Western allies are finally making good on their promises, handing Kyiv substantial economic assistance, weapons, security deals and now greater command freedom on the battlefield.
BY HOWARD J. SHATZ
Howard J. Shatz is a senior economist at RAND and a professor of policy analysis at the Pardee RAND Graduate School. He’s the co-author of the RAND report “Reconstructing Ukraine: Creating a Freer, More Prosperous, and Secure Future,” 2023.
Spearheaded by the U.K., a growing number of Ukraine’s allies are now allowing the weapons they’ve supplied the country to be fired into Russian territory, giving Kyiv a potential boost on the battlefield amid hopes of blunting Russia’s offensive on Kharkiv.
Less dramatic, but just as consequential, is the fact that Ukraine’s also been gathering momentum in other ways that could allow it to protect its independence, achieve a favorable outcome to the war, and embark on a reconstruction program that will firmly link it to the Euro-Atlantic community.
Overall, Western allies are finally making good on their declaration to support Ukraine for “as long as it takes,” handing Kyiv substantial economic assistance, weapons, security deals and command freedom on the battlefield. Ukraine’s prospects look better now than they have since early 2023 — prospects that will likely get a further boost at this week’s Ukraine Recovery Conference in Berlin.
So far, Ukraine’s skillful economic policymaking has maintained macroeconomic and financial stability in the country, despite the toll of the war. After a crash of 29.1 percent in 2022, Ukraine’s economy grew 5 percent in 2023 — faster than all other large European economies — and strong growth is expected over the next three or more years. Moreover, by holding its economy together, Ukraine’s now better prepared for a postwar reconstruction period.
This new wave of support from Western allies started last December, when the European Council agreed to open negotiations for Ukraine to join the EU. The path to EU membership may be challenging: For example, Ukraine will need to make more progress on transparency, anti-corruption and rule-of-law reforms. But accession provides a strong incentive, and the EU has now made a solid commitment with its own reputation on the line.
The same month, U.S. President Joe Biden also signed an executive order, giving the Department of the Treasury authority to sanction banks facilitating transactions that help Russia’s war effort. The measure has since hampered Russia’s international payments and trade, and led some banks to cut ties with the country.
Then, in February, the EU approved a four-year $54 billion package of grants and loans, allocating $10 billion of it to an investment framework aimed to attract $43 billion in additional finance, thus raising the package’s total value to almost $100 billion. By comparison, Ukraine’s entire GDP in 2022 was $160.5 billion.
Finally, in April, the U.S. signed the Ukraine Security Supplemental Appropriations Act into law, allocating almost $61 billion for Ukraine, roughly $50 billion of which is military-related and over $11 billion of which is for economic assistance.
Most notably, on the military side, Section 505 of this new law requires the transfer of longer-range Army Tactical Missile Systems (ATACMS) to Ukraine. The U.S. has quietly transferred some of them to Ukraine before, enabling surprise attacks on Russian military facilities in Crimea and strikes deep into occupied eastern Ukraine. But now, the transfer is overt.
Furthermore, at the same time it approved the supplemental, the U.S. Congress also approved the REPO Act, enabling the seizure of Russian sovereign assets in order to repurpose them for Ukraine. Although the amount held in the U.S. may be worth only $5 to 8 billion, the law may help spur the U.K. and other European countries to act similarly. And these jurisdictions — especially Belgium — hold approximately $300 billion in frozen sovereign assets.
The seizure of these assets likely won’t happen quickly. While the Parliamentary Assembly of the Council of Europe has unanimously endorsed the seizure of these reserves, other parties have been reluctant. The European Central Bank and others in Europe oppose such seizures, fearing adverse impact on foreign demand for euros, as well as the perception of the safety of deposits in the European banking system. Instead, for now, the EU aims to use profits and profit taxes spun off by these reserves to aid Ukraine, which amount to about $3 billion per year.
At their most recent meeting in May, G7 finance ministers and central bank governors said they’d be present G7 leaders at their meeting in Italy later this week — just after the Ukraine Recovery Conference — with options for making use of these profits to mobilize even greater assistance for Ukraine, such as using them to secure a $50 billion loan.
Still, the appeal of larger seizures may rise as does the war’s price tag. The G7 — which includes four European countries and the EU — has consistently said that “Russia must pay” for the damage its war has caused. And that damage is now estimated at $152 billion, with 10-year recovery and reconstruction needs estimated at $486 billion.
Meanwhile, beyond the economic domain and new freedoms regarding the use of weapons, support for Ukraine has increased in other ways as well. More than 30 countries have now agreed to negotiate bilateral security agreements the country — at least nine of which have been signed, and the U.S.negotiation is currently underway.
However, even with such support, Ukraine remains at great risk. It desperately needs air defense, and it has much to do in terms of mobilizing, training and equipping tens of thousands of soldiers.
And while Ukraine takes some of these necessary steps, rather than showing “Ukraine fatigue,” its partners are now renewing its ability to stand strong, to defend itself and to become a future member of the Euro-Atlantic community. For once, it’s not all bad news./Politico/