The Trillion-Dollar Blueprint for Ukraine's Future

In the years we’ve been covering mega projects, we’ve seen a handful that moved beyond the “mega” stage, becoming their own stand-alone class. The sort of projects with price tags in which a billion dollars is a mere rounding error. Projects that cover such a vast area or take so many years that they come to define an entire nation or era.

Even among these rare “GigaProjects,” though, you occasionally find one that dwarfs the others. One of such colossal scope as to be almost incomprehensible.

It’s into this category that the rebuilding of Ukraine falls.

Since Russia launched its unprovoked assault in February of 2022, Ukraine has suffered devastation not seen in Europe since the end of WWII. Hospitals have been destroyed. Factories obliterated. Farmland burned. Entire cities like Mariupol have been reduced to rubble.

Yet even as the war still rages, plans are being made. To rebuild. To not just reconstruct Ukraine as it was before the war, but to create a whole new, hi-tech country. A vast, spectacular plan that could turn this shattered nation into a 21st Century powerhouse.

A New Marshall Plan

When the final whistle blew on WWII in Europe, it echoed over a continent that lay in ruins. From Britain, to France, to Poland, to Germany itself, vibrant old cities had gone—replaced by burned out husks. Industries had collapsed. Millions were dead. Millions more were displaced.

For anyone standing amidst those shattered landscapes, it must’ve felt like maybe this was it. That the destruction wrought had been so Biblical that rebuilding was simply impossible.

Yet, in the end, Europe would rebuild. And not just eventually, but quickly. By the 1950s, several of these broken nations would be enjoying economic booms.

The key to this abrupt reversal in fortune? The Marshall Plan.

First suggested in 1947 by US Secretary of State George Marshall, the plan involved America doling out interest-free grants to European countries—allowing them to rebuild on the back of the almighty dollar. Between 1948 and 1951, over $13 billion flowed across the Atlantic—equivalent to around $165 billion today.

As that money poured in, Europe began to haul itself off its knees. By 1951, industrial capacity had reached 135 percent of pre-war levels. In West Germany, an economic miracle was underway.

Today, the Marshall Plan is seen as one of the 20th Century’s great success stories—the last time such a wide-reaching, comprehensive reconstruction effort took place on European soil.

All of which may be why the idea is now being revived: some 76 years after George Marshall outlined the idea. But this new Marshall Plan isn’t intended for Europe’s west, oh no. Instead, backers of the idea have their eyes set on the continent’s far east. On a great, vast land that—as you read this—is suffering a scale of destruction not seen in Europe since the last Allied bombs fell in 1945.

We’re talking, of course, about Ukraine. A nation so utterly battered by Russia’s unprovoked assault that rebuilding it will be an era-defining event.

Doubtless you’ve seen by now footage of the drone and missile strikes unleashed against Ukrainian civilians. Maybe you’ve read reports about the shelling that leveled Mariupol. But it can be hard to truly grasp the scale of the destruction until you start looking at the raw figures. While still just estimates, they make for jaw-dropping reading.

According to the Kyiv School of Economics’ monthly report in March of 2023, over 150,000 residential buildings have been destroyed by the fighting—ranging from apartment blocks to private homes. Nearly 350 bridges have been blown up. 25,000 kilometers of roads (equivalent to over fifteen thousand miles) are now impassable.

3,170 educational institutions have been lost, including 909 preschools. Over 1,200 medical establishments—such as hospitals and doctors’ offices—are no more.

On top of that, there’s the extreme damage done to energy infrastructure by Russian airstrikes; estimated at $8.1 billion. Or the $8.7 billion worth of damage done to agricultural land—the backbone of the Ukrainian economy.

We could go on, but you get the idea. This is a nation in need of serious funds for reconstruction. The cost just to replace the damaged housing stock alone has been estimated at over $50 billion.

Perhaps it’s no surprise President Volodymyr Zelensky has called for a new Marshall Plan to resurrect Ukraine once the fighting stops. If he gets his way, what follows will be the greatest construction project Europe has seen in decades.

Costs and Benefits

Looking back, one of the craziest things about the original Marshall Plan was how the entire thing was mostly funded by American taxpayer dollars. In the middle of a major post-war boom, the US was able to pump the equivalent of 3% of its entire GDP into the reconstruction of Europe—most of it financed with public money.

75 years later, pretty much no-one expects that to be the case with Ukraine. Even without high inflation and stock market wobbles, the likelihood of Uncle Sam just whipping out his checkbook would be pretty slim.

That’s especially true when you take a look at what the overall costs are expected to be.

Now, exactly how much money Ukraine needs to rebuild is hard to say with the war still raging, and plenty of different bodies have given wildly different answers. Suffice to say, they all agree it won’t be cheap.

At the lower end of the scale, the Kyiv School of Economics thinks at least $143.8 billion will be required—a figure that’s not far off the total spent in the entire original Marshall Plan, when adjusted for inflation. And that’s just at the lower end!

Currently, the World Bank has a figure of $350 billion, although that is expected to rise with its April report. The European Union, meanwhile, thinks the true number is more like $750 billion. President Zelensky, for his part, has said he foresees the bill hitting $1 trillion by the end of the war.

That’s a colossal sum of money. Equivalent to the entire annual GDP of the Netherlands. Ukraine, for comparison, had a GDP of just $200 billion in 2021.

Still, no-one at this stage is planning a straight rebuild, in which pre-war Ukraine is resurrected exactly as it was before the first missiles hit. Rather, the idea is to find a silver lining in all this ruin. To use the war as an opportunity to sweep away Ukraine’s tired, Soviet-era infrastructure and replace it with cutting-edge Western stuff aligned to EU standards.

That necessarily means spending more now. But it also means chances of much-greater returns a few years down the line.

To get there, though, the international community will need to first find the money. One potential source? Russia.

The sole reason Ukraine’s industry, agriculture and cities are in need of repair, is that the Kremlin keeps dropping bombs on them. That’s got plenty of people wondering if the “you break it, you buy it” rule shouldn’t be applied to international relations. And while the idea of Putin willingly handing over money for reconstruction is a little far-fetched, the world doesn’t need Moscow’s agreement to give Ukraine Russian money.

That’s because billions in Russian Central Bank assets are currently frozen abroad in nations that are friendly to Ukraine. The EU alone holds over $300 billion. Rather than let the Kremlin have it back, some have suggested just giving it to Ukraine to rebuild with.

Among their number: European Commission President Ursula von der Leyen; and the UN General Assembly, which voted in a nonbinding resolution in November that Russia should pay reparations.

Since this is so self-evidently fair, it’s a pretty easy idea to get behind. Unfortunately, though, that doesn’t mean it will happen.

The White House, in particular, is loath to confiscate Russian assets held in American banks. Treasury Secretary Janet Yellen is on record saying it would not be legal. That means that—even if the EU goes ahead and appropriates the $300 billion it holds—there would still be a shortfall that would need to be plugged.

Luckily, the world already has another funding model in mind.

A New Gold Rush

Right now, one of the oddest jobs in the world must be doing advertising for the Ukrainian Chamber of Commerce. Tasked with drumming up private finance to help rebuild the nation, they’ve begun producing videos that try to sell Ukraine as “the world’s largest construction site.”

Bracingly cynical as that might be, it’s certainly worked. A “rebuild Ukraine” conference held in Warsaw was attended by something in the region of 300 companies.

It’s in these multinationals trying to make a buck that hopes for a quick reconstruction currently lie.

The New York Times summed up the sort of firms involved, in a piece that highlighted: “Latvian roofing companies and South Korean trade specialists. Fuel cell manufacturers from Denmark and timber producers from Austria. Private equity titans from New York and concrete plant operators from Germany.”

As the paper of record noted, all of them are hoping to get in on what could be a bonanza of lucrative contracts. Less a new Marshall Plan, and more a new Gold Rush.

Indeed, President Zelensky himself is pushing this message. Aside from winning the war, he’s said Ukraine’s other focus needs to be on making itself into “an attractive country for investors.”

For anyone who’s watched previous attempts to rebuild broken nations—such as post-earthquake Haiti—that devolved into an orgy of unfettered capitalism, this can make for some uneasy listening. Multinationals don’t rebuild cities for free.

Still, working with private finance may be the best chance Kyiv currently has to recover from this devastating war. And, already, companies are making inroads.

The asset-management behemoth BlackRock recently struck a deal to work pro-bono with the Ukrainians, helping them structure and coordinate their reconstruction funds. Back in November, the Australian Tattarang Group committed $500 million in seed funding to rebuilding projects.

Speaking of seeds: French sustainable farming group Mas Seeds, and company Lidea have already gained contracts to provide Ukrainian farmers with literal seeds for growing new crops.

Nor are they the only French companies in the mix. A building contract for 30 new bridges went to Matière.

And these are just a fraction of the firms who want to help resurrect Ukraine! Taken together, they form a kaleidoscope of companies and private initiatives that—so the government hopes—will soon breathe new life into their shattered cities.

The key word there, of course, is hope.

While no-one doubts the good intentions of those involved, the Ukrainians are cautious about the qualifications of some firms knocking on the door with offers of help. As the government’s point man for attracting investment, Sergiy Tsivkach, told the New York Times: “They all say, ‘We want to help in rebuilding Ukraine’ (…) But do you want to invest your own money, or do you want to sell services or goods? These are two different things.”

Still, the level of interest from these companies does give us a clue as to what this 21st Century Marshall Plan will probably wind up looking like: a mixture of public and private finance.

However, getting the money sorted is only the first step. It’s time to turn our attention away from more abstract matters to the next, concrete steps. Specifically: how reconstruction will actually work.

Build Back Better?

For those of us who have never been near a construction site, it’s tempting to imagine that rebuilding stuff is—if not easy—then at least straightforward. You just turn up with the money, men, and equipment and get to work. Right?

Well, not-so-surprise twist: it’s harder than that. Way harder. In fact, even getting to the physically rebuilding part represents a significant challenge.

In Ukraine, the biggest problem right now is securing insurance to cover these projects.

When embarking on any large-scale construction work, companies like to know there’s insurance in place, in case of project cancellation, change of government, or anything that might compromise their ability to turn a profit.

Where Ukraine is concerned, all those worries are multiplied by about a billion. Aside from the regular risks, there’s also the added extra risk that a Russian missile is going to smash into your half-finished housing block, destroying all the progress you’ve already made.

This is what’s commonly known as a “pretty friggin’ major disincentive” for insurance companies. Which is why Kyiv is having to turn towards international bodies for help.

So far, those bodies seem receptive. The World Bank, the International Development Finance Corporation, and Britain’s Export Finance agency all seem keen to get involved.

So, let’s assume this all goes well and—in the end—Ukraine gets its insurance and companies start rebuilding. The question then is: how will this new Marshall Plan operate?

Right now, the plan seems to be to centralize control of the funds as much as possible under an international body comprised of representatives of the G7 nations. The German Marshall Fund has suggested this body be headed by an American “with global stature.”

That’s pretty vague wording. The sort of description that could technically apply to anyone from Bill Clinton to Neil deGrasse Tyson. Realistically though—and happily for Pluto fans—it’ll probably be someone in the Clinton mold. And this Clinton or Clinton-like human will be tasked with implementing a series of steps the German Marshall Fund characterizes as: “relief, reconstruction, modernization, and accession to the EU.”

Well, we say a series of steps. More likely, several of them will have to happen at once: a quick foxtrot to transform Ukrainian industry from ruins into something that operates to EU standards.

Energy reconstruction, too, is intended to overhaul the economy. BlackRock and the Tattarang Group are aiming to raise and disperse money to Kyiv to be used exclusively on clean-energy investment.

But while the international bodies will be focused on the modernization part, the Ukrainian government is likely to be more concerned with simply getting the economy back on its feet. And that means the first major investments will probably be made in agriculture.

For much of history, Ukraine was known as the Breadbasket of Europe for the sheer amount of food it was able to grow and export. On the eve of the war, half of the world’s sunflower oil came from here. A tenth of all wheat was grown on the plains of the great steppe. Literally hundreds of millions of people relied on Ukrainian exports to survive.

So any Ukrainian Marshall Plan won’t involve turning the nation into an industrial powerhouse, but first and foremost turbocharging its agricultural sector.

Unfortunately, this is easier said than done. And it’s here that we get to the downbeat part of our analysis. The part where we outline all the obstacles this reconstruction program will face.

Teething Problems

Given that the Ukraine War is still ongoing, you might think the biggest problem with the new Marshall Plan would be waiting for the war to end. But that’s not strictly true. Already, limited reconstruction work is underway in the towns of Irpin and Bucha. If insurance gets finalized, even more projects might begin.

As history nerds like to point out online, this is in-keeping with the original Marshall Plan. Greece was deep in a civil war in 1948, but that didn’t stop it from getting reconstruction funds.

No, the real problem Ukraine may encounter isn’t any one, single thing. Rather, it’s a conglomeration of obstacles—all individually surmountable but, taken together, a daunting mountain.

The most-noticeable of these? That would be landmines.

In a recent article, Politico argued that reviving Ukrainian agriculture is going to be way harder than we think, thanks to all the unexploded ordinance littering fields. Tens of thousands of landmines were laid right in the heart of the agricultural belt out on the eastern steppe. And, while demining operations are already underway, they take serious time. Time Ukraine may not have.

According to Politico, in 2020, 153 square km of land globally was successfully demined. Ukraine, by contrast, needs 160,000 square km cleared—a fiendishly difficult number to hit.

There’s a reason that, to this day, Kosovo, Bosnia, and even Vietnam are still riddled with unexploded ordinance. Mines and bombs are extremely hard to get rid of.

What seems likely, then, is a process of prioritization: where certain productive areas are cleared as quickly as possible to get the economy moving, while others are pushed to the back of the line.

Other potential issues are less life-or-death, but no-less tricky. Chief among them: Ukraine’s reputation for corruption.

Before the war, Ukraine had a reputation for cronyism, kickbacks and siphoning off state funds that wasn’t as bad as Russia’s, but was worse than most. Transparency International’s 2022 corruption index placed the country joint 116th with El Salvador—behind even Albania and Belarus, and only slightly ahead of Mexico and Uzbekistan.

That creates a worry for Western backers that reconstruction funds will go into the pockets of oligarchs, a worry Zelensky’s government is trying to solve with an ongoing anti-corruption crackdown.

The inverse worry to this, is that backers might wind up being too generous: saddling Ukraine with debts that it can’t possibly hope to repay. Already, Ukraine is surviving Russia’s onslaught on loans from bodies like the EU and IMF. If reconstruction money is also added to this, repayments could weigh down successive governments for decades to come.

Still, we don’t want to end on a down note.

For all the potential challenges it may face, a new Marshall Plan still looks like the best hope for rebuilding Ukraine. And—not just rebuilding, but transforming. Yanking one of Europe’s poorest nations out the post-Soviet doldrums and putting it on a path towards a prosperous future. One in which the living standards of its citizens keep rising, even as Russia slips into stagnation.

Pulling this off will undoubtedly be difficult. What mega project isn’t?

But, in the end, it’s the least the people of Ukraine deserve. Having bravely fought and died on Europe’s largest modern battlefield, the minimum the world can offer them is the chance at a brighter future.

Hopefully, it’s a future that’s just around the corner.

Key Takeaways

• Ukraine’s reconstruction is a gigaproject with costs ranging from $143.8 billion to $1 trillion.
• The new Marshall Plan aims to rebuild Ukraine with modern infrastructure aligned to EU standards.
• Funding for Ukraine’s reconstruction may come from a mix of public and private sources.
• Ukraine faces significant challenges including landmines, corruption, and securing insurance for projects.
• The reconstruction effort seeks to transform Ukraine into a hi-tech, prosperous nation.

Sources

• Original MegaProjects video: The Trillion-Dollar Blueprint for Ukraine’s Future
• https://www.grid.news/story/global/2023/03/02/ukraine-war-in-data-rebuilding-ukraine-for-three-quarters-of-a-trillion-dollars/
• https://kse.ua/about-the-school/news/during-the-year-of-the-full-scale-war-the-total-amount-of-damages-caused-russia-to-ukraine-s-infrastructure-has-reached-almost-143-8-billion/
• https://www.politico.eu/article/time-start-rebuild-ukraine-war-yulia-svydyrenko/
• https://www.nytimes.com/2023/02/16/business/economy/ukraine-rebuilding.html
• https://www.rferl.org/a/ukraine-rebuilding-russia-costs-marshall-plan/32193833.html
• https://www.weforum.org/agenda/2023/02/marshall-plan-for-ukraine/
• https://www.politico.eu/article/ukraine-war-wrong-marshall-plan-money-european-union/
• Hero image source by President of Ukraine / openverse, by.

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