Rebuilding Ukraine could cost hundreds of billions of dollars
MARY LOUISE KELLY, HOST:
In fits and starts, Russia is making inroads in Ukraine. The city of Mariupol is now in Russian hands. Even as the war pounds on, Western governments are already trying to figure out how to rebuild the country after the war someday ends. The European Commission released a plan to start financing that process through a mix of grants and loans.
Here to tell us more about what it would take to rebuild the country is UC Berkeley economist Yuriy Gorodnichenko. Welcome.
YURIY GORODNICHENKO: Thank you.
KELLY: I want to start with the damage that's already been inflicted on Ukraine and what it would cost to rebuild. I imagine it's a staggering number. Can we put even a ballpark figure on it at this point?
GORODNICHENKO: One way to look at this is to do an inventory of damaged bridges, buildings and so on and calculate the cost of replacement. That would be easily in somewhere between 100- and $200 billion. It's a huge number.
We can also look at other measures and also, you know, similar efforts that were done in the past. For example, what was the cost of reconstructing Iraq or Afghanistan? If you look at the size of those countries, the level of damage, and scale everything to the Ukrainian case, you come to somewhere between $500 billion, maybe $1 trillion.
KELLY: And I gather you argue that there's an opportunity here to eventually rebuild Ukraine better than it was before, to build better public transportation and housing while you're at it, to focus on features like carbon neutrality. That all feels like a very long way away with the war still raging, but you believe that's possible?
GORODNICHENKO: Yes, of course. There is no point in rebuilding Ukraine the way it was. We had a lot of legacy buildings and everything from the Soviet era, which was very energy inefficient. We should really rebuild Ukraine up to modern standards. And this is going to be good not only in terms of climate change and everything like that, but Ukraine is going to be less dependent on Russian energy, oil and gas.
KELLY: Who pays for all this?
GORODNICHENKO: In principle, you can find multiple sources to do this. One would be Russian assets, which are frozen now in the U.S. and in other countries. It's probably tricky to make it available to Ukraine, but the proposal put together by the European Union suggest that the European Union itself is willing to pay for the majority of the cost, and obviously other countries are welcome to chip in if they have resources to do so.
KELLY: And Russia, which inflicted all this damage - is there any way of securing any kind of help, contribution from them?
GORODNICHENKO: Well, so seized assets is one option. Another, based on the precedent we had before when Iraq invaded Kuwait, is to have effectively a tax on Russian energy. And a fraction of that tax is going to flow to Ukraine to pay for their reconstruction.
KELLY: Are there past models that might be instructive - the Marshall Plan, for example, that rebuilt Europe after World War II?
GORODNICHENKO: We can learn a lot from the Marshall Plan - the way it was organized, the way conditionality was done, the way coordination was set up on the ground between American authorities and European authorities. That will be, I think, really a template for successful reconstruction of Ukraine.
One thing, however, is going to be different, is that Ukraine has an aspiration to become a member of the European Union. And so it is natural to align the reconstruction of Ukraine, you know, physical infrastructure with modernization of the country in terms of institutions so that Ukraine is going to be at some point a member of the EU family.
KELLY: That makes sense - so that the rebuilding is integrated with the joining and becoming politically more aligned with Europe.
GORODNICHENKO: Yes, that's right.
KELLY: Last question, which is, is speed of the essence here? Is there evidence to suggest that aid, whether it's in grants, loans, whatever form - that it is more valuable if it's delivered early than the same amount of aid that gets held up by months and months of red tape?
GORODNICHENKO: Yes, absolutely. This is why those conversations about the reconstruction of Ukraine should be happening now. And again, if we go back to the Marshall Plan, remember, the aid did not flow to Europe immediately. It was a couple years between 1945 and when the Marshall Plan really started to help Europe. And this were very, very difficult years for Europe. We should learn from our mistakes and make sure that there is no unnecessary suffering in Ukraine.
KELLY: Yuriy Gorodnichenko is an economist at UC Berkeley. Thanks so much for speaking with us.
GORODNICHENKO: Thank you, Mary Louise. Transcript provided by NPR, Copyright NPR.