In economic terms, Ukraine’s government continues to live hand-to-mouth. While the recent Berlin recovery conference and G7 Summit yielded several important outcomes, implementation remains crucial, and more must be done. Ukraine needs predictable, sustained long-term support.
Ukraine’s funding needs for 2025 are far from secure. Kyiv’s partners are working to get vital decisions over the finishing line before the start of the new politico-institutional cycle in the EU and US. While the recent Ukraine Recovery Conference and G7 Summit produced important decisions and deliverables to consolidate and scale up international support for Ukraine, there is still a long way to go. More long-term, predictable finance, access to foreign markets, and crucially, the speedy delivery of much-needed weapons and air defence systems are necessary for Ukraine’s survival.
Ukraine Recovery Conference (URC2024)
The Ukraine Recovery Conference (URC), held in Berlin on 11-12 June, was an important step in the international community's support for Ukraine amid Russia’s full-scale war. It reinforced the West’s engagement and commitment to immediate and long-term support for Ukraine’s resilience and recovery, bringing together over 3.400 participants from over 60 countries and various sectors. This included national and local governments, businesses and civil society.
More than 100 agreements, memorandums, and business-to-business agreements were signed, including substantial financial commitments including a €1.4 billion in guarantee and grant agreements under the Ukraine Facility programme, that aims to unlock up to €6 billion in investments for Ukraine. In partnership with the US International Development Finance Corporation (DFC), a war risk insurance programme to facilitate foreign investment in Ukraine includes US$50 million to reinsure policies issued by Ukrainian companies and US$300 million to insure military risks in the healthcare and agriculture sectors.
The URC2024 also hosted the first meeting of the Multi-Agency Donor Coordination Platform for Ukraine at ministerial level uniting 30 partners, which aims to sustain effective channels for assistance coordination. It also extended the dimensions of Ukraine's recovery to four main areas: business, human capital, municipal and regional development and European integration. Significant emphasis was given to the sustainable recovery of a competitive economy as well as funds to achieve these targets in various sectors.
Areas of focus included energy infrastructure, transport and municipal sectors, and access to finance for SMEs. Most projects were dedicated to immediate recovery and modernisation of Ukraine’s energy sector whose generation capacity was largely destroyed by recent Russian attacks. Memorandums signed with leading energy companies aim at immediate and long-term reconstruction including restoring hydroelectric power plants, shifting to decentralised electricity production, increasing the use of renewable energy sources and energy-efficient technologies, building smart grids.
Another priority of the URC2024 was the participation of the defence industry as a crucial business sector. Its development will allow it to enhance Ukraine’s defence capability and protect other industries.
The greater involvement of the private sector, compared to the 2023 London conference is vital. Business is expected to play a pivotal role in Ukraine’s reconstruction and economic growth. New tangible tools have been developed for de-risking and reducing borrowing costs for investments in Ukraine to attack private investors. This includes loan guarantees from G7 countries and the EU, political risk insurance tools, blended financing, commercial reinsurance projects, and state-sponsored programmes. Moreover, the established Business Advisory Council will include CEOs of leading global companies and provide practical advice and consultations on improving the business climate and scaling up investments from the private sector.
Implementation is key
While many declarations of intent and commitments were made, implementation is crucial. This is unlikely to be straightforward without clear procedures and adequate institutional capacity at the national and local level to prepare high-quality investment projects and ensuring transparency and efficiency of funding, as well as integrity in the reconstruction efforts.
Much also depends on the security situation in the country, with Ukraine receiving more air defence systems, continued international support and macroeconomic stability, as this is crucial for a conducive business environment. A strategic vision of Ukraine’s future as a secure, sovereign and independent state and strong EU and Ukrainian political resolve to advance Kyiv’s EU accession negotiations (their official launch is expected on 25 June) will also help secure successful reconstruction and modernisation based on the principle ‘build back better’ and provide greater confidence for local and foreign investors.
Big decisions at G7 summit
The subsequent 13-16 June G7 summit in Italy also brought good news. After months of dithering and prolonged discussions over legalities – particularly from European countries – G7 leaders agreed to provide Ukraine with $50 billion in loans through the Enhanced Revenue Acceleration Loan (ERAL), secured by interest on immobilised Russian sovereign assets. The change of heart transpired following the stalled US funding package during the first months of 2024. Many Europeans feared this could be a harbinger of things to come, or even worse in the event of Donald Trump’s return to the White House. Not being able to stump up this amount of money themselves, frozen assets were seen in a different light.
While the EU had already adopted a plan to take the interest from the assets and use it to finance arms and other aid for Ukraine, Washington pushed to "front load" the revenue from the assets by using them to give Ukraine a big lump sum immediately rather than gradual payments. The loan will be provided by G7 countries and the EU, based on the size of their economies. It will be repaid using future interest from the sanctioned Russian assets (about €3.5 billion a year).
Ukraine is expected to receive the money by the end of the year. Funds could be used for different purposes, including military, budget, reconstruction, and humanitarian support. This approach allows Japan, which constitutionally cannot fund military expenditures abroad, to participate.
While this is a positive step and will help Ukraine survive throughout 2025, €50bn is a drop in the ocean when you are fighting a full-scale invasion and trying to keep your country financially afloat. While it will be supplemented by other financing strands, including the Ukraine Facility, it still falls short of the hundreds of billions Ukraine will need to completely recover from the damage the war has inflicted on the economy, while failing to give Ukraine sustained, long-term financial security. Using the confiscated Russian assets held in Western jurisdictions (some $300 bn) is a potential solution.
Russian Retaliation
While the US is ready to seize and confiscate the entirety of frozen Russian assets, significant opposition to such a move remains due to concerns over legal and financial stability.
Moscow already claims that the West is stealing its money and has broken its global rules and norms on the inviolability of foreign reserves. Russia’s main targets are the countries of the Global South. While Moscow hopes that many will withdraw reserve deposits in G7 countries, so far this is not the case. Moscow also threatens to confiscate the assets of foreign companies in Russia, which are held in special accounts, to which access has been blocked since the start of the war.
The G7 decision should be considered as an intermediate step and direct confiscation of the $300 billion frozen Russian sovereign assets should not be ruled out. G7 leaders have already made it clear to Moscow that the actual assets will remain frozen until Russia agrees to pay reparations for the damages Ukraine has sustained over the past two years of the war.
A further tangible result was the signing of security agreements with the US and Japan. While the deal with Washington includes strengthening Ukraine’s capacity to sustain its fight over the long term and accelerating Ukraine’s Euro-Atlantic integration, it is far from the Israel type agreement that Kyiv hoped for. Meanwhile, the deal with Tokyo provides Ukraine with $4.5 billion, and assistance in security and defence, apart from technical, humanitarian, and financial cooperation. It is the first agreement with a country outside of NATO and from the Asia-Pacific region.
Sustained support
While all these steps are positive, there is no room for complacency and self-congratulation. The situation in Ukraine remains dire. The cost of rebuilding is now estimated at $486 billion, and it rises every day.
While Ukraine’s partners have demonstrated important support for the country and its recovery and long-term development, it does not amount to a strategy for the major challenges ahead, including US funding (nearly $45 billion per year) potentially drying up in case Trump returns to the While House. As Ukraine’s Prime Minister stated, “Ukraine needs predictable, rhythmic and stable support” to build a sustainable, prosperous and secure future. Rapidly implementing agreements and securing long-term finance for Ukraine is crucial. Yet, without the necessary weapons to drive Russia from its lands, sustainable peace will be impossible, and the cost for the West will be much higher.
Amanda Paul is a Senior Policy Analyst and Deputy Head of the Europe in the World Programme at the EPC.
Svitlana Taran is a Fellow in the Europe in the World Programme at the European Policy Centre.
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