Ukraine’s Reconstruction: A Test of Western Resolve and Domestic Reform

Ukraine’s reconstruction programs are framed as a boon for investors and contractors, but behind the scenes, it is viewed as a high-stakes test of whether massive international aid can be managed transparently and effectively.

When people talk about rebuilding Ukraine, they often envision large-scale construction sites and  leveled foundations – and this is a misconception. In fact, the issue of post-war reconstruction of Ukraine is not about returning to the pre-war state. It is about building a new country capable of operating in today’s geopolitical and economic environment.

The upcoming Ukrainian Recovery Conference in Rome, scheduled for July 10-11, 2025, should not be a formality. Instead, it should serve as a launchpad for political, institutional, and legal decisions that will shape the success of Ukraine’s reconstruction over the next decade.

What does Kyiv Expect from the Recovery Conference in Rome? 

Expectations for the Rome conference should go beyond yet another announcement of financial pledges. Kyiv sees URC 2025 as a moment when the West will finally be able to demonstrate a long-term support strategy – not only tranches for current needs, but also mechanisms that will guarantee the flow of funds and private investment over the next five to ten years.

That is why two key theses will be emphasized. First, reconstruction should be an integral part of Ukraine’s European integration process: foreign donors should support the reform packages necessary for EU accession, from anti-corruption judicial reform to transparent and efficient public procurement mechanisms.

Secondly, investment insurance instruments are needed to cover military risks. Without such umbrella protection, substantial investments from more responsible funds will stay away from Ukraine for fear of losses from missile strikes or sabotage. It is on these signals that Kyiv is betting: the West's willingness to make not just one-time commitments, but to guarantee transparency and predictability of the amount of funding that will be available to both the state and business.

The final decision of the Rome conference cannot ignore the issue of frozen Russian assets. The Ukrainian delegation, headed by Deputy Prime Minister Oleksiy Kuleba, plans to pursue two objectives. First, to regularly transfer interest income from these assets to the Ukrainian budget. 

While the EU and G7 have already taken steps in this direction, the current arrangements cover only a small portion of Ukraine’s post-war reconstruction needs.

Secondly, Kyiv will push for the creation of a legal framework allowing for the full confiscation of the Russian Central Bank’s reserves, once international legal grounds are available. Without this discussion, the conference will turn into a collection of declarations of friendship rather than a concrete action plan.

Foreign Experience – Utilizing Hussein’s and Gaddafi’s Assets

After the fall of Saddam Hussein's regime, about $1.7 billion of assets were “transferred to the state revenue” of Iraq in 2004, and another $0.9 billion was found directly in the dictator’s personal funds. These funds were used to repair critical infrastructure and stimulate economic development. In Libya, the Libyan Investment Fund (LIA) with assets of $70 billion still remains partially frozen due to internal political disputes.

For Ukraine, a key lesson is the need to create a transparent, independent international structure for managing Russian assets, modeled after the Iraqi Development Fund for Iraq, where key donors, the UN and the IMF, act as guarantors of legitimacy.

Russia's Direct Damage to Ukraine Exceeds $170 billion

However, even the most ambitious pledges from Western capitals will be meaningless if Ukraine does not take the crucial step of thoroughly assessing the scale of destruction. According to the Kyiv School of Economics, direct material damage has already exceeded $170 billion, and this figure is growing every month. However, this $170 billion is only the tip of the iceberg. The joint RDNA4 (Rapid Damage and Needs Assessment) conducted by the World Bank, the EU, the UN, and the Ukrainian government estimates that total recovery and modernization needs exceed $520 billion over the next decade.

This is because recovery is not just about replacing destroyed bridges and hospitals, it requires reimagining them to meet modern challenges. For example, the construction of new roads in Ukraine’s western regions should comply with EU standards, while damaged energy infrastructure must be repaired with due regard to the risks of new attacks.

That is why the Ukrainian side refuses to “return to 2021”: such a strategy would only restore previous weaknesses and outdated systems. Instead, reconstruction should serve as a catalyst for building a new economic architecture. This implies, on the one hand, the creation of specialized industrial parks and logistics hubs that will attract foreign companies, similar to the technopolises of Poland and the Czech Republic, and, on the other hand, the combination of these investments with programs for the relocation of domestic businesses from the frontline areas.

Too often, reconstruction conferences focus solely on roads, but the real engine of recovery lies in the emergence of modern clusters for processing agricultural waste and scrap metal, as well as powerful eco-enterprises operating on the principles of a circular economy. The state must play an active role in this model: it shapes the rules of the game and provides transparent oversight like Prozorro, while private capital, in turn, brings innovations and accelerates project implementation.

Sources of funding for such an architecture could include not only foreign grants and loans, but also income from Russian assets frozen in various jurisdictions. Europe and North America already have mechanisms for monetizing interest income, and countries like Canada and the United States have paved the way for the confiscation of oligarch-owned private funds.

However, the experience of Iraq and Libya shows that without clear international coordination, any initiative risks being delayed for years. After 2003, Iraq managed to bring the first billions of dollars of Saddam's assets into the state revenue only thanks to the close cooperation of the Coalition Provisional Authority, the World Bank, and the UN. Libya, in contrast, has not yet received the bulk of its stock wealth due to unresolved internal disputes. 

Ukraine must draw conclusions from these cases. It must ensure the creation of an international mechanism for the joint management of Russian assets and agree on a governance format in which all major donors and institutions (the UN, the Council of Europe, the International Monetary Fund) will guarantee the proper use of funds.

In parallel, it is necessary to intensify and finalize the work on the International Register of Losses. The digital platform created by the Council of Europe already contains tens of thousands of cases of damage and losses, from broken schools to destroyed residential areas. However, the registry should not become an archive of pain. It must evolve into an economic foundation for future litigation and compensation. The data should be clearly classified, legally substantiated, and ready for gradual submission to international judicial institutions, including the International Court of Justice and the European Court of Human Rights (ECHR). Only then will Ukraine be able to present Moscow with a clear list of claims, backed by precise figures and specific deadlines for implementation.

Ukraine is Developing a Transparent and Accountable Mechanism for the Recovery Funds

Ultimately, no fund management system can function effectively without transparent national-level institutions. The Recovery Fund to be discussed in Rome should serve as an example of such transparency – not “black boxes,” but open platforms like “Ukraine Recovery,” accountable Donor Boards, regular audits by the Accounting Chamber and the National Agency on Corruption Prevention, as well as independent evaluations by international auditing firms. After all, even if the West allocates hundreds of billions, distrust or corruption could render these efforts a waste of time and resources.

Ultimately, no fund management system will work without transparent national-level institutions. 

The Recovery Fund to be discussed in Rome should be an example of such transparency. Not “black boxes” but open portals like Ukraine Recovery, accountable donor boards, regular audits by the Accounting Chamber and National Agency on Corruption Prevention, as well as independent audits by international audit corporations. After all, even if the West allocates hundreds of billions, distrust or corruption will turn them into wasted time and resources.

As a result, Ukraine will face a choice: either it will get a chance to transform into a modern European state with a brand new infrastructure, economy and institutions, or it will prolong the reconstruction process for decades by preserving Soviet-era governance models and structural weaknesses.

The conference in Rome is the beginning of a great deal of work, where the quality and ability to implement promises is more important than the quantity of promises. And the main responsibility for this lies both with Kyiv and with every Western government that is ready to take on political and financial commitments. In this sense, URC 2025 is a chance to show that post-war reconstruction in Ukraine can become not only a test, but also a symbol of a new order of things in Europe.

This should be the new architecture of reconstruction: not declarations on paper, but a system of interaction that combines politics, economics, and law into one solid structure for building a successful and sustainable Ukraine.

Igor Popov, head of United Ukraine Think Tank, expert on political and security issues