While the war in Ukraine drags on, eyes are turning to the future. The Russian economy will continue its decline. It is unlikely that Vladimir Putin’s leadership will survive. Ukraine will lie in rubble, but some are hoping that economic rebound will follow. Vast sums will be pumped into Ukraine and vast profits will be made.
Ukraine President Zelensky has demanded reparations be made by Russia. He has also made it clear that business opportunities will be available for Western capital. Speaking at The Wall Street Journal CEO Summit in May, he declared: “I’m sure after victory we will do everything quite fast,” adding that foreign capital would “get access to our country, our 40 million-plus market”.
A statement from the Ukrainian Ministry of Foreign Affairs formalised the demand for Russia to be forced to make reparations when it filed a case in the International Court of Justice in early July.
The ramifications of such an action have an ominous similarity to the end of World War I. A seriously weakened Russia and a Versailles-style punitive reparations bill offer nothing but dislocation for decades to come.
Canada has proposed “forcing” Russia to make reparations by seizing the assets of Russian citizens. This is being echoed by the British government.
However, capitalist powers in Europe and, most importantly, the United States are approaching the question differently.
There is talk of a new Marshall Plan for Ukraine.
The original Marshall Plan helped rebuild Europe’s industrial base. It also greatly stimulated the US economy and guaranteed markets for US exports. Capitalists always seek opportunity from catastrophe.
Ukrainian sources estimate the economic cost of the war will be between US$500 billion to US$1 trillion. Any post-war aid program will be a huge undertaking.
Despite their rhetoric supporting the Ukrainian people, capitalist economies will not be acting from a sense of altruism. The future for the Ukrainian working class will be marked by austerity programs, low wages and even more minimal social security. Successive IMF packages across the world have shown that this is the price of “largesse.”
While the cost of rebuilding will be huge, it is being seen as a worthwhile investment.
Martin Sandbu, writing in The Financial Times, indicates how capital views the end of the war. “The EU … should not see this as an expense. EU companies will be contracted for infrastructure, housebuilding, transport and more… Beyond this, it is an investment in Europe’s values and its security. It would bring 44 million people firmly inside the liberal democratic fold and into the social market economy – a historic achievement to rival the continent’s post-cold war reunification and the Marshall Plan itself.”
Representatives from more than 40 countries and international organisations, including the European Bank and the Organisation for Economic Cooperation and Development, attended a conference in Lugarno, Switzerland, dubbed a “Recovery” Summit in early July.
Pledges of recovery support have begun to roll in: Britain has promised US$950 million and Germany US$445 million. The EU has also pledged $9 billion Euro in loans.
United States Treasury Secretary Janet Yellen said: “Ukraine will need massive support and private investment for reconstruction and recovery, akin to the task of rebuilding in Europe after 1945”.
She added a warning that “the bilateral and multilateral support announced so far will not be sufficient to address Ukraine's needs, even in the short term”.
European Commission President Ursula von der Leyen made it clear there would be strings attached. The EU has demanded the judiciary be reformed and brakes on the power of Ukrainian oligarchs. These may be positive, but, as von der Leyen added, "Ukraine will need courageous reforms. But reforms should go hand-in-hand with investment”.
“Courageous reforms” mean making the Ukrainian economy more compliant to the needs of European and US capital. Conditions for the Ukrainian working class were already difficult before the war. Foreign direct investment (FDI), so essential for a capitalist economy, was already low before the war, at just US$900 million.
The future for Ukraine is bleak, even if the war is resolved in its favour.