The West can offer a plan similar to the Marshall Plan to rebuild Ukraine

By Vishal Manve, MALD 2023 Candidate, The Fletcher School

On May 26, 2022, the Russia and Eurasia Program at The Fletcher School organized its second panel discussion in the War in Ukraine series, featuring alumni from Harvard University and The Fletcher School. This series focused on three key areas impacted by Russia’s war on Ukraine: the humanitarian crisis, the economy, and international security.

The second event in the series centered around the ongoing war’s impact on Ukraine’s economy and business, the potential outflow of technology-based businesses, and the impending challenges of rebuilding the economy after the war ends. The panel included Andrei Pivovarsky, managing director of WOG Holding BV and a Fletcher alumnus who is also a former minister of infrastructure in Ukraine. The second speaker was Captain Oleh Khalayim, a Harvard alumnus and a member of the Armed Forces of Ukraine. The final panelist was Nuru Lama, chief investment officer at IFC and a Harvard alumnus. The panel was moderated by Daniel Drezner, Professor of International Politics at The Fletcher School.

Outlining the current situation in Ukraine, Pivovarsky stated how supplying fuel to Ukraine was “more art than science,” as Russia’s bombing of storage depots ensures products cannot be stored without the risk of destruction. His goals are to ensure that the army has enough fuel for the war, the railway network is managed in a timely and secure manner to transport people from the East to the West, and customers do not face fuel shortages despite rising precarious conditions.

“Everything changed suddenly during the war, be it management of financial resources, human resources, logistical networks, etc. Our company supplied a lot of products from Belarus, Russia, and the Black Sea ports, but they reneged on a signed contract on prepayments,” he added.

As the Russia-Ukraine war continues into its fifth month, Pivovarsky also expressed how staff shortage was a key issue for transporting fuel, as many young Ukrainians have been conscripted into the war and Russia “started bombing depots, hence products had to be moved all the time.”

“We had to buy products in U.S. dollars and the national bank imposed sanctions after the currency devalued, resulting in small and medium businesses closing out in Ukraine,” he added.

WOG Holdings could not move its operations elsewhere due to its critical importance for the Ukrainian economy in the light of most logistical networks collapsing.

“Businesses are unable to take risks, and we have lost a significant chunk of our economy and foreign currency value since we cannot export agricultural production, iron ore, or metals,” Pivovarsky outlined, stating that Ukraine was hit on two fronts: rising unemployment and loss of revenue.

The Ukrainian government has placed a moratorium on the payment of taxes until the end of the war, but Pivovarsky’s company continues to pay taxes and support its employees, despite not needing the services of 7,000 staffers as the war continues.

Meanwhile, Captain Oleh Khalayim, a member of the Armed Forces of Ukraine, expressed the dissonance between citizens feeling uplifted as Ukraine has shown its ability to withstand a much stronger enemy in Russia, despite the economy struggling badly.

“I spoke to people who were under occupation in March and they are coming back, businesses are coming back and the government is coming back. People are ready to restart their lives, the economy and the challenges are enormous,” Khalayim added.

He further expanded upon the challenges by recognizing that the size of Ukraine poses logistical challenges to rebuilding efforts.

“Ukraine is still under war and it is very difficult to talk about what will happen after the war, but everybody is positive about the outcome of the victory. Two of Ukraine’s exports-linked sectors, metallurgy and agriculture, are hit hardest in Mariupol,” he added.

“The city is virtually gone, razed to the ground, and Russia knows we are stronger on the agriculture front, hence why they blocked the Black Sea route to prevent [agricultural] exports,” Khalayim said.

Khalayim expressed further dissonance between “countries that support Ukraine but are less exposed to the consequences of war, and countries that are struggling with food price hikes, and thus less eager or proactive in condemning the war.”

“When news reports appear about countries like India buying Russian oil at a 30 percent discount, it does not serve Ukrainian public opinion well…we struggle to understand how India, a country that pioneered the fight against colonialism and fight for independence, decided to be opportunistic and effectively provide funds that bankroll the war,” Khalayim explained.

“If the world is not united and doesn’t show the principal view towards sovereignty and the right to self-determination, it is going to be a tough battle for us,” Khalayim said.

As Russia’s invasion of Ukraine impacts the global energy supply, many countries in Europe are aiming to build liquified natural gas terminals and reduce dependency on Russian gas pipelines.

“Some of the consequences you’re seeing is that because European demand for gas has gone up, prices have gone up, and that means that prices are going up in Asia because this is a global commodity,” Nuru Lama said.

“But the opposite is happening right now, and energy demand has gone up as economic activity has resumed. But the gas is expensive, so demand for coal-fired power generation has spiked,” Lama added.

He continued how this was not the “intent as phasing out coal is critical in terms of climate change, but unfortunately, we are headed in the wrong direction.”

He further added that the war has displaced the focus on green hydrogen, which is a “very interesting innovation.”

“With gas prices going up, the advantages and attractiveness of green hydrogen have gone up and will change the global energy mix in the next few years,” Lama said.

On Drezner’s question of the geopolitical scar left by the war, Khalayim added that the hypothesis may not be valid, as Ukrainians believe the world supports them.

“Even those countries that vote neutral or don’t vote in the UN, there are still voices there that say the war is terrible. But the longer the war takes place and the more there are instances where Russia can do business with other countries, the more it will have a scar,” he added.

On the challenges of rebuilding Ukraine after the war, Khalayim compared the possibility of the introduction of a Western-backed plan similar to the Marshall Plan, which was offered by the United States to Europe after World War II.

Meanwhile, Pivovarsky warned that the war was not just about Ukraine’s sovereignty, but the sovereignty of its neighboring countries like Moldova, the Baltic states, and Poland.

“A lot of our neighbors are now trying to help in order not to be next in line of Russia’s attacks, and they are creating economic bonds to support us,” he concluded.