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Western aid to Ukraine is a value marker

Western aid to Ukraine is a value marker

Ukraine is shedding blood for peace and Western democracy, but Europe and the West have not yet realized this.

18 August, 2024
War in Ukraine
Euro-integration of Ukraine

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To understand the real values ​​and priorities of a country, company or person, follow ... money. Thousands of documents, statements, appeals in support of peace and democracy can be adopted every year, but this will only be a ritual shake of the air in front of the nose of the Nazi aggressor, who kills civilians in Ukraine with missiles and drones, who openly calls the West an enemy. When Ukrainians ask, beg, demand, convince the EU/G7/NATO to provide enough weapons and resources to wage war against the biggest threat to European democracy and peace, in response they are offered to implement thousands of European legislative norms - from fishing parameters to the size and shape of cucumbers, from gender equality to "green" metallurgy, as well as urgently implement regulatory, tax, financial, customs legislation. Yes, it is difficult, Eurobureaucrats admit - but who said, dear Ukrainians, that the path to the EU is lined with roses?

L"The more aid Ukraine receives today, the sooner it will win the war and begin reconstruction. Unlike Iraq or Afghanistan, Ukraine has a legitimate and effective government. It is determined to provide for itself, to pay for itself."L
This is a quote from the work "Financing democracy: Why and How Partners Support Ukraine, Policy Insight #124", published by the Center for Economic Policy Research (CEPR) back in December 2023. A group of the most influential European intellectuals who regularly communicate with policymakers around the world, including the Ukrainians Tymofiy Milovanov (Kyiv School of Economics), Olena Bilan (Dragon Capital), Nataliya Shapoval (Kyiv School of Economics), Ilona Sologub (VoxUkraine) and a Ukrainian of the American origin Yury Horodnichenko (University of California, Berkeley). CEPR has published several major works on the post-victory economic transformation of Ukraine based on the traditional model of the General Interventionist State. It is actively promoted by the IMF and McKinsey. Judging by the documents approved by the Ukrainian Government, this particular model has already been adopted by the country's authorities.
The authors of the report state certain successes of the Ukrainian economy:
  • a considerable decrease in inflation,
  • normal functioning of the banking system,
  • resumption of work of many businesses.
L"On the other hand, a war of attrition causes severe damage. Undoubtedly, Ukraine would not be able to resist for so long without the military, humanitarian and financial aid of other governments and international organizations. Continuation of support is vital for Ukraine. Now, it seems, its provision is under threat. There are voices that allocating resources to Ukraine is not a priority."L
The authors of the Report rightly claim that supporting Ukraine is not charity.
L"Ukraine is waging an existential war for its survival, but it is also a war to protect international law, European democracy and security."L
They indicate two critically important reasons for the need to support Ukraine:
  1. Values. Ukraine is a liberal democracy that respects human rights, the rule of law, and strives for a united Europe. If Russia is not defeated, it will be a defeat of the West, a failure of democracy and a huge support of all totalitarian, Nazi, fascist, barbaric regimes around the world.
  2. Safety. Putin's Russia is a real threat to Europe and the world. It is aimed at the subjugation and enslavement of neighbors. Ukraine restrains the spread of this threat by weakening the aggressor. At the same time, NATO countries have helped Ukraine very modestly - in the amount of 3% of military expenses. Not budget expenditures, not GDP, but only defense expenditures.
L"If Russia is not defeated, the war is prolonged or frozen, Europe will face the prospect of a zone of instability in the East. The occupied territories will be exploited by the Russians and various and sundry malicious actors to escalate the influx of refugees, arms trade and smuggling. This will lead to increased expenditures on security and defense."L
In addition, Russia will also increase its influence on critical resources, especially food supplies. It will use its influence as a weapon.
According to CEPR's assessment, postwar reconstruction of the country will require extraordinary financing in the amount of $400 billion to $1 trillion over ten years, depending on the duration and outcome of the war. Considering how much money has actually been allocated to Ukraine (G7/EU-27), the goals of "financing democracy" and "ensuring peace" are understood differently by them.
In 2024, net financing from the IMF will amount to $3 billion.
The Ukraine Financing Facility (UFF) program of the European Union is an opportunity (but not yet a reality) to receive $18 billion. This is less than half of the deficit predicted for this year.
The focus of CEPR experts is on three principles to determine the conditions for providing aid to Ukraine for the post-war reconstruction.
  • The first is that the recovery plan must first of all be developed by the Ukrainian government, taking into account the proposals of the foreign partners.
  • The second principle is "partnership conditions should correspond to the reconstruction plan and correspond to the stage of reconstruction", a bet on the leadership of the IMF during the implementation of the institutional reforms.
  • The third principle is "we propose to limit additional requirements to avoid overloading the Ukrainian government."
At the same time, CEPR does not say that it is the IMF that demands (with the sanction of the government of Ukraine) the restoration of precisely those institutions that condemn this country to the preservation of a chronic state of Oligarchy/Schematosis and, accordingly, an aggressive, destructive corruption for the country. The current regime of monetary, fiscal, regulatory, and institutional policy is a source of weakness and vulnerability of the Ukrainian economy and statehood. Unfortunately, most of the mainstream organizations of the West impose this kind of policy on Ukraine, because there is not enough scientific principle, institutional honesty, and moral responsibility for exactly how and how much the West and Europe really help Ukraine.

Military and humanitarian aid: figures and facts

  • According to the data of the Kiel Institute for the World Economy, on April 30, 2024, the EU institutions committed themselves to allocating (loans, grants, guarantees) in the amount of 152 billion euros, and allocated 87 billion euros (57.2% of the promised amount). This is ~0.3% of the state expenditures of the EU countries. Their aggregate state expenditures exceed 50% of GDP.
  • In April 2023, Switzerland adopted a program to support Ukraine for 2025-2028 in the amount of 1.6 billion euros. It has not yet started to be implemented.
  • In February 2023, Norway made a resolution to provide aid to Ukraine for 2023-2027. for 6.6 billion euros. As of the beginning of March 2024, only 1.2 billion was allocated.
  • The US reached peak obligations at the end of 2022 - 70.38 billion euros. Then, until the end of April 2024, the US government did not make any commitments. In the period from January to July, 2023, the average monthly allocation of resources to Ukraine from the USA amounted to 2.9 billion euros. In the period from August to December 2023, they decreased to 570 million euros per month. According to the law passed in April 2024, the supply from the USA until July 2024 did not actually exceed one billion euros per month.
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As noted by the Kiel Institute experts regarding the US law on Ukraine, "the funds intended for Ukraine amount to 31.5 billion US dollars and this is only about half of the declared 61 billion US dollars. This is substantially lower than the $39.5 billion provided in December 2022. The other half is mostly DoD procurement, operation and maintenance funding, and cannot be directly attributed to aid to Ukraine."
In light of the constant shelling of Ukrainian cities in the summer of 2024, this conclusion of German analysts also characterizes the attitude of the EU, the USA, and NATO countries to real threats to Ukraine: "However, neither the new US packages nor the latest European packages contain components that are urgently needed for air defense systems, requested by Ukraine. As before, there is a large discrepancy between the most important parts, such as the launchers for these systems, given to Ukraine, and the stocks held by the donor countries."
Infographic

Recommendations of the International Liberty Institute

Based on the priorities of the budget policy, the G7/NATO/EU countries have not realized the mortal danger that the Russian evil empire poses to the world and Europe. Therefore, instead of their adequate military and resource aid to Ukraine, we are still observing imitation and hear thousands of reasons for delaying the supply of weapons and preventing the creation of a favorable trade regime.
In the context of the real state of Ukraine and our foreign partners, taking into account the risks and threats to our country, as well as the agenda, which includes budgetary and resource support from the G7/NATO/EU countries, the International Liberty Institute ILI has formulated the following recommendations and observations:
  1. Post-war reconstruction. Before the victory over Putin's Russia, the Ukrainian authorities need to limit conversations and activities related to the discussion of how the hypothetical $400-1000 billion of foreign money will be spent after the victory. It was a gross mistake to divert attention to the Lugano Plan (June 2022). It is absolutely necessary to ensure adequate, uninterrupted military, resource and humanitarian aid to Ukraine in order to achieve a confident position on the battlefield. When the G7/NATO/EU increases support to Ukraine to at least 1% of GDP, then we will quickly defeat the enemy.
  2. Synchronization of regulatory legislation with the EU. The activities of the Government of Ukraine in synchronizing regulatory legislation with the EU during the war will not bring the expected results, but will significantly worsen the situation in the blood-soaked country. The diplomatic efforts of the Ministry of Foreign Affairs should be aimed at explaining to Western capitals that a real bloody war does not require European bureaucracy, but European freedom, which has made the West the most successful civilization in the history of mankind. We are surprised by the position of the scientists, CEPR experts, including the Ukrainian colleagues, who do not understand this, as well as the fact that the system of risk and uncertainty management in war conditions is fundamentally different from the peaceful European Union.
  3. Taxes. Any demands of Ukraine's external partners regarding the preservation of the current tax and monetary policy, tax increases, "killing" simplified regimes of business activity, strengthening control over commercial activities harm Ukraine, weaken our defense capability and competitiveness.
  4. Strategy for investors. The G7/NATO/EU countries still do not understand the true priorities of the Ukrainian authorities. One group needs the Lugano plan, another does not need Lend-Lease, the third is lobbying for grain schemes, the fourth is creating a bond syndicate, the fifth is fascinated by opaque public procurement for Prozorro, the development of money for road construction, etc. The Ukrainian Leviathan is not an attractive value benchmark of a strategic partner country for the world, therefore Ukraine needs to define priorities that are attractive for investment. The G7/NATO/EU countries do not imagine the world without Russia, as before - without the USSR. They do not see how a powerful Ukraine can completely replace Russia in production value chains. Here, too, there is a clear lack of work on the part of the Ukrainian authorities.
  5. NATO. Ukraine and our partners abroad need to make every effort to finally bring NATO out of torpor, to remind it of the real threats to peace, to remind it of its raison de vivre (reason to live). This also requires the efforts of organizations such as CEPR, CSIS, McKinsey, etc. It will be much more beneficial for Ukraine and the West when, instead of forcing Ukraine to build a state of total interventionism, they will bring the West out of its lethargic sleep in terms of realizing true values.
The West hardly wants to see Ukrainian oligarchs as partners of Western business instead of Russian ones. We have to provide a clear value alternative to Russia for Europe, the USA and the world, but the restoration of the power system according to the IMF's models, and the implementation of the CEPR recommendations are unlikely to create such an alternative.
In 2024, all Ukrainian diplomacy, all world-important influencers, public organizations, analysts, and researchers must reduce their agenda to one basic issue – give Ukraine weapons and resources for victory. The rest, including the "green" transition, inclusiveness, political correctness and global public goods must disappear from the "Ukraine-West" agenda.
Today, it is critical to achieve awareness, acceptance and implementation of the principle "Ukraine defends democracy and peace for the West".

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Yaroslav Romanchuk photo

Yaroslav Romanchuk

A well-known Ukrainian and Belarusian economist, popularizer of the Austrian economic school in the post-Soviet space. He specializes in reforms in transitional economies in the post-socialist space.

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