Season 1 Episode 11
Power Lines Season 1 Episode 11 Transcript
[Music Playing]
Anastasiia: I am looking at two photos of Irpin, my hometown, a small place of about 60,000 people, 20 kilometres north of Kyiv. You may remember it as one of the last strongholds of Ukrainian resistance when Russia made its assault on Kyiv nearly a year ago now. It was partly occupied in the early stages of the war.
The first photo is from 2015. It's a bird's eye shot of a normal looking town, green trees surrounding modest houses with a busy commuter bridge running over a meandering river. It looks European, definitely.
The second photo is from 2022, but it looks like it's from a different century. There is a massive rubble, gap-tooth holes where people's houses once were, cars are blacked out and mangled. And the bridge is a splintered, fractured wreck. It's not somewhere I recognize.
Jakub: The damage that Russia has inflicted on Ukraine's infrastructure has been devastating. It's probably the most visceral sign of the war. People have been left without homes. Monuments and buildings are surrounded by sandbags or else damaged and destroyed.
But in those sandbags, you can see in others, hope, because even while the war continues across the country, individuals are safeguarding their homes with what they can and beginning the huge task of rebuilding Ukraine.
To start this week's episode, we wanted to hear from two of them.
Anastasiia: [Speaking Foreign Language].
Borys: [Speaking Foreign Language].
Anastasiia: Borys Dorogov is the COO of Balbek Bureau, an interior architecture studio he co-founded in Kyiv with his partner Slava Balbek. Mention Balbek to any young Ukrainian, and they will recognize the name. These guys built some of my favourite spaces in the country.
In March 2022, Balbek's team decided to help their building effort with a social initiative they call RE: Ukraine. They have loads of different projects across the country, one of which involves building temporary shelters for IDPs or internally displaced people.
Borys: There are already several, temporary live-in quarters were built in Ukraine since 2014. They were mostly built from the shipment containers, which are limited in order to easily transport them.
So, we decided that we need to improve somehow, the person's state of mind, also to keep their dignity, even if they're inside circumstances like we have right now. Doing that project as a completely new approach to temporary living because first of all, comes comfort, not the materials which can be transported by the roads.
The project started develop very quickly, and now we started to build the pilot project near Kyiv in Bucha, which will give lodging for 15 families.
Anastasiia: Your guys’ catchphrase with this project is dignity no matter what. And I'm glad you mentioned it, that kind of socialisation and comfort is a key part of what you guys are trying to do. How exactly does that look like in practice?
Borys: First of all, we keep the person's space in a comfortable way. It is wide enough to put the bed. It is wide enough to put a normal window, normal doors.
Anastasiia: So, you're not trying to crunch a hundred people in a small space. You're just trying to build it normally from the beginning?
Borys: Yeah. The second thing, we build lots of community spaces and lots of sharing spaces. And those sharing spaces are not shared bathrooms. These are common spaces like a big kitchen with big tables, which is also transformable to different functions, which will help people to integrate into different societies.
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Jakub: Before any of Borys’ new designs can be implemented, the decaying structures have to be dealt with. The remnants of war need to be wiped clean. Balbek are not the only people involved in the rebuilding effort.
Other teams of volunteers are coming together to start the process themselves, like Andrii Kopylenko, the co-founder of the charity organisation, District One.
To start off, I'd like to ask you before the full-scale invasion, what was District One doing?
Andrii: District One was organised in 2018, but until 2020, we created events in Ukraine for rebuilding some streets, and only after full escalation of the war, we decided to start again our project. But in other way.
Jakub: Before the war, District One were reviving Kyiv's urban ecosystem, but their urban regeneration pivoted after the full-scale invasion to something much more pragmatic.
Can you tell us a little bit about the current projects that you're doing?
Andrii: In the first two weeks and maybe one, two months we trying to clean streets, clean some buildings, trying to cover up for rain, for snow, or something like that.
In the start of the summer, we understood that we need to collect more money for rebuilding because if people don't have a roof, it's not so good when we are just cleaning up, we need to rebuild their buildings.
And now we are building 26 buildings in Chernihiv region. We already built three buildings in Kyiv region, private houses for families. Also rebuilding big apartment house for 70 apartments, rebuilding 55 houses, which not totally destroyed. We just rebuilding.
Jakub: Can you tell me a little bit about what that first project looked like? How did you organise it?
Andrii: First day was really interesting because when we understood that we can go to Kyiv region, we organised all meetings with local governments and understood they can give us a chance to go and help them because not everybody can go in occupied territories in first days.
Jakub: And just for context, the reason why you couldn't go there before is that there were a lot of Russian troops around there. So, we're talking about the moment after they had been expelled, and it was possible for civilians to access those regions.
Andrii: A lot of mines, a lot of bombs. And first hour weeks we worked exactly with military, with soldiers. They show us, it was like a square where you can go. And they said that in this part of Hostomel, you can work with volunteers, with civilian people because it's clear with no bombs, no dangerous objects in this part. And we cleaned that up.
But in some weeks, we understood by ourselves how to organise this work, how to work with the local government, with military, how to deliver these volunteers in this region.
It's one of the most important part of our job because it's like psychologists help for them. Because there was in occupation territory for 30 days, for example. And it's really difficult to be in this situation.
And after that, when they saw us, they understand that “Oh, my God, we are not alone. We can live our life after this crazy situation.”
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Jakub: Rebuilding homes and fixing infrastructure is the first step in rebuilding Ukraine from the ground up. But as well as reconstruction, things need to be preserved.
Another social initiative from Balbek seeks to protect Ukraine's monuments from harm. You've probably seen the photos of statues in Kiev surrounded by sandbags, cultural artifacts of huge significance to Ukraine's national identity, all covered in scaffolding and wrapped in plastic.
Anastasiia: So, to continue the legacy of the monuments underneath, the coverings also include images of the monument itself and a QR code leading to their Wikipedia page. It's protecting them, all while keeping their symbolic resonance alive for all to see.
And then you're not only shielding monuments, you're also making a memorial in Irpin. Tell us about that, that place and why it's important.
Borys: There is a bridge in Irpin, which was destroyed during the war. It was destroyed by explosion, and some cars fallen down to the river. Some parts of bridge also fell down to the riverbed.
It reminded the broken bone to Slava, and it was his initiative to make from it a monument. The idea was to make some landscaping, which will allow people to look at it from different points, but to keep that architecture, that wound of Ukrainian earth open to you. And that's the main idea.
Anastasiia: Those photos I mentioned of my hometown, well, Balbek are making the splintered bridge into a monument. The bridge which connects my home with Kyiv, was destroyed on February 25th, 2022, by Ukrainian forces to prevent Russia from entering the capitol.
Balbek's monument will leave the fracture as it is, with the platform to view it, immortalising its memory as an object of resistance against war and Russian aggression.
These small-scale rebuilding efforts, whether of people's homes, monuments, or memorials, are about returning the Ukrainian people's dignity. They're indelibly linked to the reconstruction of a national identity. Here is Andrii again.
Andrii: I see that our project now created really huge community. We know that maybe 50 organisations in Ukraine, they're trying to make something like we are doing. And for us, it's really good. We love that people seeing what we are doing and trying to do it by themselves because government can’t do everything.
Now for government the most important thing is the war. We understand that only civilian people can help themself in civilian life.
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Jakub: What about the reactions of the people who have moved back into some of the rebuilt areas? Is there any sort of typical messages that you hear, things that they're saying?
Andrii: They’re always crying. For them it's a hope for new life. They didn't expect that they can go back to their home in two months. And when we are giving them this chance, it is most important thing.
It's like energy of our organisation, of our people who are working with us, all of them saying that only one thing which helps us work in every day without vacation, without holidays. You are understanding that your life, it's not only yours when you are working with charity organisation, you need to help other people.
Jakub: The work of rebuilding Ukraine is already happening at a granular level, but amid the talks of a Marshall Plan for rebuilding Ukraine's economy or a Green new Deal from the West, putting things back together in the here and now needs to come from Ukrainians themselves.
It needs to be owned by Ukraine and be seen to owned by Ukraine. Even in the midst of war, the first steps towards this have already begun.
Anastasiia: From Message Heard and the Kyiv Independent, you're listening to Power Lines: From Ukraine to the World.
Jakub: In this series, we're going to be mapping the undercurrents and global consequences of the war in Ukraine, beginning in Kyiv, and following the roads out wherever they may lead. I'm Jakub Parusinski.
Anastasiia: And I'm Anastasiia Lapatina. This week we're beginning a two-parter to end our first series, looking at how Ukraine is being rebuilt both now and following the war.
And today we're focusing on infrastructure and the economy to things which have been really devastated by the Russian full-scale invasion.
Jakub: Yes. So, one thing which has been really interesting economically, on the one hand it's been really interesting and inspiring to see how durable and resistant the Ukrainian economy has been.
So, if you think about the situation back to February of last year, Russia launched this all-out war against Ukraine. Not just the tanks rolling in across Ukraine's borders, the troops landing and all of that, but also cyber warfare against its infrastructure, its banking system. There's been a tax on its economy, shipments that couldn't go out through different Ukrainian ports. And it's almost surprising how resistant the Ukrainian economy has been.
So, the hryvnia has held up, it's devalued a little bit, but it has held since. The Central Bank reserves are holding up, the country's continuing to function.
Anastasiia: So, what you were saying is that could have been significantly worse.
Jakub: Absolutely. So, Ukraine's GDP dropped by about a third, and when you look at the forecasts from the first days of the full-scale invasion, they were actually much more grim.
Anastasiia: Interesting.
Jakub: They expected to be a complete collapse, and Ukraine has held, and it has held in a very impressive way.
Anastasiia: And is that because of all of the foreign and aid that we're getting? Because I know the monthly payments that we get is like, that is the money that we essentially used to pay all the salaries. That's how we keep the government functioning. It looks like we would literally collapse without it.
Jakub: Absolutely. There's 5 billion a month that is sort of coming in to keep Ukraine afloat. But even that in itself isn't enough to keep the economy going.
That replenishes the Central Bank Reserve. It covers for the drop in tax revenues because obviously, a lot of businesses have been shut. A lot of people have moved out, their real earnings have dropped.
But even with that money, it's not an easy task. And Ukraine has performed admirably. But the challenge ahead is kind of insane if you think about it.
Anastasiia: I just don't even really know how to talk about it because it's just so big. And I'm actually a bit worried about this rethinking process because this is going to also need to happen in a large scale. All of these buildings that have been destroyed, many of them are terrible looking and just completely non-functional.
And the way we rebuild them is going to have to be by modern standards. And I'm really interesting in what that's going to look like.
To dig into all of this a bit deeper. This week we both did interviews with two really top economists from both Ukrainian and international perspectives.
Let's start with you, Jakub. Who did you speak to?
Jakub: Yeah, so I spoke with Ivan Miklos, a Slovakian politician and former Minister of Finance. So, Ivan has been a driver of this sort of program of liberalisation and transformation for Slovakia, which worked extremely well and sort of turned it in what was then called the Tatra Tiger, this kind of booming economy.
Since leaving politics in Slovakia, he spent about five years advising the Ukrainian government, actually working with the Ministry of Finance and other positions.
And today he's working with Ukraine's National Recovery Council as they plot a route forward towards the post-war reconstruction of Ukraine.
So, he was actually pretty perfectly placed to answer my questions about what needs to happen in order for Ukraine to have a successful recovery.
You are now working with the National Recovery Council. I know that you have looked a lot at reform in Ukraine and what this means in terms of the future EU integration. What does your current work at the National Recovery Council look like?
Ivan: Yeah, generally speaking about what is the today's situation regarding reforms and integration because these are very important, that successful post-communist countries have been successful not only because reforms, but also because integration, EU integration and these processes are interconnected of course.
And now it is first good news — of course, war is terrible. Bad news is tragic, but maybe paradoxically, some things are, especially will of the Ukrainians, Ukrainian nation to be unified, to really have strong will, to be part of the Western society and to support necessary changes, necessary forms now is stronger than it was before.
And integration, the candidate status is very, very important. Which means on one side it is more difficult situation because the cost of the war and direct/undirect damage is impossible to even count some material damage.
But on the other side, I hope, and I think that this unity, this will and this courage not only to win in a fight, in a war, but also to change the country and to rebuild country, not the same as it was before war, but is really new, the country is very, very, very strong.
Without financial support, it couldn't be possible to hold macroeconomic stability in such, surprisingly strong level as it is during last year, for instance, during war year.
It is of course difficult to say that war could have some positive side, but there are some aspects which is very, very important to use in speeding up necessarily for necessary changes.
Jakub: Looking forward a bit, let's say hypothetically the war ends in a couple of months, how do we rebuild Ukraine? What were the things that are really sort of critical, the key elements for you to essentially rebuild the country?
Ivan: Yeah, there are a lot of things, but one thing is even important precondition before speaking about economic dimension, to speak about how war … and it’s the key, because only a real end of the war, which will not create more problems than solutions, is that Ukraine have to return to its international recognized borders, including Crimea and Donbas and Luhansk.
Because if not, I'm afraid that any kind of bad compromise, it'll be the source of so big instability, and tensions inside Ukraine that outside Ukraine as well, but especially inside Ukraine, that it couldn't be possible in this conditions to really successfully rebuild and reconstruct the country.
This is my deep conviction after spending five years in Ukraine, and after I think knowing and feeling the atmosphere and the society.
Jakub: Could you say a bit more about the reasons for this instability? What would be the problems? So, for example, right now, part of the integration process is essentially adopting EU legislation. Part of it is about rebuilding roads. What would be the sources of this instability?
Ivan: The main source of instability will be that today by public opinion polls majority, almost 90% of Ukrainians are strongly supporting, are strongly convinced that Ukraine has to return to its internationally recognized borders.
And any bad compromise could create so big dissatisfaction and frustration among people, especially among those who lost their friends, their family members. It could create a lot of tensions and problems.
Which means politically that compromise and sacrificing some part of territory, for instance, will create a lot of tensions inside of the society because people simply don't want to accept that changing borders, their own countries borders by force is acceptable and can be acceptable even.
Can you imagine how many veterans and people affected somehow by war will be after this war? How many veterans will be among people? How huge could be this dissatisfaction? And how strong could be this emotion if they will feel that their losses and everything was for nothing? Or at least they'll see that it was politicians finally accepted some defeat and some bad compromise.
I'm deeply convinced that this emotion is and it'll be very, very strong. And that's the reason why necessary precondition for stability, not only in Ukraine, but even much broader, even internationally, even in the global scale, why it's important that Putin will be defeated, and Ukraine will win and will be able to return to its internationally recognized border.
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Anastasiia: I think this point that Ivan brought up is really, really crucial, especially with the scale of involvement that Ukrainians have with active facilities now, and by that I mean that our veterans are not a few dozen thousand people. I think the amount of people in our society that have either actively participated in war or have family members who've done so is a huge, huge number.
So, if that group has some sort of overwhelming feeling of discontent after whatever peace plan we agree on comes through, that's really going to be a problem. And it is not only a problem morally because of course we want to respect the effort and the sacrifice that these amazing people have done.
But also, I think politically it will be, because it's probably pretty obvious (correct me if I'm wrong), that some of those veterans perhaps are going to aim for certain level of political power.
I think we've seen this in 2014, that people who were actively involved in the revolution, for example, or in Donbas, they then went on to pursue political interest, which is fair.
So, if that happens and there is conflict, I think that's going to be really problematic and it's just going to cause more instability and that's not something that we need at all.
Jakub: You're absolutely right. I think the way that Ukraine ends up integrating, reintegrating, working with its veterans is going to be absolutely critical for the future of the country.
What I mean is, you look at societies that are heavily militarised, Israel, the U.S., having a pathway and sort of having bridges between the army and the private sector and the political sort of various initiatives, the civic sector, this is essentially something that will make or break the future of Ukraine. Right?
Anastasiia: Yeah, I agree.
Jakub: So, how the country deals with that, it's really important.
Anastasiia: This also just really highlights why we can probably say for sure that if we do concede any territory, it will be some sort of en masse upheaval.
Jakub: Massive resentment is a very dangerous thing for Ukraine. But I argue that even sort of thinking from the perspective of conceding territory, it's sort of starting from the wrong place because whatever happens, the truth is that the current people in power in Russia (and I'm not talking about just Putin, this is going several levels down the line, at the very least), see Ukraine as an enemy state that they need to destroy.
So, even if Ukraine reconquers all of its territory tomorrow, they're still planning to reinvade. Nothing changes for that.
Anastasiia: Yeah. That's true. Yes. That’s absolutely true.
Jakub: And whether it's five years’ time, 10 years’ time. So, I'd almost argue that if you concede territory now, well you are just sort of easing them all into the next war.
Anastasiia: Yeah.
Jakub: But even if you don't concede any territory, essentially what you want to portray is that you are kind of — it's a little bit like in business negotiations where you essentially tell the other party “I'm crazy, this is my red line. And if you do even a small thing to sort of go beyond my red line, I will react disproportionately.”
They need to say, “Look, any sort of additional kind of attempt to coerce Ukraine is going to be met with disproportional reactions because you want to stave off the next war, which will come.”
Now Nastya, you also spoke to another guest this week, right?
Anastasiia: I did, because as well as that international perspective, we also wanted to hear from someone in Ukraine. So, I was really lucky to sit down with Tymofiy Mylovanov. Tymofiy is another economist who works across some of the highest positions in the Ukrainian civil society and government.
He's the president of the Kyiv School of Economics, currently an advisor to Zelenskyy Administration, and previously the Minister of Economy in Ukraine from 2019 to 2020.
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Now, Ivan mentioned that assessing the material damage of buildings and infrastructure in Ukraine is a really difficult task, impossible even. So, I asked Tymofiy about this and how the government in Ukraine are beginning to calculate the material cost of this war.
Tymofiy, thank you so much for finding the time. I know you're very busy these days.
So, we're particularly interested in the damage assessment and the destruction of infrastructure in Ukraine. So, let's talk about the scale of this damage. Can we put a number on it and if we can, what does that number actually mean, practically speaking?
Tymofiy: There are multiple methodologies and there are multiple numbers which are out there in the field. So, we have the most recent report, which actually came out on the 24th of January. And it says that the total amount of damages has increased to $138 billion.
This number is measured as direct losses to the economy, according to the methodology, which is based and an upgraded version of the methodology used by The World Bank.
The amount of damage and the extent of war is so large in Ukraine, so that sometimes the standard methodology doesn't work. For example, if you took the Mariupol damage, we don't even have access to that.
Anastasiia: Right, yeah.
Tymofiy: And even if we had, it probably is not practical, feasible, it would take 10 years or five years to document everything.
So, the way we then do damage assessment, we use satellite imaging and drone imaging and AI recognition. The number is direct damage, direct damage is the cost to rebuild or devalued.
But as of the January 24th, it's 138 billion. To put this number in perspective, the nominal value of GDP in 2021 of Ukraine was $200 billion. So, it is about 70% of annual GDP has been destroyed. So, it's a large number comparatively, but even in absolute terms for any economy, it would be a large number.
And the leading element of this, it's housing, it's $54 billion, in fact, between five and 7% of residential housing has been destroyed. So, think of this as every, I don't know, 12th, 15th house, a building in your country or in your village or in your city has been destroyed or damaged by Russian artillery or missiles.
Then the next it's infrastructure. This is roads, bridges it's about $35 billion. Assets of enterprises industry, manufacturing, for example, meteorological plants, just one example, some production facilities are at 13 billion, educational facility at nine, energy facilities at seven, agriculture and land resources at six. And you keep going.
There's transport, trade, utilities, cultures, sport, tourism, healthcare, and we are not even counting ecology because if you start counting, this might even be in trillions, but there's also a direct assessment of ecology. And it's at $14 billion currently, which in my view is an extreme understatement. It’s a underestimation.
Anastasiia: Underestimation, yeah. So, when you say that it's direct damage, does that mean that we now need that exact number that we lost to rebuild it back? Or do we need a bigger number?
Tymofiy: We tend to need more. Because actually it costs much more because first you have to clean up and remove the foundation, remove what's left of the building.
On top of that, often, we want to build back better. So, if we have a house which has been destroyed, but this house was built let's say in 30s or 50s of the previous century, then often we will be building … that house might not have been even up to the standards today, up to the current regulations.
But there could be also savings in the sense that we might try to build back better, and we don't have to build inefficient facilities, but it tends to be 40, 50 and sometimes 100 percent more what needs to be, if we're actually thinking about rebuilding in terms of cost.
On top of that, there is a different number, which is opportunity cost of damages, which is not only counting the direct damages, but also what has been lost. Because if we take a clinic for example, and there is a direct cost of rebuilding a clinic, but there's also a period of time the clinic has not been operational and will not be operational. And that means people have been denied care.
If you're talking about facility and business, manufacturing or infrastructure or a road, then business has not been done. People have not earned money; products have not been delivered, taxes have not been paid.
So, you can calculate the opportunity cost. And when these numbers come up, then we hear numbers like $355 billion from the World Bank of 750 from the government of Ukraine. And I think the number is probably between 500 billion and a trillion, if we take into account everything which has been lost so far.
Anastasiia: So, what is the Ukrainian government's current plan to deal with this number? Where are we going to get this money?
Tymofiy: This is a trillion-dollar question.
Anastasiia: Literally.
Tymofiy: Where are we going to get it? Yeah, a trillion-dollar. In practice, it's very difficult to get this amount of funding very quickly during the war or post-war, unless there is a coordinated effort at the political level and there is a source of funding.
And the source of funding, the most realistic in my view, would be the Russian assets, which have been frozen outside of Russian jurisdiction and which should be confiscated.
And in my view, it's the fair and the right thing to do because Russia has imposed this damage. So, Russia has to pay. It's the only just thing.
Anastasiia: It's logical.
Tymofiy: So, and the source of money is there because there are several hundred billion dollars. The estimates differ from 300 plus to $500 plus billion, but they're there and they can be confiscated, and they can be used. In the long run on this is a much better deal.
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Jakub: It's a little bit mind boggling to think about the scale of the damage in Ukraine.
Anastasiia: Yeah. I don't even know how to react to it to be honest. I think the numbers are kind of beyond comprehension.
Jakub: The idea of sort of a trillion invested to rebuild a East European economy is something that was absolutely unfathomable a couple of years ago.
Anastasiia: I think one way to kind of digest this a bit easier is to perhaps not think about it as trillion dollars right here and now, and something that Ukraine is going to have to receive it within a month. Of course not. This is going to be many, many chunks spread across dozens and hundreds of donors, countries, organisations, et cetera, across years.
Jakub: The other side of it, and sort of this is the, I guess maybe optimistic perspective, is Ukraine plays this really central role in a lot of, let's say, industries or pieces of the broader European economic puzzle.
It is one of the paths sort of to get into Europe historically. That's sort of one of the reasons that, for example, there were some plans on Chinese infrastructure investment and building roads and whatnot.
With the roads — oh God, actually this is kind of devastating now that I think about it. Because look, Ukraine was interesting from the perspective of it is a breadbasket that is very close to Europe, but also to the Middle East, which is sort of this deficit area. And you need to export lots of food stuffs to that region.
It's a country that's the size of Texas on Europe's border, which creates a lot of opportunities. What I think is a little bit scary is that historically it was also seen as a land bridge between sort of Europe and Asia.
And there was this perspective of running railways between sort of China and Europe that would probably cross through Ukraine. There were a lot of kind of these speculative plans.
Now if there's a hard border with Russia and all the ties are cut and there's a big trench on the border, none of that is happening. And that's actually kind of scary from Ukraine's perspective because then it really becomes the periphery.
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Anastasiia: Next I wanted to find out some more from Tymofiy about the money Ukraine is likely to get from the international community and about the conditions under which this money will be given.
In one of your articles, you mentioned the problem of conditionality when it comes to money that we receive from the EU or from the U.S. or from our other partners, that there are always strings attached and conditions that Ukraine has to fulfil.
And you said that while that's of course natural, that people want to check on where the money is going and how it's spent and everything, it is important, but it can also be vulnerable to what Russia may do with that.
Tymofiy: There are three aspects to it. One is conditionality is good or it can be bad. It depends on the competence of people who are designing this conditionality. And so, it's important that there is very high-quality personnel who is designing this conditions or thinking about this contracts not based on some stereotypes or some knowledge of some concepts of let's say how it worked in Afghanistan or in Iraq.
Anastasiia: People like to compare.
Tymofiy: People do. And I think it's a good comparison to demonstrate the difference. Actually, there has been over time a lot of understanding that Ukraine should not be treated as a country, which doesn't have the government, doesn't have the agency.
And President Zelenskyy has demonstrated and has built the brand of sovereignty. And I think at this point people understand that there should be ownership of the reconstruction and it should be run by Ukrainians. And I think that's item number two.
So, whatever the conditions are in place, you have to ensure that it is Ukrainians who are designing their future, not some outsiders, because Ukraine is not a colony.
And then there's the third point, of course about corruption, but more generally about competition, about competence, about lobbying, about profiteering. And that happens in all areas.
And again, I will use the example of Afghanistan and the reports coming out after decades of support for Afghanistan, of how much funding was diverted by also international agencies and officers and corporations.
And so, we've already seen some of it in Ukraine where different companies local, domestic and also international are starting to position themselves to try to benefit and profit from the reconstruction, where different companies will be coming in and say, “Listen, our country have helped you quite a bit during the war, now through the embassy or through some political connections, please give us the contracts.”
So, all of that has to be addressed. And I think Ukraine will manage it because Ukraine essentially is fighting two wars.
Anastasiia: That's true.
Jakub: One war is on the front lines, and the other one is the very same Russian culture. So, Russia has a culture problem on top of all other problems and corruption in Ukraine is actually the same Russian culture. Which-
Anastasiia: It's a plague.
Tymofiy: Yes. It has no empathy for the cause of others. It disregards the rules, it ignores and tries to takes advantage. It lies, it exploits, and it's done in a broad light. And there's no limit to it, that's why I want to be a part of Europe because we don't want to be a part of this.
But it's everywhere. Russian culture is bad, and we have elements of that, and so we have to eradicate it. So, we're fighting that war too. And I'm confident Ukraine will win both battles, but that's a long road to have.
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Jakub: What do you make of these conditions that Tymofiy just mentioned?
Anastasiia: I think the fact that many conditions exist to these huge sums is completely fair. If I was sending that much money to rebuild something, I'd be interested in how that's spent.
But it depends on what kind of conditions. If those are conditions that are all about transparency and accountability, then I'm all for it. Because we know that Ukraine perhaps needs a few nudges in the right direction when it comes to transparency. And I definitely want those strings attached.
But if it's something like what the IMF usually does where they're like, “We're going to give you a bunch of money, but you change half of the way that your economy functions, to adjust to our systems,” then no, of course not. I think that's a bit absurd.
And I think that Tymofiy is correct in saying that Ukraine is an independent country, and that's actually the key points of this war, and it will be when we win. And Ukraine is not a colony, and we don't want to be a colony. This should not in any way be an exercise of, “We're going to give you billions of dollars, but now you are going to rely on us and do what we tell you to do.”
Jakub: I think that's fair. Ukraine has earned the right to be assertive and to show that it can be a responsible caretaker and steward of all of this capital. Take a look at sort of how overall the military aid has been used, how the social aid, there was a lot of concerns about corruption that's going all over the place or being ineffective, and I think Ukraine has stepped up.
Should there be checks? Should there be monitoring? Yeah, absolutely.
Anastasiia: Of course.
Jakub: The fact that things are going relatively well now doesn't mean that they always will be. So, and that doesn't give you a full licence to do whatever you want. But the comparison with Iraq and Afghanistan, Ukraine is different. There is a functioning government, there is a-
Anastasiia: We're not a collapsed state in any way.
Jakub: No, not at all. And I think really, this has been not just the government, but the people of Ukraine, the way that they've rallied, they've organised in very difficult circumstances shows that this a very different situation.
Anastasiia: And also, we are not making these arguments up. I think just a week ago or something, a new report came out from the U.S. that they were checking the due diligence and all of the military aid that they sent to us, and they found no mismanagement and no problems with the way that U.S. military aid and the money was applied in Ukraine, so-
Jakub: No, you're absolutely right. Have there been sort of cases here and there of various misdeeds? Yes, sure.
Anastasiia: For sure.
Jakub: By the way, it's quite encouraging to see that the government is also sort of following up on some of them and kicking people out, and there's turnover in the cabinet and so forth. These are all encouraging signs, right?
Anastasiia: Mm-hmm (affirmative).
Jakub: In a sense, you think about it, every single country has criminals. The question is, is the country putting them into prisons or putting them in power?
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Anastasiia: Shall we hear some more from Ivan to end, Jakub?
Jakub: Yes. He actually had a lot to say about the kind of opportunities that potentially lie ahead for Ukraine in this rebuilding process, given the kind of money that might be available for investment.
So, in terms of where that money needs to be spent, I had the chance to look for the recovery plan. In terms of the big buckets, it looks like there is a lot of work around energy. There is a lot of work around logistics, obviously, Ukraine now has enemy borders on three sides that are kind of blocking its way. And there is a huge bucket in terms of housing. Are those sort of the big ones, first of all?
And then secondly, what are the things that private investors or maybe indeed government investors, public investors, what are the big things that they would be looking at in those areas?
Ivan: Yeah. But before speaking about areas, let me say that what I think is even more important. It is first, yes, you're right that still even after war, the systemic risk to invest in Ukraine will be much higher than in, let's say Central and Western European countries.
But there are no known mechanisms how, for instance, is the possible to use, for instance, part of the Russian frozen money as money for covering political and war risk by insurance. This will be very important part of this institutional framework for reducing risk connected with investing in Ukraine.
Second important point is that of course, investment in the Ukraine will be even after war, connected with a higher risk, but also with higher possibilities and higher opportunities.
Because even before war, Ukraine was deep, very deeply under its potential, Ukraine had a really huge potential. Ukraine had everything, the educated people, the best land in the world, natural resources, everything. But this potential was unused.
Now, Ukrainian economy dropped by 30% in one year, which means potential for high and sustainable economy growth for Ukraine after war is unbelievable. Ukraine could have over 10% economy growth for many years, for 10 years maybe. It'll create so many opportunities for return of the investment, for profitable investment.
And then we can speak about areas and of course, the biggest area for the special public investment, public private investment is another, let's say instrument, it could be public private partnership, especially in infrastructure.
It was underdeveloped before war. It is now damaged by the war, which means it'll be need a lot of investment in infrastructure.
Housing, you have mentioned, public houses, private houses, kindergartens schools, hospitals, everything, in every area will be a lot of potential for new investment.
Jakub: What lessons, I guess, can we take in terms of preparing the reconstruction and well, two questions. So, one is in light of the unsuccessful Marshall Plans, the Iraq or the Afghanistan, these sort of coordination of responses.
And two, I guess, and this is unrelated, but it relates to the veterans that you mentioned earlier. Is there some way to engage them? Is there some kind of focus or some way to kind of … how do you deal with, because Ukraine will have a massive population of people who have been through war, have suffered through war, the veterans who have been fighting and they need to have a place in the new rebuilt Ukraine.
Ivan: Yeah. Let me start with veterans. It'll be one of the most important and very sensitive task and question how to deal with this, how to offer them also some kind of, I'm not saying compensation, but some kind of benefits for this. And there are a lot of experience from other countries in this regard.
But it is important to think in advance, even now, how to deal with this. And yes, on the one side it'll be sensitive, it'll be also potentially dangerous.
But on the other side, Ukraine will have surely the most experienced and most best trained army in Europe. Which means on the other side, it'll be not only kind of burden, but also let's say strong side of this.
Regarding your first question, I think fortunately Ukraine is not Afghanistan and Iraq. Culturally, Ukraine is European country, which means the risk is lower as it was in Afghanistan or Iraq, that it'll fail this reconstruction.
Especially important is that this strong unity and will of Ukrainians to become the part of Western society is the most important precondition for successful recovery, reconstruction, rebuilding, rebuilding process.
But it is inevitable but not sufficient precondition for success and very important will be what I have already mentioned, how to create this architecture, this institutional architecture of the using this money with strong ownership of Ukrainians and Ukrainian representatives. But at the same time also a maximum assistance and supervision of the Western donors.
And with using also, outsourcing public private partnership and this kind of mechanisms because reality and the most important, maybe the most dangerous also battle neck could be the limited capacity of the Ukrainian public sector to manage it effectively and transparent.
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Anastasiia: I have a thought. I have a thought.
Jakub: Sure. I have a slightly depressing thought as well.
Anastasiia: Go ahead. Okay. You start with the depressing one and I'll end with an optimistic one.
Jakub: Okay. So, there's a lot of opportunities to help Ukraine rebound after the war. One thing that concerns me a bit is, well, what kind of result will that actually lead to? Because Ukraine is now the poorest country in Europe, massively underinvested underdeveloped in recent years, even if it has a lot of potential.
And let's say that we get the next 10 years of 10% growth, that will multiply the economy by let's say two and a half, we're still halfway to Poland in the best of cases, probably a third of the way.
Anastasiia: That is a bit depressing, yes. But then on the other hand, I think there is a very real motivation for the West and especially for Europe, to do absolutely everything they can to help because this is also their project. Because well, first of all, if Ukraine is doing terribly economically, that is going to be felt across Europe and it's already being felt.
And likewise, like a big economic stimulus and Ukraine being prosperous and Ukraine having a working economy that can produce stuff and export stuff and buy stuff, that is also going to be felt across Europe. And that's going to be a very good thing for consumers and producers there.
But then also Ukraine is this global European project in a way, as in if Ukraine goes to war for progressive Western values and ideas, wins and then ends up being a country that does not have a stable economy, a country where the infrastructure hasn't been rebuilt in like 50 years and just not a place where you want to be, what is that going to say about the EU and what is that going to say about kind of this European dream, if you will?
Jakub: That's true. And there is an argument to try to use that in Ukraine's favour, to say that basically this is a litmus test of can Europe, a sleeping giant on the global stage, wake up and sort of take this country-
Anastasiia: Exactly.
Jakub: Which has fought and bled for it and turn it into a success case. And I think, you have the Ukrainian nation on board ready to do anything that's necessary to make that happen.
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Anastasiia: In two weeks in Power Lines, it'll be the one-year anniversary of Russia's full-scale invasion of Ukraine and our final episode of our first season, so to mark it, we're going to look to the future to explore how the nation will rebuild its national psyche when the war ends.
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Anastasiia: Power Lines is a partnership between the Kyiv Independent and Message Heard. It was produced by Bea Duncan, Harry Stott, and Talia Augustidis. The executive producer is Sandra Ferrari. The theme music is by Tom Biddle and Alfie Godfrey.