China on the Offensive
How the Ukraine War Has Changed Beijing’s Strategy
It has been over four months since Russia launched an unprovoked military offensive in Ukraine, expanding an eight-year-long conflict and unleashing untold destruction and suffering on the Ukrainian people. In that time, Ukraine has halted Russia’s advance on the back of a monumental whole-of-society effort. It remains unclear how long the war will last, but what is clear is that this war will end with a Russian defeat and a sovereign and independent Ukraine emerging as a new European power. Russian efforts to orchestrate regime change have failed, and Moscow’s meager military gains in Ukraine’s east and south have come at a debilitating and ultimately unsustainable cost.
In repulsing Russia, Ukraine will win the admiration of the democratic world and emerge as a shining example for other fledgling democracies, especially in the post-Soviet space. Yet in the immediate aftermath of the war, Ukraine will be in desperate need of reconstruction. That is where the United States and its allies must help. With their assistance, Ukraine’s unyielding and resolute democracy can also become a thriving economy. Together, the democratic world and Ukraine will share the responsibility of converting Ukraine’s hard-won freedom into a century of mutual prosperity.
Moscow’s current offensive in eastern Ukraine is almost over. The Russian military is struggling to replenish personnel, raise low morale among its troops, manage the degrading quality of its military equipment, and suppress Ukrainian resistance in captured territories. At this crucial juncture, it may be tempting to dream of peace talks, off ramps, and negotiated settlements. But pursuing a negotiated peace is a decision for Kyiv to make on its own terms. Until then, Ukrainians will continue liberating their country. The West cannot take its foot off the gas. Ratcheting up sanctions and diplomatic pressure on Russia while expanding aid are the keys to a Ukrainian victory that staves off long-term conflict, regional instability, and further escalation. Within this context, Western countries must focus on their own efforts to support Ukraine’s counteroffensives and its long-term plans to rebuild the country.
Thus far, Western advocacy has rightfully focused on supplying Ukraine with the lethal aid it needs to prevail. Such aid is only one piece of the puzzle, however. Ukrainian Prime Minister Denys Shmyhal and the Kyiv School of Economics have estimated that war reconstruction costs will total nearly $750 billion—a colossal sum that will only increase as the conflict continues. Werner Hoyer, president of the European Investment Bank, has gone a step further—estimating that Ukraine may need as much as $1 trillion for reconstruction. Representatives from the Ukrainian government have also stated that Kyiv will need $5 billion per month for up to five months in economic assistance to sustain the war effort and cover budgetary expenditures. External support from the United Kingdom, the United States, and the European Union will be vital to balancing Ukraine’s budget, rebuilding the country’s damaged infrastructure, and recouping Ukrainian losses. Given Ukraine’s sacrifice for democratic values, mending these wounds will require economic investment on the scale of a twenty-first-century Marshall Plan.
The time to start gathering resources for Ukraine’s reconstruction is now, not once the war has ended. Reconstruction, especially in regions such as Kyiv and Chernihiv that are hundreds of kilometers from the eastern and southern battlefields, need not wait until hostilities conclude. Delaying this all-important task will only extend the suffering of millions of Ukrainians. Small-dollar donors, wealthy philanthropists, and corporations alike have already contributed to the flood of humanitarian aid. But these efforts are diffuse and tend to address acute short-term humanitarian needs rather than the long-term revitalization of Ukraine’s economy. These actions reflect genuine altruism and solidarity, but outsiders will struggle to judge their value without more information on the allocation or oversight of these funds. After all, war does not eliminate the possibility of corruption, a problem that has dogged Ukraine in the past.
Together with other allied and partner governments, Washington must therefore create a series of multibillion-dollar reconstruction funds for Ukraine. Western countries should provide the capital and technical expertise; Ukraine should provide the vision. Allied countries can finance this reconstruction effort through a range of sources, including grants and loans, forfeitures and reparations from Russian sources, public-private partnerships, and public and private equity. Organizationally, the most logical route might be to establish these funds on a bilateral basis, between the United States and Ukraine, for instance. This strategy would fit with proposals put forward by the Ukrainian government at the recent Ukrainian Recovery Conference in Lugano, Switzerland. Individual countries could draw on these funds to manage reconstruction in particular regions, cities, industries, or communities.
Given the history of corruption in Kyiv, some may balk at making such sweeping donations. But even if the problem of graft has not fully disappeared, the political circumstances in Ukraine have fundamentally changed since February 24. The country’s population now shares a collective purpose that, in the postwar period, will help forge a sense of unity around European values and integration. Those entrenched political forces seeking to resist reforms and anticorruption efforts will find themselves facing the iron resolve of a Ukrainian people hardened by the struggle to preserve their democracy and independence. The country has also rallied behind President Volodymyr Zelensky, who now has an unprecedented degree of political capital. If he uses it wisely, Zelensky has the opportunity to break barriers to reform. His government’s popularity could usher in Ukraine’s emergence as a truly twenty-first-century democracy, complete with modern cities and infrastructure. In this respect, U.S. President Joe Biden can aid Zelensky by couching reconstruction in terms his administration holds dear: build back better. Merely replacing destroyed infrastructure with more of the same should not be the end goal. Refurbishing an outdated Soviet-era airfield makes less sense than striving to connect satellite cities around Ukraine’s largest metropolitan centers with a high-speed rail system.
In the aftermath of the war, Ukraine will be in desperate need of reconstruction.
As with the original Marshall Plan, grants should fund the majority of these infrastructure projects. Washington’s post–World War II effort to revitalize Western European economies stands out as one of the greatest long-term investments in U.S. history precisely because it did not overburden aid recipients with debt. After fighting for their freedom and defending the liberal order, Ukrainians shouldn’t be saddled with unsustainable financial commitments. Although loan programs and international financial institutions will play an important role, the bulk of reconstruction must be carried out by using government grants.
The U.S. Marshall Plan for Ukraine should be housed in the U.S.-Ukraine Charter on Strategic Partnership, a 2021 document that outlines guiding principles for bilateral cooperation. Cabinet-level officials would lead the fund, backed by a binational board of directors to round out oversight. To facilitate broader international cooperation, board members could also participate in the “Joint Coordination Group” that Ukraine proposed as part of its recovery platform in Lugano. A majority of seats would be reserved for Americans—including high-profile individuals whose reputations would lend legitimacy to the enterprise—who would ensure the proper use of U.S. loans and grants. The remaining spots would go to Ukrainians, who would provide the institutional knowledge and on-the-ground experience necessary to specify exactly where the fund should allocate resources. As Ukraine progresses with reforms and reduces corruption, however, Ukrainians could eventually gain a controlling interest on the oversight board.
In the best-case scenario, this ambitious approach could serve as one piece of a broader Western stimulus package for the Ukrainian economy. A unified reconstruction fund could also act as a beacon for donations from the public sector, which would have a single, reputable way to back U.S. reconstruction efforts in Ukraine. As a complementary measure, moreover, the U.S. fund could also supply existing nongovernmental organizations, such as the U.S.-Ukraine Foundation and U.S.-Ukraine Business Council, with additional grant money to scale up their work.
Irrespective of U.S. contributions, the most important element of a potential recovery program will be a new EU-Ukraine reconstruction fund. Brussels has a lot riding on Kyiv’s success, given Ukraine’s proximity to the EU and strong links to many European economies. An EU program could be nested within a broader plan for Ukrainian accession into the body, which may come in the near future now that Kyiv has officially received EU membership candidate status. Once in place, new funding and development projects could branch out from existing institutions, such as the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank. The EBRD is already well positioned to meet the challenge of economic recovery, given its roughly $17 billion investment in Ukraine and $4.2 billion portfolio of current projects within the country.
The success of an EU-Ukraine reconstruction fund will not depend solely on the EU, however. As part of this arrangement, Ukraine will need to meet a series of EU benchmarks, including setting up new anticorruption institutions and a court system capable of delivering accountability. Ukraine also should receive a massive influx of European capital that is contingent on it purging graft. Like the U.S.-led fund, the EU could set up a high-level commission focused solely on EU-Ukraine relations. This commission would guide reconstruction efforts and liaise with counterpart funds in the United States and elsewhere. Ukraine and the EU might also explore a mechanism through which Ukraine would set the pace of accession and the funding it receives based on its willingness to institute reforms.
The time to start gathering resources for Ukraine’s reconstruction is now.
Venture capital and private equity will be another important element of Ukraine’s reconstruction efforts. For private equity to flourish, however, governments will first need to address investment risks such as ongoing conflict and postwar corruption. Despite enormous goodwill, at least initially, private investors will be wary of directing their money to a war-torn country. To address their fears, the United Kingdom, the United States, and the EU should provide institutional support to investors through agencies such as the U.S. International Development Finance Corporation. Such agencies and other comparable institutions could underwrite some of the risks inherent in investing in a postconflict environment. Congress will need to appropriate additional funding and pass new rules and regulations that allow its agencies to support business investment in Ukraine.
Allied and partner countries could also protect investments in Ukraine using more creative methods. To ward off another war of aggression in the near term, Western governments could threaten to seize previously untouched or frozen Russian assets, including estates, planes, yachts, and bank accounts in the United Kingdom, United States, and EU. The message, whether implicit or explicit, would be that any new aggression would lead to further seizures and selloffs. In this way, Russia’s ill-gotten gains could be transformed into a kind of insurance for the Ukrainian economy and investors. Finally, international financial institutions should continue to suspend or exclude Russian representatives to maintain pressure on Moscow while limiting its influence on policies toward Ukraine.
Taken together, a multinational wave of support for Ukraine would be a powerful opportunity for democratic renewal. In the best-case scenario, the United States could rally allies across the world to defend democracy and reconstruct a victim of authoritarian aggression. If successful, governments could frame these efforts as a template for future assistance to other countries targeted by autocratic regimes. States could preserve the structure of Ukraine-focused umbrella organizations and international cooperation efforts—harnessing them in the event of an authoritarian war of aggression down the road.
Here, public diplomacy will be indispensable. Although the transatlantic alliance has generally closed ranks in support of Ukraine, it is not yet clear that this solidarity extends to the entire democratic world, particularly among countries in Africa, Asia, Central and South America, and the Middle East. As such, the United States must communicate that its support for Ukraine is neither an unrepeatable exception nor a double standard. If this is handled with grace and humility, Washington could position support for Ukraine as emblematic of a transition to a new era of democratic unity in which the United States plays an active role as a facilitator, partner, and guarantor. This would send a powerful message of solidarity and resilience to both developing democracies and would-be aggressors.
Ukraine is winning this war. But the heroic sacrifices of Ukrainians will all be for naught if the United States and its allies wait too long to support Ukraine’s economy, only to move on to the next news item once the war is over. There is danger in Western complacency, and allied states must not squander this moment of political goodwill and unprecedented solidarity. Instead of bombed-out apartment blocks and the twisted wrecks of industry, Ukrainian refugees returning from abroad should witness the emergence of a beautiful and prosperous Ukraine—whole and secure in Europe. That is the vision Ukrainians are fighting and dying for. That is the dream that the United States and others can help make a reality. That is the future the Ukrainian people deserve for saving democracy and preserving a democratic twenty-first century.
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