The heavy cost of rebuilding Ukraine

Russia's war in Ukraine is nearing its third year, but eventually hostilities will cease. When this happens, the rebuilding process will commence, although the cost of reconstructing Ukraine from the ashes will likely be a heavy financial burden. Cities across the country lie in ruin, and restoring them to their former glory won't be an easy endeavor.

How much will it cost?

The World Bank and United Nations estimated in February 2024 — the two-year mark of the war — that it would cost about $486 billion to rebuild Ukraine, a $75 billion increase from their 2023 report. This includes "around $15 billion for immediate reconstruction and recovery priorities at both the national and community level," said the World Bank. There will need to be a particular focus on "restoration of housing, soft infrastructure and services, energy and transport." It is also over 120 times higher than the U.N.'s 2025 budget of $3.72 billion. And given that this report is nearly a year old, the cost for reconstruction is now likely even higher.

By comparison, the U.S. distributed more than $13 billion in economic aid to 17 European nations — more than $150 billion in today's dollars — in the aftermath of World War II, in what was called the Marshall Plan, NPR said, citing economists Yuriy Gorodnichenko and Barry Eichengreen. Most of that was in grants, not loans, but very little of it arrived until 1948, three years after the war ended.

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The Marshall Plan didn't pay anywhere near the full cost of reconstructing Germany and other European countries, but it did cover the costs of machinery and food that jumpstarted domestic reconstruction efforts, Harold James, a European studies professor at Princeton, said to the Brookings Institution. While 1950s Europe needed a spark in the agriculture and manufacturing sectors, he added, Ukraine could use a boost in the energy and technology sectors.

What will $486 billion (and counting) buy?

Ukrainians "see that the needs for reconstruction have continued to grow," Ukrainian Prime Minister Denys Shmyhal said to the World Bank. The "main resource for Ukraine's recovery should be the confiscation of Russian assets from the West."

Russian incursions have damaged or destroyed millions of homes in Ukraine, along with massive amounts of the country's energy, shipping and transportation infrastructure. By February 2024, there had also been "1,336 attacks on Ukraine's health system," said Physicians for Human Rights. Rebuilding these areas remains Ukraine's top priority.

Who will (or should) pay for rebuilding?

It's most likely that some combination of foreign aid from Western countries and private investment will finance Ukraine's recovery, according to consulting firm McKinsey & Company. While some may want Russian President Vladimir Putin to foot the bill, this is unlikely.

There is "not a snowball's chance in hell that Putin's Russia will pay Ukraine reparations for the destruction," Shmyhal said in The Guardian, unless the West makes it do so by using lawfully seized Russian assets to fund reconstruction.

Most of Russia's frozen central bank assets, about $220 billion, are being held in European accounts, and the EU is considering using or taxing the more than $3 billion in annual interest that those sequestered assets are producing. The U.S. Congress is considering bipartisan legislation that would give the White House the authority to simply confiscate Russia's frozen assets.

"Confiscating Russian funds is a dangerous proposition, no matter how strong the moral, political and financial case," The Washington Post said. Those assets are protected under international law, and seizing them could destabilize the dollar and the euro by scaring away international investors. "Even using the predicted earnings generated by those assets is risky, as it could expose the United States and Europe to sizable losses if markets tank."

"We understand the fears of our partners, but Russia's criminal actions are so unprecedented that fundamentally new, courageous decisions are needed," Shmyhal said. "Russia's assets should work for Ukraine," but this isn't just for Ukraine. Letting the frozen assets return to Russia "would mean the defeat of the free world and maximum injustice to Ukraine: Russia will use these resources for new wars and our country will be in ruins," he added. "We are aware that we are pioneers," but, ideally, making "the internationally recognized aggressor and perpetrator of war" pay for its crimes will become a universal system and universal deterrent.

What about corruption?

Since the 1990s, Ukraine "has had a well-deserved reputation for corruption, which it has spent the past decade trying hard to shake," said Wired. And "spending $1 trillion on potentially hundreds of thousands of different projects, with thousands of stakeholders, touching on areas of the economy and parts of local government long associated with corruption — all under the fog of war — is an incredible opportunity to get it wrong."

But "Ukraine now wants to show — has to show — that it's moving in line with other European countries" so it can join the EU, earn the trust of its citizens, and reassure international donors that their money won't be pilfered or squandered, said Wired. To do that, Ukraine has uploaded every reconstruction project into a single digital platform, allowing radical transparency for Ukrainians and international partners and providing tools to help them make smart decisions on where to invest.

Can Ukraine rebuild back better?

That is the hope in Kyiv — and elsewhere in Ukraine. "We really want to build a better country, and this is the chance that we have," Oleksandr Gryban, the deputy economy minister, said to Wired. A lot of the infrastructure Russia has destroyed was "outdated, inherited Soviet infrastructure that was not super efficient," and "we do have a chance to, as we say, to build back better," maybe becoming "the powerhouse of Europe with renewable energy, with hydrogen projects." This is a chance "we cannot waste," Gryban added, "because we're paying too high of a price."

"Look at these fields, this forest. Everything grows again," a Ukrainian sergeant who uses the call sign Fedya said to The Associated Press near Andriivka, a gutted village just south of Bakhmut. "The cities that we reclaim, they will be rebuilt." Ukraine "will clear out all that's left of the Soviet Union."