Ukraine reconstruction: EU efforts to use Russian assets progress

The EU has been planning to utilize frozen Russian assets to aid in the reconstruction of Ukraine in 2023. This move could affect assets held by the Russian central bank in Europe worth an estimated €300 billion.

During the EU executive’s visit to Kyiv in early February, Commissioner Valdis Dombrovskis stated that Russian assets will be used to pay for reconstruction of Ukraine, violently hit by Russia’s war. 

Donor countries have already designed a mechanism to coordinate financial support better. Under the political leadership of the G7, the US, the EU, and Ukraine have agreed on a mechanism for financial aid in Ukraine’s rebuilding efforts, with about equal weight.

Confiscated Russian assets for Ukraine reconstruction

The Ukrainian government is pressing to use the Russian central bank’s frozen assets to cover long-term reconstruction needs. In Europe and America, up to $300 billion in assets have been frozen.

Ukrainian Prime Minister Shmyhal claimed that Ukraine would require roughly $17 billion for “rapid recovery,” which includes urgent reconstruction needs.

There might be some progress in this area since Dombrovskis remarked: “It’s vital to start working with confiscated Russian state assets to make Russia pay for the damages it caused in this war. We’ll present an EU proposal on the issue soon”.

Short-term macro-financial assistance and long-term reconstruction project

The new rebuilding platform structure should enable better coordination of long-term reconstruction efforts and more significant short-term macro-financial aid to keep the Ukrainian government functional.

“We call it the financial Ramstein,” Ukrainian Prime Minister Denis Shmyhal stated, when 20 EU Commissioners met with the Ukrainian government in Kyiv, referring to the existing military aid framework.

The EU calls the structure the “Multi-agency Donor Coordination Platform for Ukraine.”

While the G7, which includes the US, Japan, Canada, the UK, Germany, France, and Italy, provides a political stance for reconstruction, the coordination of help is overseen by a steering committee composed of the US, Ukraine, and the EU Commission.

The US is represented by Mike Pyle, deputy national security advisor for international economics, Ukraine by Finance Minister Serhiy Marchenko, and the EU Commission by Gert Jan Koopman, the new Directorate-General for Neighborhood and Enlargement Policy at the Commission.

Reconstruction platform to rebuild Ukraine

The reconstruction platform, which is based in Brussels and has an office in Kyiv, also has a secretariat, which is represented by G7 countries and multilateral financial institutions such as the International Monetary Fund, World Bank, European Bank for Reconstruction and Development, and European Investment Bank.

The EU has offered €18 billion in macro-financial aid to Ukraine through 2023. Three billion euros were paid out in January to compensate for EU commitments that could not be met in the previous year.

Short-term financial needs and support

Serhiy Marchenko, Ukraine’s Finance Minister, warned of macroeconomic concerns with monetary funding. The Ukrainian government has turned to print money to fund defense and other public expenditures.

The EU is set to send out the next batch of cheap loans in March. These payments, however, will be subject to Ukraine implementing reforms.

Also, in the spring, the IMF will likely approve a large loan to help the Ukrainian government financially.

While the donor platform, or “financial Ramstein,” is currently primarily concerned with organizing this very short-term macro-financial support, “this will evolve into a body concerned with Ukraine’s more long-term needs,” according to Kleine Brockhoff, as reported by Euractiv.

World must stop the war in Ukraine before beginning reconstruction

However, before any reconstruction can begin, the EU and the rest of the world must assist Ukraine and its army in stopping Russia’s war and repelling invaders in the Donetsk region and the country’s south. 

The Russian attack on Bakhmut and the Donetsk region, as well as missile assaults on multiple cities, continues. Tanks and long-range missiles approved by the West will be incredibly helpful in achieving this objective.