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Zaporizhzhia missiles strike Russia

A Marshall Plan for Ukraine and how to get there

The German Marshall Fund calls for a Ukraine Marshall Plan. The challenge is immense, but the alternative is far worse.
Workers of Ukraine’s State Emergency Service extinguish the fire caused by a Russian missile strike on a Zaporizhzhia apartment building in the night of 9 October. Photo: State Emergency Service
A Marshall Plan for Ukraine and how to get there
The German Marshall Fund calls for a Ukraine Marshall Plan. The challenge is immense, but the alternative is far worse.

As Ukraine’s counteroffensive advances, preparations must be put in place as soon as possible for Ukraine’s post-war future. The Washington DC-based German Marshall Fund (GMF) has called for the establishment of a Marshall Plan to aid in Ukraine’s reconstruction. The tasks at hand are multi-faceted; they include building an alliance for reconstruction, garnering international support, establishing reconstruction priorities, and putting the necessary institutions in place.

The challenge is immense, but the alternative – allowing Ukraine to become an economically failed state – is far worse.

Echoes of the Marshall Plan

The GMF’s initiative echoes the post-World War II recovery strategy named after then-United States Secretary of State George Marshall, which provided over $12 billion (equivalent to approximately $203 billion today) in economic assistance to help rebuild Western European economies.

The Marshall Plan was not just about aid; it was a strategy underpinned by the belief that economic stability was crucial for political stability and to end Europe’s endless cycle of conflict and violence. The unprecedented aid package from the US, spread across four years (1948-1952), helped kickstart economic recovery, enabling Europe to rebuild its infrastructure, regain agricultural productivity, and set the foundations for the golden age of European economic growth.

The GMF believes a similar approach should be taken for Ukraine. Even as the war goes on, the GMF asserts that the foundations of a Marshall Plan for Ukraine need to be laid now. Just as with post-war Europe, preparation for a foreseeable difficult period ahead in Ukraine requires immediate attention and proactive planning.

Progress has already been made.

  • In October 2022, the European Commission, as then Chair of the G7, co-hosted the International Expert Conference on the Recovery, Reconstruction, and Modernization of Ukraine in Berlin, which was crucial in demonstrating unwavering support for Ukraine beyond its immediate needs, and on its path to EU accession.
  • Then in January 2023, the G7 launched the Multi-agency Donor Coordination Platform for Ukraine, a mechanism synchronising short-term assistance with long-term planning.
  • In addition, a new front-loaded program has been agreed upon with the International Monetary Fund to stabilize and reform Ukraine’s economy.

The GMF presented its proposals for establishing a Marshall Fund for Ukraine at the Ukraine Recovery Conference in London in June 2023. The GMF identifies five critical elements that should shape the reconstruction efforts to secure Ukraine’s rapid recovery and successful integration into the European and global economies.

  1. According to GMF, donors must initially share the risk with investors by providing war insurance. To this end, the establishment of a multilateral investment trust fund is proposed. This fund, dedicated to supporting investors from countries aiding Ukraine during the war, would offer a much-needed safety net to incentivize investment into the recovering nation.
  2. The report also emphasizes the opportunity presented by Ukraine’s damaged energy infrastructure, proposing that the rebuilding process aligns with the EU’s decarbonization goals. This would allow Ukraine to leapfrog into a net-zero future, joining EU’s key climate policies ahead of full bloc membership.
  3. Crucially, GMF advises that Russia should pay for its aggression in a legal and transparent way. One proposed measure involves temporarily investing frozen public funds, with the proceeds made available to Ukraine. In addition, an international claims conference should be prepared to handle legal claims arising from the conflict.
  4. GMF also insists that continued aid must be tied to ongoing anti-corruption reform in Ukraine, urging the participation of civil society in a transparent reconstruction process that adheres to decentralization principles.
  5. Finally, GMF calls for an improvement in donor coordination. It suggests that the newly created G7 Multi-agency Donor Coordination Platform for Ukraine needs to develop a strategic planning capacity, and its leadership structure should be revisited to better facilitate Ukraine’s reconstruction.

However, writing in an op-ed for POLITICO, the reports authors, Josh Rudolph and Norman Eisen, stress that the road ahead is not going to be an easy one, namely because of Ukraine’s history with corruption and oligarchy. For years, Ukraine has been wrestling with a tenacious adversary: a small group of powerful businessmen, or oligarchs, who made fortunes manipulating the privatization of former Soviet companies. By leveraging their wealth, these oligarchs have historically controlled weak governments through various means, including owning media conglomerates, financing political parties, and corrupting the judicial system.

These oligarchs’ influence, however, has been eroded, thanks most recently to growing public intolerance towards corruption and the enforcement of martial law. During the war, Ukraine has made strides in weakening the oligarchs’ grip, yet concerns persist about their potential return, especially as Ukraine embarks on a massive reconstruction effort. Ukraine is making significant progress in evolving from a Soviet oligarchy into a modern political-economic system.

In the past decade, Ukraine has shown impressive progress in its anti-corruption journey, a journey that the US and Europe consider a prerequisite for further security aid, recovery assistance, and potential EU membership. Transparent and accountable processes are essential for Ukraine’s sustained progress and its aspiration to fulfill the post-2014 social contract, which aims to limit malignant Kremlin influence, avoid a new oligarchy, and foster a level playing field to unlock investments.

Why post-Euromaidan anti-corruption reform in Ukraine is still a success

Ukraine has made considerable progress in restructuring entire economic sectors previously exploited by oligarchs. These include energy, health, education, land, customs, and finance. G7 donor agencies have collaborated closely with other organizations to design national anti-corruption institutions and sustain the momentum of implementation of anti-corruption policies. Ukraine’s efforts have created an international gold standard for a suite of anti-corruption agencies responsible for preventing, investigating and prosecuting, and ruling on cases of grand corruption.

Observers believe that Ukraine’s impressive progress so far toward implementing reforms demonstrates a profound deep national commitment to combating corruption. With European Union and NATO membership on the horizon for a post-war Ukraine, the momentum to continue implementing reforms will only grow.

Rudolph and Eisen note that it is precisely Ukraine’s attempts at democratizing and combatting oligarchy and rampant corruption which motivated President Vladimir Putin to invade Ukraine.

Three days before the full-scale invasion, President Putin delivered a speech in which he vented his grievances at several of Ukraine’s anti-corruption institutions and lamented Ukraine’s leadership selection and foreign support in which he revealed his meticulous knowledge of and resentment towards Ukraine’s efforts at tackling corruption. The authors said that President Putin fears Ukraine’s attempts at striving for transparency and greater accountability as “they close pathways for the Kremlin’s covert influence, strengthen Ukrainian defensive capabilities, prepare the country for Euro-Atlantic integration and risk inspiring his perceived subjects — whether in Russia or other former Soviet states — to overthrow thieving despots like him.”

Therefore, the GMF stresses that countering corruption through transparency and accountability is a strategic imperative that must be integrated into a modern Marshall Plan for Ukraine in a similar fashion to how containing the spread of Communist ideology was integrated into the original Marshall Plan.

The GMF’s proposal is more than a blueprint; it’s a mission to provide hope, mirroring the very essence of the original Marshall Plan. The intention is to show Ukraine – and the world – that a better future is possible, even in the face of the most challenging circumstances.

Kazys Kleiza is a British civil servant of Lithuanian origin and is based in London. Kazys is a graduate of the School of Slavonic and East European Studies and his work and interests largely revolve around energy security issues and sanctions.

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