The situation in Ukraine, more than a year after Russia’s invasion, reveals extensive infrastructure damage estimated to cost close to $150 billion. Key areas like education, transportation, and energy networks have been hit hard by airstrikes, making the cost and effort required for reconstruction a daunting task. Economic factors are complex; although there has been mild economic recovery, the challenges ahead are monumental, with estimates for rebuilding costs ranging significantly higher than those seen in past post-war recoveries.

Rebuilding Ukraine is not just about financial numbers but also involves navigating complex political and global dynamics. Historical rebounds show varying outcomes due to investment conditions and institutional frameworks established post-conflict. Ukraine faces additional challenges like a depleted labor market exacerbated by a high unemployment rate, a huge refugee outflux, and pre-existing demographic issues. In maximizing growth potential post-war, elements like stable institutions, skilled workforce, and an inviting climate for foreign investment become critical.

Main takeaways from the video:

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Key Vocabularies and Common Phrases:

1. infrastructure [ˌɪnfrəˈstrʌktʃər] - (noun) - The basic physical and organizational structures needed for the operation of a society or enterprise. - Synonyms: (framework, foundation, structure)

That's the cost of the damage to Ukraine's infrastructure.

2. reconstruction [ˌriːkənˈstrʌkʃən] - (noun) - The action or process of rebuilding after being damaged or destroyed. - Synonyms: (rebirth, rebuilding, renovation)

The European Commission and the World Bank estimated the total cost of reconstruction at $349 billion.

3. stabilization [ˌsteɪbɪləˈzeɪʃən] - (noun) - The process of making something physically or metaphorically stable. - Synonyms: (steadiness, firmness, equilibrium)

We've observed economic stabilization and recovery, which was a surprising outcome.

4. ceasefire [ˈsiːsˌfaɪər] - (noun) - A temporary suspension of fighting, typically one during which peace talks take place. - Synonyms: (truce, armistice, halt)

What really matters is, after a war, do you have the institutions that support growth? Is there a lasting ceasefire?

5. demographics [ˌdɛməˈɡræfɪks] - (noun) - Statistical characteristics of human populations, such as age or income, used especially to identify markets. - Synonyms: (statistics, data, population analysis)

And also, it's important to bear in mind that demographics are not great.

6. immobilized [ɪˈmoʊbəˌlaɪzd] - (verb) - Prevented or restricted movement or flow, especially to a desired location. - Synonyms: (frozen, held, trapped)

We have had quite lengthy discussions on this, and we are now, I hope, in a position to soon bring forward ideas on how to use at least the proceeds of these immobilized assets

7. coordination [koʊˌɔrdəˈneɪʃən] - (noun) - The organization of the different elements of a complex body or activity so as to enable them to work together effectively. - Synonyms: (collaboration, cooperation, teamwork)

President Vladimir Zelenskyy and Blackrock CEO Larry Fink agreed to coordinate investment in rebuilding Ukraine.

8. threshold [ˈθrɛʃˌhoʊld] - (noun) - The level or point at which something would start or cease to happen or come into effect. - Synonyms: (brink, verge, level)

Is there any sort of threshold when you look at previous wars?

9. institutions [ˌɪn.stəˈtuː.ʃənz] - (noun) - Established organizations, especially those providing public or social services. - Synonyms: (organizations, establishments, agencies)

Do you have the institutions that support growth?

10. depleted [dɪˈpliːtɪd] - (verb) - Used up the supply or resources of something. - Synonyms: (exhausted, drained, diminished)

The labour market has been depleted.

Can Russian assets be seized to rebuild Ukraine?

Close to $150 billion. That's the cost of the damage to Ukraine's infrastructure. More than a year after Russia began its full-scale invasion. Schools, homes, transport hubs, and key energy networks have all been targeted by Russian airstrikes, and there's no end in sight to this conflict. As Ukraine attempts to chart a way forward, how hard will it be and how much will it cost to rebuild the country?

On February 26, two days into the war, a residential tower in Kyiv was hit by a missile. While there were no fatalities in that particular strike, it cost more than a billion dollars and ten months for the building to be restored. The time and money spent to rebuild just this one tower shows the scale of the task that Ukraine faces.

The economy contracted very sharply in 2022, the first year of the war. It fell by about 30%. What we've observed over the winter and spring is a degree of economic stabilization and recovery, which was a surprising outcome given the scale of attacks on energy infrastructure. In light of that stabilization, we see a mild economic recovery, but a very difficult path lies ahead.

14 months into the war and the damage to properties had reached $54 billion. Destruction to infrastructure totaled $36 billion, while agriculture, a very important part of the Ukrainian economy, had suffered damage of almost $9 billion. In June 2023, a strategically important dam in eastern Ukraine was destroyed, causing further social, environmental, and economic harm, the extent of which could take months to calculate.

Back in September 2022, the European Commission and the World Bank estimated the total cost of reconstruction at $349 billion. These numbers are constantly being revised upwards as the war drags on. Other institutions have gone as far as saying they expect a $1 trillion bill.

If we decide to do this thing, we can do it successfully. As a way of comparison, though, the wars were different. The Marshall Plan, which supported the recovery of several European economies after the Second World War, cost the US $13.3 billion, and in today's currency terms, this would correspond to about $224 billion.

The success of postwar recovery depends on a variety of factors. In many cases, it can take decades. After the Second World War, Japan took 23 years to get the growth of the country's economy back to a level. Had the war not happened in Iran, income never actually returned to its pre-conflict trends after the Islamic revolution and the Iran-Iraq wars around the 1980s.

We don't know when and how the war will be over and how much damage will be done by then. It depends on policy choices how much the rebuilding will cost. For instance, if you create conditions for foreign investment to come in, then the economic rebound can happen fast, and in the case of Ukraine, very fast.

So unfortunately, there is no clear sum on how much it will cost. But yes, it will be expensive. Is there any sort of threshold when you look at previous wars, in terms of how much more expensive rebuilding Ukraine might be versus previous conflicts? No, there is no clear threshold.

We saw that after the Second World War, the damage in various countries of Europe was quite unevenly distributed. But even some of the countries with the most damage, including Germany, did have a quite fast rebound afterwards, even faster than the less damaged UK. Why? Because there were conditions in place for investment to take off.

What really matters is, after a war, do you have the institutions that support growth? Is there a lasting ceasefire? And then do you still have the skilled people to make use of the money that comes in?

Prior to the war, Ukraine was already grappling with an aging population and low fertility rates. Its labor market also faced a high unemployment rate. This spiked to 24.5% in 2022. And with a reported 8 million refugees fleeing the nation since February 22, Kyiv might struggle to find the necessary human capital to rebuild its economy. The most important development, indeed, was the large exit of refugees. At the same time, quite a few men were recruited into the army, so they were taken out of the economy and into the military forces.

So the labor market has been depleted. In addition, unsurprisingly, people's skills have been eroded over the past year. And also, it's important to bear in mind that demographics are not great. This was already an aging labor force.

One would expect, as the war tapers off and eventually comes to an end, that people will come back, and that those people will come back with new skills and new ideas. So there are certainly potentially bright lights on the horizon once the war is over. But right now, it's very challenging.

As you can tell, there's a lot of uncertainty about the cost and pace of reconstruction. But another key question is, who will foot the bill? European officials have been looking at how to use frozen Russian assets in the bloc to support Ukraine's reconstruction. I spoke to Swedish official Anders Annlid, who is chairing those conversations.

We have been working since early March. We've had five meetings now. We have confirmed data. We know that there are more than €200 billion in Russian central bank assets in European countries. And in addition to that, there are also around €20 billion of private frozen assets.

One possibility this group is studying is using the money generated by the Russian central bank assets currently frozen by European states. Legally speaking, experts say it is easier to go down that route than using confiscated assets belonging to individuals and private firms.

We have had quite lengthy discussions on this, and we are now, I hope, in a position to soon bring forward ideas on how to use at least the proceeds of these immobilized assets. Ideally, of course, if any action of this sort should be taken, it should be taken in tandem with partners such as the United States, the United Kingdom, Japan, Switzerland, and other countries.

One of the doubts that I have is around when will this money potentially be available for the reconstruction of Ukraine? Can you send those proceeds to Ukraine as soon as possible, or would that have to wait for the end of the war?

Well, there are many steps to be taken before money can be transferred, so I think the intention would be that these proceeds should be possible to use as soon as possible.

The Ukrainian government seems aware that ultimately making Russia pay for the damage caused may prove to be a lengthy and complex solution. So officials have put a lot of emphasis on drawing in private support. President Vladimir Zelenskyy and Blackrock CEO Larry Fink agreed to coordinate investment in rebuilding Ukraine.

For example, at least two international conferences have also been organized to increase contributions to Ukraine. In addition, Kyiv has also signed a deal with JP Morgan to help support the rebuilding efforts. The reality is that Ukraine is nowhere near recovering from the war, mostly because the conflict is still ongoing, and it is difficult to put a price tag on rebuilding while the war drags on.

But private investors and international institutions are preparing for that. And for Kyiv, the hope will be the plans to rebuild Ukraine in the midst of a bloody conflict will provide a crucial boost for morale and confidence in their future.

Economics, Global, Politics, Ukraine Reconstruction, Post-War Recovery, Foreign Investment, Cnbc International