The second edition of the Rapid Recovery of Ukraine conference, organised by the Luxembourg-Ukraine Chamber of Commerce (LUCC) at the Chamber of Commerce in Kirchberg on 21 May 2024, brought together experts from the business, political and financial worlds to talk about sources of investment capital and financial support, defence tech and cybersecurity, decarbonisation, the reality of running a business in Ukraine during Russia’s full-scale invasion and Ukraine’s EU accession progress.

Russian invasion a “revelation”

Ukraine’s EU membership has been on the agenda for quite a long time, said panellist Vsevolod Chentsov, head of mission of Ukraine to the EU and the European Atomic Energy Community, during a panel dedicated to the topic. But the Russian factor--the “elephant in the room,” so to speak--was “overwhelming” and a major obstacle.

The start of Russia’s full-scale war against Ukraine in February 2022 was a “revelation” that Russia cannot “be pursued any longer as a reliable, serious partner in political, economic terms for the European Union. And eventually, that was a game-changer,” said Chentsov. It also took “time and effort” to change Brussels’ attitude, but Russia’s aggression has opened a “window of opportunity” to grow the EU.

For Ukraine’s deputy finance minister Olga Zykova, the in terms of anti-corruption and justice reforms, for instance, accelerating Ukraine’s progress on the path towards the EU.

Be aware of threats to democracy

With EU-wide elections approaching, said moderator Shirin Wheeler, principal advisor in international communications at the European Investment Bank, how important is the election to ensuring continued support for Ukraine?

“I think that all the parties in the middle of the political spectrum have this feeling that this is a crucial election,” said , an MEP from the CSV party and on the committee on foreign affairs. “It is a crucial election because of this fight for democracy--exactly what Ukraine is doing.” Hybrid threats to democracy are present in Europe: there’s the military front, for instance, but there’s also the social media front, where authoritarian states like Russia and China are pushing certain narratives and trying to polarise society.

To counter these threats, unity and raising awareness will be key. This can only be combatted if you are aware, Wiseler-Lima argued. “This is really the most important. To see, and then to go on, to make steps for more autonomy.”

Accession and reconstruction “mutually reinforcing”

Supporting Ukraine is not just about supporting an external body, said Wheeler. “It’s existentially, actually about the European Union as well, and our own political survival. But there are economic opportunities there.” How can urgent reconstruction needs and EU accession be balanced?

Indeed, the “historical decision” to grant Ukraine the status of candidate for accession to the EU was “obviously a fundamental decision for the future of Europe, but also a fundamental decision for the security of Europe as a whole,” said Gabriel Blanc, team leader on reconstruction of Ukraine, DG Near at the European Commission. Looking at the twin challenges of reconstruction and accession, the two are “mutually reinforcing.”

The accession procession “provides a blueprint for reform,” he said, covering rule of law, the fight against corruption, public administration reform, public finance management and more. It’s a framework for Ukraine to project itself in the future, in line with EU standards. The reconstruction itself, Blanc added, offers “great opportunities” to move away from the Soviet legacy and “leapfrog” into the future by building back better--and building back European.

One of the key features seems to be the “extremely close partnership that exists between the EU and the Ukrainian government,” noted Wheeler. Is that the case?

Yes, it is. Blanc, who worked in Ukraine with the delegation of the EU from 2010 to 2013, said there were “extreme difficulties” working with the government at the time. He’s now been working on the reconstruction of Ukraine for the past year and a half, and it’s been a “Copernican revolution. This is incredible. The change in the administration is something which is quite amazing. The quality of the staff and the level of engagement is something that we can only praise.”

EU enlargement progressing more quickly

Ronald Dofing, Luxembourg's ambassador to Ukraine, noted that the grand duchy has so far committed roughly €700m for Ukraine, covering financial, military and humanitarian aid. “We have been engaged since the start,” he said. “Ukraine is defending our values--that’s absolutely true--and that’s why we have to do more and welcome Ukraine in our European family.”

Dofing worked on the “Big Bang,” the round of enlargement that saw 10 countries join the EU in 2004. In the meantime, the process has changed, becoming more complex, technical and specific, but this is a “good thing.” More ground can be covered and elements that were overlooked in the past can be addressed. Helping Ukraine in terms of military support and reconstruction, in parallel with negotiations for EU membership, is a “mutually enforcing” process that’s also a “game-changer,” he said. “We’re progressing probably quicker because of that.”

IFIs create the “right conditions” for investors

The European Investment Bank has been present in Ukraine since 2007 and has mobilised €2bn since the start of Russia’s full-scale invasion, helping Ukraine to keep its economy running and ensure access to public services like hospitals or schools. Newly-named EIB president  has made Ukraine a top priority for the institution, said Lionel Rapaille, director for lending operations in enlargement and EU neighbourhood at the EIB. “Clearly, we are here for the long term.” And “what we see on the ground is the incredible determination of the Ukrainian people. I think Ukraine defines the word ‘resilience’ by its daily life and actions.”

EIB financing has been supporting both immediate needs and EU accession, said Rapaille. Examples include re-establishing Ukraine’s export capacity or synchronising the EU and Ukraine’s energy systems. Going forward, he added, “we need to galvanise the energy systems of Ukraine, and we’ll do this by investing in renewables in a decentralised manner.”

“From a strategic perspective, we will align our priorities with the Ukraine Plan [part of the ],” he explained. This covers support for the public and private sector, modernising the economy or signing guarantees to enable banks to continue lending. “Constant dialogue” will also help adapt to Ukraine’s evolving needs.

International financial institutions can help create the right environment for other investors to come in by giving confidence to contractors, suppliers or consultancy firms to start business in Ukraine, said Rapaille, while guarantees can enable additional “financial power.” A third element is that “we are supporting the EU enlargement process.” But while financing is certainly part of the process, that’s not all. It also involves reforms. The EIB and other international institutions can provide experience and knowhow to their partners.

“It isn’t just about the money,” said Wheeler. “It’s also very much putting in place the right conditions, but also doing that through advice.” The EIB’s --Joint Assistance to Support Projects in European Regions--started working in Ukraine in 2022, supporting integration of the rail systems and projects in the energy sector.

Potential in green transition and digitalisation

What are some sectors with potential for deeper cooperation between Ukraine and the EU, asked Wheeler, where investors from Europe can benefit from doing business?

For Chentsov, the modernisation of Ukraine’s energy systems is an opportunity, particularly given Russia’s destruction of the Ukrainian energy infrastructure. “But if you look into the Ukraine plan, you will see more or less the same priorities which the European Union member states have for themselves, which is the green transition, the energy transition, digitalisation. And definitely, in Ukraine’s case, all those areas, they are relevant,” he said. More than that, “Ukraine is an asset for the European Union’s transition in those fields.”

It’s very realistic, Chentsov added. “It has been developing in Ukraine before the war. Yes, war is a big challenge. But in spite of the war, our companies, they’re open for business. They’re alive and kicking.”

One mistake could cost everything

How can progress on projects be monitored?

It’s important to ensure that funds are not only properly channeled to projects, but also efficiently used and that there is a “clear track record” in terms of audits and the results of previous work, noted deputy finance minister Zykova. “We are working together with the partners--especially with the European Commission and the EIB--towards creating a single project pipeline, which would actually allow all the external donors to see what the priorities of the country are, and what is additionally needed, which goes beyond the public policy but is on the private side.”

Ukraine has also launched the Dream platform (), which collects, organises and publishes open data across all stages of reconstruction projects in real time. “Each and every citizen of Ukraine and each and every partner that cooperates with Ukraine can see the actual use of the funds and how the project is ongoing.”

The Ukrainian government understands a “very critical point,” she added. “One mistake on the side of transparency and accountability might cost everything, literally. This is why we’re so much focused on anti-corruption, judicial reforms, which--to my personal view--are the core ones, for every funding coming, both public and private.” Without sufficient anti-corruption steps, we cannot speak about reforms in the public management or energy sector. “This is the core point.”

Predictability is also key for donors, said Zykova, and “we at the ministry of finance can work towards macro-financial stability.”

Why is Ukraine the right place to invest?

To conclude the discussion, Wheeler asked the panellists: Why Ukraine the right place to invest?

Addressing the question from a “political perspective,” Wiseler-Lima replied that many still take democracy for granted. “But it has to be defended--very strongly,” and this is something that Ukraine understands. It’s a country that “looks forward,” where people want change. “I think investment should be made taking into account people.”

“It’s a big country; it’s in immediate need of major investments,” answered ambassador Dofing, highlighting a few sectors he considered “interesting” for the business community. “First and foremost is the energy sector. There are a lot of concrete avenues and alternative proposals how to rebuild [so that it] is safe from attacks.” There’s also scope for joining other EU countries in improving the European defence sector, as well as the IT and cyber sector.

For the EIB’s Rapaille, “it’s a once-in-a-lifetime opportunity.” It’s a “renaissance project”: the reconstruction needs are huge, but Ukraine’s people and its institutions are determined and resilient, he said. “On top of that, you have the perspective of the accession to the EU, which--as shown in other countries--has a breathtaking transformative power. It’s a driver for growth and it’s a key lever for changes. Clearly, investing in Ukraine is investing in Europe’s future.”

This is the moment that Ukraine needs investment the most, said Zykova. The quicker the investments come, the quicker Ukraine will be seen as a member of the Euro-Atlantic family, which will bring benefits for investors in time.

Not all of Ukraine is Bakhmut, Blanc from the European Commission added. “The country is a large country, and there are many places where companies are growing.” On the topic of corruption, there’s a gap between perceptions and the reality in Ukraine. Members of the business community have also told him how their experiences in Ukraine were easier compared to other countries. One of Ukraine’s “key assets” is its people, he said: the population is “highly skilled,” resilient and innovative, making it a “real asset for the future of the economy.” There’s always an advantage to being the first mover, Blanc argued, “so it’s time to go.”

“The most important element is people,” concluded Chentsov. The energy, dynamism and spirit of society are key, and “this spirit can also help revive the spirit here in the European Union.”