A comprehensive recovery is the real goal of the ongoing efforts to support Ukraine. The country is on a quest for a better future, as a fully independent and democratic country. Recovery means something broader than physical reconstruction, with a fundamental role for civil society as well as state and local institutions.
Business is a key component of the reconstruction efforts, but it clearly needs support from the government. In order to operate safely and efficiently within an international framework, business needs such things as insurance schemes, public-private partnerships, and stronger rule of law. The EU’s regulatory role is therefore essential to Ukraine’s future, particularly given the economic opportunities provided by links to the EU. Both natural and human resources in the country can only be mobilized in the context of a progressive transformation of its economic structure. And that, in turn, requires reliable connections with the rest of Europe and the global economy.
The key priorities for the Ukrainian economy can be described as trade, investment, and logistics. It should also be kept in mind that from a European perspective some of these sectors are of truly strategic significance given Ukraine’s geopolitical role. But for all this to start moving, international actors and agencies need to help the country relaunch its labor market and create a local ecosystem that is attractive for international capital. Clearly, this also presupposes basic security guarantees to ensure deterrence and prevent new Russian attacks down the road.
While corruption and inefficiencies need to be tackled at various levels, some basic needs are more urgent for the population at large, such as housing, energy supplies, training and education. A delicate balance will have to be struck between the will, on one hand, to rapidly restart the civilian economy beyond the war effort and the need, on the other, to put the country on a fully democratic trajectory by strengthening its institutions. Both processes are indispensable to gaining people’s trust in state institutions, political pluralism and economic opportunities. Clearly, today, such trust is low and declining, for understandable reasons.
The ultimate goal is to transform Ukraine from a war economy into a functioning peace economy. The country must go from being low income to middle income, while maintaining an adequate set of capabilities for deterrence and territorial defense. Furthermore, due to the size of the diaspora, the country is also facing a major demographic challenge. This will only complicate the transition and future stabilization of a balanced economy.
The main catalysts of a successful Ukrainian recovery can be EU membership, international private capital, and local Ukrainian capital on the ground. In all three areas, competition must play a positive role, by simultaneously opening up the Ukrainian market and encouraging other European countries to keep their own markets open, despite concerns in sectors such as agriculture, which is so big in Ukraine as to create serious distortions for some EU producers.
Looking at the evolving US position and at the wider international context, the attitude adopted by the Trump administration certainly poses a challenge. According to most participants, there are elements of uncertainty but also reasonable hopes of continuing international support.
It is likely that the Senate will pass an authorization for the president to use secondary sanctions to increase the pressure on Russia, and that a mechanism will be set for new arms and munitions shipments to Ukraine. This is actually not the preferred deal that Trump had initially envisaged, but from his perspective it is still compatible with the priority of keeping the US out of the war and of finalizing the minerals agreement. Washington’s approach posits that creating significant American economic interests will suffice to stimulate a political interest that, in turn, will make even generic commitments credible in Moscow’s eyes.
Regardless, any effective and long-term effort to better integrate the Ukrainian economy will also require multilateral commitments and involvement by international agencies and non-US business actors. Even developing the country’s mining industry implies relying on complex value chains that go beyond bilateral US-Ukraine cooperation.
Some conference participants believe that EU enlargement will continue to be opposed by Russia just as vehemently as NATO enlargement – especially to Ukraine. This is because the EU poses an existential threat to Putin’s vision of his country and to his concept of spheres of influence, which remains a lodestar of his foreign policy. It is also true that EU membership for Ukraine is a controversial prospect for several European countries, and thus will be a topic of difficult political negotiations.
The overall Russian attitude toward national security and even outright territorial expansion or revanchism makes it likely that destabilizing efforts of a hybrid and multipronged nature will continue well after a possible Ukrainian ceasefire or even peace arrangement of some sort. This prospect should set the stage for future policy decisions by the EU, NATO and individual countries across Europe. Essentially, Putin views the invasion of Ukraine as a proxy war on the West; gray zones are a source of potential danger exactly because of their undefined strategic standing, which Russia is likely to exploit again whenever possible.
There is a strong argument to be made that it is in the EU’s interest to engage and integrate Ukraine. A variety of strategic reasons – from mineral resources to energy, from agriculture to defense – suggest that the EU-Ukraine partnership can be mutually beneficial: it is a two-way street.
China is key to the evolution of the conflict in Ukraine, given its role as a supplier to the Russian war effort. Beijing does not control Moscow’s decision-making process, but its influence is evident. Chinese support has basically allowed Russia to compensate for its continuing economic losses due to the war. Looking ahead, China remains a factor in Ukraine’s and Russia’s future economic prospects: while its partnership with Moscow may not be “without limits”, it has certainly not been repudiated.