(Re)Building Ukraine’s Economy as a Pillar of Regional Stability and Security

The devastation brought by Russia’s invasion of Ukraine since 2022 has been staggering, but Western leaders increasingly frame Ukraine’s reconstruction not just as humanitarian duty but as a strategic investment in their own security.

A prosperous, stable Ukraine is seen as a bulwark of political stability and security for Eastern Europe – a buffer against aggression and a reliable partner embedded in the democratic West. In the eyes of the EU and US, helping rebuild Ukraine’s economy will yield long-term dividends in regional security and prosperity, firmly anchoring Ukraine to the Euro-Atlantic community.

The Cost of War: Destruction on an Unprecedented Scale

After over three years of full-scale war, the scale of destruction in Ukraine is almost without modern precedent in Europe. Vital infrastructure – from housing and schools to bridges, power stations and factories – lies in ruins across swathes of the country. A joint assessment by the World Bank, United Nations, European Commission and Ukrainian government in early 2025 estimated the cost of rebuilding Ukraine’s economy at around $524 billion, nearly three times Ukraine’s pre-war GDP.This figure has climbed steadily as the war drags on – up from a $486 billion estimate a year earlier – and will continue rising the longer the fighting continues. It encompasses not only direct physical damage (which reached $176 billion by the end of 2024) but also the investment needed to “build back better” – modernizing and improving Ukraine’s infrastructure and economy beyond their pre-war state.

The human and material losses behind these numbers are immense. Approximately 13% of Ukraine’s entire housing stock has been damaged or destroyed, displacing millions of people. Energy infrastructure has been ruthlessly targeted – damage to the power grid and generation facilities jumped 70% in one year as Russia bombarded utilities.

Key sectors of the economy have been devastated: housing alone accounts for an estimated $84 billion of reconstruction needs, transport $78 billion, energy $68 billion, industry and commerce over $64 billion, and agriculture more than $55 billion. This wreckage of cities, industry and farmland has shattered livelihoods and crippled economic output, creating a huge reconstruction challenge for Ukraine and its allies.

The longer the war continues, the greater the damage – and the greater the financial burden to rebuild. Yet amidst the ruins, Ukraine and its partners see an opportunity to rebuild a stronger, more modern country. Every bridge repaired and power line restored now lays a foundation for post-war recovery.

Indeed, even under fire, Ukraine has made surprising progress keeping its economy afloat and beginning repairs with donor help. By the end of 2024, Ukraine and international partners had already met over $13 billion in urgent recovery needs, from patching housing to reopening roads. More than 2,000 km of roads had been given emergency repairs to reconnect communities. This resilience underscores why the West believes that with sufficient support, Ukraine can emerge from war with a functional – and eventually thriving – economy. But it will require a concerted global rebuilding effort on a scale not seen in Europe since 1945.

Western Commitment: Reconstruction as a Strategic Imperative

From the start of the invasion, the European Union and United States recognized that Ukraine’s fate has direct bearing on their own security and the international order. Ukraine’s resistance has been bolstered by tens of billions in Western military aid, but equally vital is economic assistance to keep the state running and prepare for recovery. For the EU especially, helping rebuild Ukraine is about cementing peace and stability on the European continent for the long term. Brussels policymakers openly describe Ukraine’s reconstruction as “an investment in European stability and security.”

In other words, the enormous sums required are justified by the priceless return of a secure, democratic Ukraine that underpins regional order rather than undermining it. This strategic logic has driven unprecedented pledges of support. The European Union has already marshalled over €70 billion in aid to Ukraine by mid-2023 – from budget support to keep the government running, to emergency energy repairs, to hosting millions of refugees.

In 2023, the EU moved to institutionalize its long-term support with the proposal of a dedicated Ukraine Facility, a financial instrument for 2024–2027 that will provide up to €50 billion in predictable assistance for Ukraine’s recovery and modernization. This bold commitment – equivalent to a new “Marshall Plan” for Ukraine – is aimed at rebuilding a “free and prosperous” Ukraine fully integrated into the European and global economy.

Public–Private Partnerships: Mobilizing Investment for Recovery

Given the astronomical sums required for Ukraine’s reconstruction, it is widely acknowledged that governments alone cannot foot the bill. Western officials are therefore intent on catalyzing private-sector participation in Ukraine’s recovery – both to supplement public aid and to spur sustainable growth. This means creating public–private partnerships and investment frameworks that give businesses confidence to engage in post-war Ukraine.

The United States–Ukraine reconstruction fund is one such example, explicitly designed to “leverage public guarantees from both governments to attract private capital” on a large scale. Similarly, the EU and financial institutions have set up instruments to de-risk and co-finance private investments in Ukraine. At the 2023 Ukraine Recovery Conference in London, the European Commission, European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD) and others announced over €800 million in guarantees and blended finance to “mobilise private investment for the recovery and reconstruction of Ukraine's economy.” These guarantees – backed by EU budget funds – will help banks and investors lend to Ukrainian projects by insuring against default or war-related losses.

In 2024, the Commission went further, signing €1.4 billion in new guarantee agreements to enable some €3.2 billion in affordable financing for Ukrainian businesses and municipalities, with a focus on repairing the energy grid. Such efforts underscore a core principle of the Western strategy: use public funds as a catalyst to “ensure enhanced coordination… and longer-term assistance for the reconstruction phase”, including vigorous involvement of the private sector. Encouragingly, the international business community is already lining up to participate.

Urgency and the Current Investment Climate

Although full-scale reconstruction of Ukraine is linked to an eventual end of hostilities, Western allies stress that preparations and early projects must begin now. They argue that waiting until the war is over to start rebuilding would be a grave mistake – both for Ukraine’s people and for the West’s interests. War damage to infrastructure has cascading economic effects that cannot be left unaddressed: businesses close, jobs vanish, and millions of Ukrainians remain displaced abroad.

Already, Ukraine’s GDP has shrunk by roughly a third, and government revenues are crippled while war costs soar. If Ukraine’s economy is allowed to collapse, the country could become unstable or ungovernable even before the war ends – a scenario that would jeopardize battlefield gains and create deeper humanitarian disaster. Thus, Western support now for “fast-track recovery” projects is intended to shore up essential services, keep the economy limping along, and prevent a wider societal breakdown. Every repaired power station or rebuilt bridge also hastens the day that refugees can return and normal life can resume in liberated areas.

Mutual Benefits: A Strong Ukraine Pays Dividends to the West

Ultimately, the driving logic behind EU and US support for Ukraine’s reconstruction is that a strong, self-reliant Ukraine will benefit its Western partners economically and geopolitically. In the short term, aiding Ukraine is about thwarting Russia’s aggression. But in the long term, it is about creating a new pillar of stability and prosperity in Europe – from which the EU and US will reap many rewards.One obvious benefit is enhanced security in the Euro-Atlantic area.

If Ukraine can recover and deter future aggression, Europe avoids having a permanent war-torn gray zone on its frontier. Instead, NATO’s eastern flank would be reinforced by a Ukraine capable of its own defense and contributing one of Europe’s largest armies to collective security. American military leaders note that supporting Ukraine now – to ensure Russia does not succeed – spares the US and NATO from far costlier security crises later.

A Ukraine that can stand on its feet economically will also be better able to fund its military and intelligence, acting as the front line in containing Russia. This reduces long-term pressure on US and European defense budgets. Moreover, a democratic Ukraine integrated with the West sends a powerful message to other adversaries: it demonstrates the West’s commitment to its principles and allies.

U.S. officials have explicitly linked the outcome in Ukraine to China’s calculations in places like Taiwan. In their view, helping Ukraine win both the war and the peace will signal to Beijing that the Western alliance stands firm, possibly deterring future conflicts. In this way, reconstruction aid to Ukraine is seen as an investment in the wider liberal international order that benefits global stability which the US and EU rely on.

Beyond security, the economic payoffs of Ukraine’s recovery could be significant for Western countries. In the near term, Western companies contracted in reconstruction will gain revenue and a foothold in a new market. In the longer term, a revitalized Ukraine adds to the collective prosperity of the democratic world. Consider Ukraine’s potential as an EU member economy in a decade’s time: with its vast agricultural output, skilled tech workforce, and huge consumption needs for new goods, Ukraine could materially contribute to Europe’s growth. Its integration would enlarge the EU’s single market, creating new export opportunities for French machinery, German cars, American aerospace, and so on.

Ukrainian membership is forecast to boost EU GDP over time – and, by extension, generate demand for American products as well, since Europe is the United States’ top trade partner. Furthermore, Ukraine’s youthful tech sector (often overlooked amidst the war) could inject innovative talent into Western industries. Even now, Ukrainian IT firms collaborate closely with European and American clients; a reconstructed Ukraine could become a tech and R&D hub serving Western markets. And as Ukraine rebuilds infrastructure with Western standards, it will likely buy predominantly Western-made equipment – from electric grids to rolling stock – rather than Russian or Chinese, thereby benefitting Western manufacturers.

Crucially, any short-term competitive frictions between Ukraine and existing Western industries are outweighed by long-term synergies. Some Europeans worry that rebuilding Ukraine’s powerful agriculture or steel sectors could create new competitors. Similar fears arose when the U.S. helped rebuild Europe after WWII – and indeed Europe’s industries did rise to challenge American companies. But, as history proved, the United States ultimately benefited enormously from an economically strong Europe, which became a stable market for US trade and a bulwark against communism. The same principle applies to Europe and Ukraine now.

In the big picture, the EU will benefit from a strong Ukrainian economy integrated into its value chains, even if certain sectors need adjustment. Europe’s experience with the Marshall Plan showed that creating new economic rivals through reconstruction can enrich all sides in the long run. Ukraine’s success would mean a new engine of growth in Europe, contributing to collective economic strength rather than draining resources.

Western policymakers argue that this far-sighted perspective must prevail over any protectionist reflex. As one policy analysis succinctly concluded, “in the long run, the US benefited from an economically strong Europe, just as the EU will eventually benefit from a strong Ukrainian economy.” In sum, the United States and Europe have compelling self-interests in championing Ukraine’s reconstruction. It is a chance to fortify the rules-based international order by proving that aggression does not pay – and that democracies band together to rebuild what tyrants destroy.

It is also a chance to unlock Ukraine’s abundant human and natural resources in a way that complements Western economies and reduces strategic dependencies on rival powers. From securing new energy sources and mineral supplies, to opening markets for exports, to gaining a partner in regional security – the dividends of Ukraine’s recovery are manifold for the West. None of this will be easy or cheap: the price tag for rebuilding Ukraine already rivals the cost of the Marshall Plan, and ensuring funds are spent effectively amid ongoing conflict is a massive governance challenge. Yet the consensus in Washington and Brussels is that this effort is not charity; it is a prudent investment with returns measured in both wealth and security.

A stable, flourishing Ukraine could anchor Eastern Europe in peace and provide prosperity for its people – thereby vindicating the EU and US commitment to Ukraine’s cause. In the words of President von der Leyen, Europe is determined to help Ukraine “re-establish the foundations of a free and prosperous country” integrated with Europe. For the EU and US, that vision is not only about Ukraine’s future, but their own. By building a strong economy in Ukraine, the Western allies are ultimately building a safer, more stable and more prosperous world for themselves.

Bohdan Popov, head of digital at the United Ukraine Think Tank, communications specialist, and public figure