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The Guardian - UK
The Guardian - UK
World
Patrick Wintour Diplomatic editor

Concern that Ukraine will be split up casts shadow over reconstruction talks

Volodymyr Zelenskyy looking to his left towards Giorgia Meloni in the foreground who is speaking into a microphone
Volodymyr Zelenskyy and Giorgia Meloni at the Ukraine recovery conference in Rome on Thursday. Photograph: Massimo Valicchia/NurPhoto/Shutterstock

Ever-escalating Russian drone attacks and the concern that Ukraine will be split up under a future peace plan have cast a shadow over a meeting of European leaders to plan for the eventual reconstruction of the country.

The conference is the fourth in this format and is being attended by Volodymyr Zelenskyy, Germany’s Friedrich Merz, Italy’s Giorgia Meloni and Poland’s Donald Tusk. It comes at a time of unprecedented pressure on the Ukrainian economy as Vladimir Putin widens his targets across Ukraine, deploying record numbers of long-range drones.

There is deep uncertainty surrounding a US-led plan for peace that is expected to include territorial concessions. A report last month found that more than a third of Ukraine’s estimated reconstruction costs, or nearly $200bn (£150bn), would fall to a bankrupt Russia if Ukraine were forced to concede the loss of control of four territories as part of an eventual peace settlement.

The figure – a challenge to policymakers meeting at the Ukraine reconstruction conference in Rome – underlines the likelihood that Ukraine’s future will be one of not just political division but also divergence in terms of wealth and economic growth, with eastern Russian-held territories likely to suffer significantly.

The focus of the conference is on encouraging long-term private-sector investment, but this has been overshadowed by the urgent need to protect Ukraine’s population and its economy from the spiralling impact of the drone strikes.

Zelenskyy said in Rome: “Russia has also prepared, I must say, for this meeting because unfortunately last night, a few hours ago, there was a massive, heavy attack on Ukraine. In this case the target was the capital, the city of Kyiv.”

Merz railed against the Russian attacks, saying: “These are practically only civilian targets. This is terrorism against the civilian population. This has nothing to do with a war against military targets.”

He added: “Our political duty is to increase pressure on Russia, to change Putin’s mind and bring him to the negotiating table.” Merz appealed to Slovakia to lift its veto over an 18th round of EU sanctions against Moscow.

The Institute for International Political Studies (ISPI), an Italian thinktank, has predicted based on World Bank research that the reconstruction costs in four largely Russian-held regions – Donetsk, Luhansk, Zaporizhzhia and Kherson – will be $188bn. Those regions could remain with Russia under a future peace deal, although Kyiv has not agreed to that.

Overall, the World Bank predicts that a 10-year plan for reconstruction and recovery, to be implemented between 2025 and 2035, would require investments of at least $524bn.

Although the entire territory of Ukraine has been hit by attacks since 24 February 2022, 66% of the direct damage ($116bn) and 47% of the total recovery and reconstruction costs ($248bn) are attributable to Donetsk, Luhansk, Zaporizhzhia and Kherson as well as Kharkiv.

“If Kyiv decides to concede the four disputed regions in order to achieve the end of hostilities, it is plausible that Russia will have to shoulder a significant share of the costs of reconstruction,” the ISPI said.

The difficulty for postwar planners in designing realistic scenarios is underlined by the fact that since the last recovery conference, in Berlin in 2024, the damage to energy infrastructure has risen by 93% in a year.

Sectors most affected include housing (with damage of $57bn), transport (about $36bn) and energy and mining (about $20bn).

The expansion of the war through drones, and a widening frontline including in the Dnipro and Sumy oblasts, has also had an impact on the economy. High war spending is leading to rising inflation, which recently reached 15%. Economic growth is slowing, partly due to the increasing attacks on industry and infrastructure. The World Bank has revised its growth forecast for this year by 4.5 percentage points to just 2%.

There is frustration among analysts that a succession of reconstruction conferences has not produced meaningful results.

In a fierce critique for the Centre for European Policy Analysis, the former US envoy to Ukraine Kurt Volker wrote: “Past Ukraine recovery conferences have convened thousands of experts and produced grand ideas, with zero follow-through. The humanitarian aid and budgetary support that have kept Ukraine afloat have been provided by the EU, its member states, and the United States, Japan, the UK, and the World Bank. A genuine strategy for Ukraine’s own economic renaissance has been woefully absent.”

Volker has called for a permanent body to be set up to drive private-sector investment.

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