Russia is waging a war of attrition. Artillery shells and logistics dominate. If both sides maintain their will, economic resilience will likely determine the outcome.
Moscow’s economy has declined, but sales of raw materials from Russia will keep Vladimir Putin’s regime supplied with war products for a long time to come. Ukraine’s production capacity, on the other hand, collapsed between 40 and 50%. Nearly 13 million Ukrainians have leak Their houses. Kyiv cannot export most of its harvest to earn foreign currency. The best guesses are that Ukraine needs $5-6 billion in aid every month just to stay afloat. Nevertheless, the heroic Ukrainians managed to maintain basic government functions while supporting a warring army.
The G-7 must create and commit to an economic plan worth hundreds of billions of public and private dollars to do more than just meet Ukraine’s immediate humanitarian needs. An economic mobilization of this magnitude would signal to Moscow that Russia is waging a financial struggle against a coalition it cannot defeat. Such a commitment, combined with a recovery and reconstruction project, would offer hope to Ukrainians.
The Center for Economic and Policy Research, a London-based network of economists, recommended three phases: emergency aid; rapid restoration of critical infrastructure and services; and lay the foundations for rapid and sustainable growth. Labor anticipates the human costs of divided families, workforce disruptions, and loss of children’s education, in addition to physical infrastructure needs. The path followed by the European Union for Ukraine’s future membership guides the integration of infrastructure, standards, foreign private investment and supply chains.
Ukraine must be a co-owner of the plan. In doing so, Ukraine must confront the obstacles that have hampered reforms since independence in 1991: corruption, the domination of oligarchs who resisted competition, the manipulation of the energy sector and the emigration of talents. . Transparency and the use of mobile apps for procurement, supported by international judges during a transition, can counter corruption and theft. Fiscal decentralization will link spending to local citizen authorities.
Where security conditions allow Ukraine to look beyond emergencies, assistance should encourage rapid recovery, conditional on accountability and achievement of measurable and verifiable milestones. To revive economic life, Ukraine – like Europe in 1948 – needs basic shelter and housing, transportation systems, social infrastructure such as schools and medical facilities, and inputs primary for production. Aid should be in the form of grants, not loans; some 90 percent of Marshall Plan support were grants.
With a healthy recovery, Ukraine’s reconstruction offers great potential. The country enjoys high levels of education; the world has witnessed Ukraine’s powerful technological and digital capabilities. Modern production capacity, designed for a carbon-free future, will serve the world well.
The G-7 in Bavaria must agree on an agency to coordinate this effort in partnership with Ukraine. The European Commission, International Monetary Fund, World Bank, European Investment Bank and UN humanitarian agencies should all be involved, but someone has to be in the driver’s seat. A central organizer will help avoid confusion and unnecessary duplication, save time for overworked officials in Kyiv and ensure accountability. The Marshall Plan created an autonomous agency which closed its doors when it finished its work; the EU should consider establishing such a model.
The G-7 must integrate the economy into a geopolitical strategy. The open transit of the Black Sea is today vital for the world food supply as well as for the future economic geography of Ukraine. The G-7 and Turkey should propose and, where appropriate, ensure and protect a neutral passage for food supplies; in the future, any settlement must guarantee Ukraine’s right of maritime transit. The coalition should also encourage China to participate in the financing of reconstruction and thus distance itself from Russia’s blunder. The G-7 must also support developing countries facing food, energy, climate, covid-19 and other threats to resilience. Otherwise, the countries of the South will conclude that the sympathies of the G-7 extend only to people who look like those of the G-7.
North America and the EU have already authorized huge sums. Yet G-7 leaders must decide if they want Ukraine to survive – and eventually thrive – as an independent, sovereign democracy. Their legislatures and publics are more likely to maintain their wartime resolve if governments can explain how aid now contributes to a cohesive plan for Ukraine’s eventual victory.
Finally, the G-7 should declare that Russia owes Ukraine compensation under international law.
During WWII, lend-lease helped American allies defeat a common enemy. The G-7 must build on this experience in deciding to empower Ukraine to win both the military and economic campaigns.