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66 Opinion
bne July 2024
The disappointing muted tone of the Berlin conference of the Berlin Recovery conference is a prelude to the Swiss international Ukraine peace conference to be held next month, that is already considered to be a flop after key players like China and the Kingdom of Saudi Arabia (KSA) have said they won’t attend and India has downgrade its presence to sending some low level diplomats. Even US President Joe Biden has skipped the event, preferring to do an election fundraising event in California instead and sending vice president Kamila Harris in his stead.
The theme of last year’s London Recovery conference was to persuade the private sector to step up and provide the hundreds of billions of dollars required to rebuild the country that has suffered around $450bn worth of damage. That effort appears to have been abandoned completely
as unworkable and there was little emphasis on attracting the captains of industry to this event. Instead of talking about the hundreds of billions needed, the EU’s European Commission President Ursula von der Leyen offered a token €1.4bn that is less than the circa €5bn a month needed
to cover the monthly budget deficits that Ukraine is currently running.
The parties also discussed Ukraine's expectations from the results of the Peace Summit in Switzerland, Zelenskiy said on X on Tuesday.
In separate conversations, fund managers and multinationals have told bne IntelliNews that while they agree that Ukraine has massive potential and many attractive sectors, investors require predictability and worry about the risk of renewed war.
“I would love to invest into Ukraine, but if there is a ceasefire than I think most investors will wait at least five years before committing, as they need to be sure that the war won’t break out again in six months’ time,” one leading international fund manager told bne IntelliNews on the condition of anonymity.
Ukraine’s international partners also remain very reluctant to seize the $300bn of frozen Central Bank of Russia (CBR) reserve money, and earlier this year said that possibility was now off the table.
The US also seems to have accepted this decision and has proposed to use the profits earned by the frozen reserve money to back a bond issue of some $40bn – a scheme that seems to be moving ahead. Nevertheless, while $40bn is a significant amount, it remains well short of the hundreds of billions Ukraine will need to completely recover from the damage the war has inflicted on the economy.
Zelenskiy also said the shift to the right in the recent European elections was a problem for support for Ukraine as many of the right-wing parties are less keen to support Ukraine’s struggle against Russia.
“I think the most important thing is that when making their choice people do not just vote for some pro-Russian populist slogans. I think this is dangerous. Because this is dangerous not for Ukraine. We are already in the most dangerous situation: we are at war. The radical pro-Russian slogans also pose a threat to your own countries," Zelenskiy said.
EU accession
The one positive development to have surfaced in recent weeks is the EU seems keen to accelerate the start of Ukraine’s EU accession talks.
Zelenskiy said that Ukraine has fulfilled all the conditions for the start of negotiations on membership in the European Union and formal negotiations should begin in June.
"No matter how the political mood in Europe changes, the fact of our reality is that all Europeans, without exception, and every nation that shares the common values of the whole of Europe and wants to live like us, live in peace," he said during the opening ceremony of the Berlin conference. "Ukrainians are a nation like our neighbours in Moldova, like the people of Georgia, like the Balkan states and other states that respect Europe, freedom and the rule of law."
Zelenskiy also expressed confidence that "the time will surely come for a free Belarus. Belarus in Europe."
Short-term needs
The Berlin recovery conference has produced nothing concrete that will materially improve Ukraine’s position. The government is still living hand to mouth.
For the second year in a row, Ukraine is drawing up a budget with a record deficit, hoping to cover the bulk of this deficit with help from Western partners. This year it will amount to $43.9bn, which is becoming increasingly difficult to
raise in the face of growing and palpable Ukraine fatigue;
the IMF mission to Ukraine, Gavin Gray, noted, over time, international support for Kyiv will diminish and the country’s authorities need to "develop internal resources for self- financing."
Ukraine’s recovery will require external investments in the amount of $10bn to $30bn per year over the next ten years, the country’s Prime Minister Denis Shmyhal said on social media following a Berlin meeting at the ministerial level for the first time.
"It is important for us that the support of partners is predictable, rhythmic and stable. We need restoration, access to foreign markets and improved logistics. We need external investment and technology transfer from our partners. Ukraine will need from $10bn to $30bn of annual investment in the next 10 years," he wrote in his Telegram channel following his participation in the donor session in Berlin.
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