further humanitarian aid from Germany.

·      $45 million in further financial support in 2023 from France with a pledge to prepare a further humanitarian, financial and economic package.

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The United Nations also announced plans to mobilize $300 million for a Community Recovery Fund to restore housing and critical infrastructure, and support local businesses in Ukraine.

The World Bank has put a cost estimate of $14 billion on Ukraine’s short-term reconstruction needs. In terms of the longer-term, a recent study by the World Bank, the UN, the European Union and the Ukrainian government said the wider recovery of the economy would cost $411 billion.

The study was done prior to the destruction of Kakhovka dam, which Ukraine’s Prime Minister Denys Shmyhal preliminary estimated at a minimum of $1.5 billion in environmental damage, which did not include losses from agriculture, in infrastructure and housing, let alone how much it would cost to rebuild the plant.

Since the beginning of the year, Ukraine has attracted $20 billion in international financial aid, while the total amount of aid provided since the beginning of the war has reached $51 billion, Ukraine’s Minister of Finance Serhiy Marchenko told the conference.

Delegates, including Ukraine’s Shmyhal, UK Prime Minister Rishi Sunak and US Secretary of State Antony Blinken, said the Kremlin would ultimately foot the bill. 

"Let's be clear: Russia is causing Ukraine’s destruction," Blinken told delegates. "And Russia will eventually bear the cost of Ukraine’s reconstruction."

The EU estimated in April that about $300 billion of assets belonging to Russia’s central bank were frozen in G7 countries. The EU’s President Ursula Von der Leyen said the European Commission would make a proposal on tapping these assets before the end of the summer.

As well as government and institutional support, Ukraine and key allies are aiming for more private-sector firms to join the reconstruction effort. More than 400 companies from 38 countries, with a combined market capitalization of $4.9 trillion, have already promised to back Ukraine’s recovery and reconstruction, the UK’s Prime Minister Rishi Sunak told the conference.

Delegates included captains of industry from major multinationals and corporations, many of whom have signed up to a new Ukraine Business Compact. Citi, Sanofi and Philips are among signatory firms who are signaling their intent to boost investment in Ukraine.

The Compact encourages trade, investment and expertise-sharing with Ukraine in exchange for assurances from President Zelensky to tackle corruption and ensure financial and legal transparency.

 To practically facilitate investment, Ukrainian President Volodymyr Zelensky has previously enlisted BlackRock and JPMorgan to advise on the Ukraine Development Fund, a medium that seeks to mobilize capital from private and public sector investors toward rebuilding the Ukrainian economy.

The Fund, in development stage, is being “socialized” at the London conference.

As reported by CNN, it aims to raise so-called concessionary capital from governments and development banks, and then use that to attract private investment. Concessionary capital is provided on more favorable terms and can include debt issued at below-market interest rates or equity from investors asking for lower returns. 

Private investors see a “tremendous opportunity” to invest in Ukraine’s post-war future, Stefan Weiler, JPMorgan’s head of debt capital markets for central and eastern Europe, the Middle East and Africa, told CNN.

Weiler, who traveled to Kyiv in February, said he was impressed by how “forward-looking” the government is in preparing for the post-war period.

The Ukrainian government has identified five industries to which initial investments from the fund will be directed: infrastructure, energy, manufacturing, agriculture and information technology.

UK Prime Minister Rishi Sunak also unveiled a “war-risk insurance” framework, backed by the Group of Seven (G7) countries, which will help limit potential losses faced by private investors in Ukraine.

“This is a huge step forward towards helping insurers to underwrite investments into Ukraine, removing one of the biggest barriers and giving investors the confidence they need to act,” Sunak said in a speech at the conference. 

Private and public sector investors are already deploying capital in the country, even though the end of the war may yet be some way off, CNN reported.

Horizon Capital, a US private equity firm, has won backing from a dozen major development finance institutions for its funds investing in Ukrainian tech and export-oriented companies, according to CNN.

Horizon’s $254 million Growth Fund, which closed to initial contributions in April, was at the time the largest Ukraine-focused fund to be established since Russia launched the full-scale invasion of its neighbor, the firm’s CEO Lenna Koszarny said to CNN.

Today, the conference will focus on both tech-led recovery and region-to-region arrangements.

"We strive to activate horizontal connections between Ukrainian communities and international partners for the implementation of restoration projects. More than 200 projects have already been launched, we want there to be many more of them," Shmyhal said. 

Meanwhile, African countries, some of whom led a supposed “peace mission” to Moscow and Kyiv last week, have voiced concern that by pumping aid into Ukraine, the West is backing off from previous pledges to help the continent with its development and to fight climate change.