Resilience amidst war: Ukraine's road ahead

Russia’s invasion of Ukraine has an enormous impact on the current and future security of Europe. This Clingendael Spectator series analyses how Europe’s relation with Ukraine and Russia will be affected. In the fifth episode, Clingendael expert Julia Soldatiuk-Westerveld reflects on how Ukraine aims to stay resilient in the context of a long war and what the European Union can do to support these efforts.

Despite ongoing international discussions on how to end the war, Ukrainians are not betting on the hostilities with Russia to end soon. Over two years after the large-scale invasion began, and ten years since the start of the war in the Donbas, Ukraine is readying itself for an even longer conflict.

How does Ukraine aim to stay resilient in the context of a long war, and what can the European Union do to support these efforts? This article aims to answer these questions through four different angles: scaling up Ukraine’s defence industry, strengthening Ukraine’s economy, supporting Ukraine’s civil society and joining efforts in strengthening the resilience to Russian information warfare.

Scaling up defensive capabilities
After a period of overwhelming military support for Ukraine and optimism about a counteroffensive, Ukraine is currently back to defensive positions. The country does not have enough ammunition and long-range missiles to protect itself properly from Russia’s military advances, let alone reclaim territory. Simultaneously, the West is struggling to provide Ukraine with what it needs.

Ukraine needs stronger defensive capabilities; not only in the short and medium term, but also in the longer run when the war is over and Ukraine needs to deter Russia from invading again. Examples from Taiwan, Israeland Indiashow that successful deterrence requires strong defensive capabilities.

For this, two things are necessary: security guarantees from an ally in the form of a military alliance, such as NATO or NATO member states, and an upscaling of domestic arms production. As prospects of NATO membership are not progressing so far, Ukraine is focussing its attention on the latter. In 2023, Ukraine initiated significant advancements in its defence industry, aligning with NATO standards and expanding production in various sectors, including artillery systems, ammunition, hybrid air defence equipment, drones and thermal imagers.

Ukraine needs to look for ways to reduce defence investments as a percentage of GDP

The country has undertaken reforms to involve private companies in its previously state-owned defence complex, with over 190 enterprises now participating. Ukraine has also introduced robotised systems on the battlefield, such as water-surface and underwater drones, which have proven effective against the Russian Black Sea fleet.The smaller first-person view (FPV) drones are effectively deployed on land to target Russian vehicles and artillery but cannot compensate for the lack of conventional artillery ammunition. The impact of these drones is therefore limited without a consistent supply of Western artillery. Long-range drones are in the process of development as well to target objects further beyond the frontline.

For the strategy of domestic production to be successful, it is important to ensure that the Ukrainian share of investments in the defence industry does not overly burden its national economy. Currently, Ukraine’s defence budget is estimated to be no less than 21,6% of its GDP for 2024, with over half of the state budget allocated to the security and defence sector.This is deemed an unsustainable amount. For reference, NATO members defence spending averages between 2% and 4% of the national GDP, global defence spending in 2023 grew by 9%,and Russia’s current defence spending reaches 7,5% of its GDP. Ukraine thus needs to look for ways to reduce defence investments as a percentage of GDP. This would require both a stable economic recovery and the assurance of consistent foreign support for its defence industry. 

Ukraine is seeking bilateral military alliances to stimulate foreign investment and closer cooperation with partners to scale up its domestic defence industry. Such agreements have been signed with the UK, France, Germany, the Netherlands, Denmark, Canada, Italy and Finland.

The countries that signed these agreements commit themselves to at least maintain the current level of support to Ukraine for the next decade. They prioritise strengthening Ukrainian defence capabilities through direct military support, investments in research and development and the production of weapons in Ukraine itself.

Looking ahead, Ukraine aims to prioritise high-tech military systems by using advanced technologies like AI and positioning itself as an attractive partner for the EU in the field of military research and innovation. The EU could facilitate this partnership by fostering technology sharing and innovation. Nevertheless, providing military aid to Ukraine – air defence systems and ammunition, spare parts and other weapon systems, which Ukraine cannot (yet) produce at scale – remains essential to counter the current Russian attacks and further advancement into Ukraine’s territory.

Supporting stable economic recovery
A strong and stable economic recovery is key for upholding Ukraine’s resilience. In the first year of the war, Ukraine experienced a significant 28,8% decline in GDP. However, last year, the country managed a modest recovery, registering an economic growth of 4,6%, as estimated by the International Monetary Fund (IMF) and Ukraine’s Ministry of Economic Affairs.Next to partly restored grain exports, much of this growth is owed to foreign budgetary aid, meaning that Ukraine’s economy remains vulnerable due to its reliance on external financial injections.

To reduce the dependence on foreign support, recovery funding needs to be structured in a way that strengthens the fundamentals of the country’s economy. This includes reducing the dependency of Ukrainian companies on imports while increasing their export capacity.

The removal of trade barriers would help achieve the goal of strengthening Ukrainian businesses, particularly in the agricultural sector

The role of small and medium-sized enterprises (SMEs) is of particular importance here, as their empowerment serves as a safeguard against business monopolisation, which could exacerbate inequalities and revitalise oligarchic structures that President Volodymyr Zelensky and his government have tried to break down. Over the past two years, Ukraine’s oligarchs have lost much of their influence on the economy, politics and media.Notably, the Ukrainian government has broken the monopoly of the five biggest energy and commodity companies, which are currently undergoing comprehensive reforms.

Dedicated efforts towards the reconstruction of SMEs also offer the potential to foster a more competitive business landscape, laying the foundation for a more resilient economy. One of the most impactful initiatives to support Ukraine’s SMEs is the state credit programme ‘Affordable Loans 5-7-9%’.Over the past two years, banks have been reluctant to invest in Ukrainian businesses, and government programmes like this encourage them to provide support through loans, notwithstanding the military risks involved.

The removal of trade barriers would help achieve the goal of strengthening Ukrainian businesses,particularly in the agricultural sector, an important part of Ukraine’s economy. Before the war, 98% of Ukrainian agricultural commodities were exported via seaports. Redirecting these exports overland became challenging after the blockade of Ukrainian seaports by the Russian fleet. Although the reopening of the maritime export channel via the port of Odesa was a welcome relief for the Ukrainian economy, many other former shipping routes remain closed due to the occupation of various harbours.

Alternative routes, such as the rail and road ‘solidarity lanes’, along with the use of river barges to transport grain up the Danube river, were helpful for restoring agricultural exports. However, these efforts have been hindered by unilateral restrictions on Ukraine’s agricultural products by EU neighbours.

Poland is one such example, fearing the shipments of Ukrainian grain might harm Polish farmers. Those worries might be allayed,as a considerable share of these commodities are destined for markets outside the EU.Moreover, these restrictions not only harm the Ukrainian economy but also contribute to a food crisis in other parts of the world. Meanwhile, Poland’s imports of grain from Russia increased by more than 50% in 2023 compared to the year before, while across the EU, Russian grain imports declined from 12% to 6% of the total since the invasion of Ukraine.To supress these imports into the EU, in March 2024 the European Commission proposed to raise tariffs on Russian and Belarusian grain products.It is expected that these restrictions will have a limited effect on the whole of Russian grain exports, as only around 2% of its shipments are destined for Europe.

According to the World Bank, 50% of Ukraine’s pre-invasion energy generation capacity – mostly coalfired – is currently destroyed or in Russian possession.Ukraine now aims to replace that lost capacity with a decentralised and more resilient ‘green’ energy system along the lines of the EU’s accessing priorities and Green Deal.

Ukraine must further integrate into the EU single market

To implement these plans, three things are required. Firstly, there is a need for public foreign investments and war insurance mechanisms to attract private investments. So far, the World Bank’s Multilateral Investment Guarantee Agency (MIGA) has provided the equivalent of 215 million dollars in guarantees to Ukraine. Additionally, various individual governments like Japan, the UK, Norway and Belgium have established the Support for Ukraine’s Reconstruction and Economy Trust Fund (SURE TR), providing 73 million dollars in insurance capacity.

Secondly, as mentioned before, local entrepreneurs and SMEs need access to quick and flexible loans, enabling them to take the lead in stimulating local economic growth and job creation in the short term.

Thirdly, Ukraine must further integrate into the EU single market. Last June, Ukraine joined the EU’s Connecting Europe Facility (CEF), which grants Ukrainian companies and public authorities access to EU funding in sectors of mutual interest like transportation, energy and digital domains. Currently, Ukraine is implementing four priority projects through this programme, aimed at increasing connectivity.Integration into the European electricity grid through alignment with ENSTO-Ehas aided Ukraine in managing power grid deficits resulting from intentional Russian shelling of electricity infrastructure.

To enhance the meaningful impact of Ukraine's integration into formal EU structures, in addition to the tools and financing mechanisms provided by the EU, supporting Ukraine's integration into both these formal structures and its informal networks, associations and professional communities would facilitate a mutual understanding of practices and contribute to the ongoing transformation of Ukraine's mindset.

Backing civil society to safeguard Ukraine’s democracy
While the security threat emerging from Russia has mobilised Ukrainian politics and created an incentive to bolster parliamentary scrutiny, parliamentary oversight remains weak. The ongoing Public Administration Reformis expected to enhance the parliament’s role in overseeing public institutions. In the meantime, Ukrainian civil society will continue to play an important role in safeguarding the accountability of the government sector, as it has done in the past decade.

However, following the Russian invasion of Ukraine, many of Ukraine’s civil society organisations were forced to redirect their original focus areas towards humanitarian aid and advocating for military and economic support from other countries. This shift includes human rights organisations and transparency and accountability watchdogs.

The capacities of these organisations are overstretched, and they struggle to maintain their original objectives. Yet, these objectives remain crucial for holding the government accountable, both during the war and as Ukraine transitions into the postwar period. Until Ukrainian democracy is reinforced, civil society will continue to play a key role in safeguarding 'checks and balances’, thus ensuring that Ukraine's institutions remain on the path of democracy. Hence, the EU could consider ways to provide more capacity and structural funding directly to Ukrainian civil society organisations.

Countering Russian disinformation
The war has played a pivotal role in shaping and solidifying Ukraine's national identity. Russian aggression has fostered a sense of unity among Ukrainians, transcending regional and linguistic differences. Under martial law, the media landscape in Ukraine has experienced a significant shift. Following 24 February 2022, the nine largest media outlets collaborated to create a ‘United News Telemarathon’, aimed at delivering urgent news, fostering cohesion, and deflecting the risks of panic and instability arising from Russian information warfare.

While this is a common measure in a wartime situation, there are ongoing discussions in Ukraine regarding the timing and method of discontinuing the Telemarathon, given its constraints on media freedom. Nevertheless, the participating channels are hesitant to this idea due to financial concerns.

Information warfare does not stop at the Ukrainian border

Lawmakers in parliament are also hesitant, since the measure has proven very effective in decreasing the impact of Russian disinformation on Ukrainian society, and a viable alternative is yet to be found. Ukraine cannot afford pre-war societal division; it is crucial for the country’s survival to keep the population unified, while simultaneously strengthening a civic Ukrainian identity that also accommodates the country’s rich ethnic and linguistic diversity.

However, information warfare does not stop at the Ukrainian border. At the end of 2023, Russia launched a new disinformation campaign within the European Union, aimed at deepening societal divisions, increasing a feeling of insecurity and lowering support for Ukraine.To effectively counter these efforts, it is in the interest of both Ukraine and the EU to cooperate as much as possible on countering Russia’s information warfare efforts.

Between hope and fear
Overall, Ukraine’s resilience rests upon four pillars: its defensive capacities, a robust economy, a strong civil society, and a united and well-informed population. Confronted with Russian aggression, Ukrainians have shown strength and resilience in the past years. Despite, and because of, the war, the country is reforming and progressing towards a European, democratic future.

However, Ukrainians live between hope and fear. Which of the two will be victorious, will be in part determined by the support of other European nations, the United States and Ukraine’s partners around the world. The recent approval of the military and financial support package by the American House of Representatives should not diminish the urgency within the EU to sustain its support to Ukraine. After all, Ukraine’s success remains strategically vital for the European Union, as the EU’s decisiveness and backing of Ukraine’s interests impact its influence and global reputation worldwide.