Ukraine’s Economic Recovery: Remarks and a Conversation with Penny Pritzker

U.S. Special Representative Penny Pritzker discusses ongoing Ukraine recovery and reconstruction efforts, having just returned from three trips to Ukraine in six weeks, including joining the Secretary of State in mid-May. She will also outline U.S. priorities for supporting Ukraine in advance of the Ukraine Recovery Conference on June 11-12 in Berlin.

FROMAN: Well, welcome, everybody. My name is Mike Froman. I’m president of the Council. And it’s really a great honor to convene this meeting, both because of the importance of the issue—reconstruction of Ukraine—but even more so because of our guest, Penny Pritzker, who I had the pleasure of working with, well, for years, actually, in the Obama administration and even before.  

She is the president’s special representative for Ukraine’s economic recovery. It’s a position she brings an immense amount of experience to, both from having been in government but, very importantly, being a very successful businessperson and entrepreneur as well. Having set up really dozens of businesses and invested in them over the years and brings a real private sector eye to the challenges of rebuilding Ukraine’s economy and society, as well. I had the pleasure of working most closely with Penny when she was the secretary of commerce. And I saw from a ringside seat just how she elevated that role to a whole new—a whole new level, in terms of both the span of work, its effectiveness, and the importance to the U.S. government. 

So it’s a pleasure to welcome my friend Penny Pritzker. She’s going to give remarks for a few minutes, and then we’re going to have a conversation and open it up to questions. Please welcome Penny Pritzker. (Applause.) 

PRITZKER: So I’m really honored to be here today. Thank you. Mike, thank you very much. First, thanks for the warm introduction and, frankly, for being such a great partner. We worked for years together and your tireless efforts to find solutions for many of our global challenges is really something that I always appreciated. I really felt like we had a true partnership working in government. And thank you for your friendship as well.  

I want to thank also the Council community for hosting me today. I’ve been a proud member of the Council on Foreign Relations for years. And I was a former board member. And it’s a real privilege to have the opportunity to speak with you all today. You’re really a group of doers and committed to our planet’s collective peace and economic security. So it’s a pleasure to be able to come and talk about a subject near and dear to my heart. I’m also particularly grateful to the European brain trust here at CFR—Charlie Kupchan, Liana Fix, Thomas Graham, and, of course, Ambassador Stephen Sestanovich, whose work on behalf of the United States regarding the newly independent states of the former Soviet Union back in the ’90s still bears huge influence today.  

Let me start by talking about the situation on the ground in Ukraine today. On the battlefield, there is no doubt that the past months have been difficult, with the delays in our security and economic assistance leading to a situation in which Ukraine has lost ground in the war. That’s really undeniable. Since March 22 of this year, Vladimir Putin really doubled down on his cruelty, stepping up his attacks on Ukraine’s energy infrastructure; laying siege to Ukraine’s beautiful second city, Kharkiv; and seeking to break the psyche of the Ukrainian people. He has intensified his shelling of hospitals, schools, homes, around the towns of Chasiv Yar and of Vovchansk, which are near Kharkiv.  

And he has positioned 30,000 troops just over the Russian border—in Russia, but right over the border from Kharkiv, in an apparent preparation for a further assault. These attacks have forced more than 10,000 residents from the oblast to flee their homes and created an eight-gigawatt energy generation gap this summer. He depends upon his dark alliances for these attacks, with Iranian drones, North Korean artillery, and Chinese satellite imagery all contributing to the death, destruction, and needless suffering that we are witnessing. So without a doubt, these are sobering facts. 

And yet, amid the dark headlines, I’m here today to talk about why there is real reason for optimism towards Ukraine due to the facts and trends that we see, and which the media does not often capture. As we head towards Ukraine reconstruction conference in Berlin, which will occur in about three weeks, it’s important that we not just take advantage of these trends, but that we take heart from them. They show our belief in Ukraine’s future is not only based on a—it’s not based on a Pollyannish fantasy, but based on the reality as we see it at play.  

I’ve traveled to Ukraine five times since being named President Biden’s special representative for Ukraine’s economic recovery in September, and most recently I was there two weeks ago. And I’ve seen the trends with my own eyes. What we see is that with our help, Ukraine can and will win this war. And today, I’d like to explain why we believe it will, and describe a few key things that must happen on the economic side for that victory to take place.  

First, militarily. Though the supplemental was delayed, Ukraine is now getting what it needs. In the last thirty-one days since President Biden signed the supplemental legislation, the United States has flooded the zone with weapons and equipment, including couple billion dollars in munitions, including air defense systems, ammunition, armored vehicles, small arms, and other equipment. The democratic world is also there with us. The Czechs are leading a European effort to rush 500,000 artillery rounds to Ukraine. The U.K. has just announced a new multiyear military package. Germany is supplying a new Patriot system. Australia is providing a new air defense system of its own. And Ukrainian-manned F-16s will be flying over the airspace within months, provided by the Europeans.  

Ukraine is wasting no time that putting this wave of support into action. And its difficult, but absolutely necessary, new conscription law which just went into force will help it ensure it has troops necessary to defend itself. This is, of course, on top of the huge success Ukraine has seen in the Black Sea, where it pinned back Russia’s fleet, and its overall success in the battlefield, where it has by and large held a much larger force at bay along front lines that are over 600 miles long.  

Economically, we’re also seeing Ukraine take important strides forward. Take Ukraine’s defense industrial base. The number of drone manufacturers has grown from nine to over 200. Cyber, robotic systems, and demining expertise are skyrocketing. And data from the battlefield is helping Ukraine’s defense industries reduce the time for development of new technologies from years to weeks, with concrete impacts on the battlefield effectiveness. As the drone manufacturer Brave1 says, Ukraine is, and I quote, “where the technologies of victories are born.”  

American defense CEOs would agree. They literally marvel at the innovation of Ukraine’s defense production, sometimes combining different technologies, precision missiles, drones, armored vehicles, with American, Soviet, and European parts, to create whole new systems. It is this kind of creativity that is putting Ukraine’s defense companies at the leading edge of modern warfare technology. In fact, three American defense companies are working right now with their Ukrainian counterparts, and us, to coproduce low- and medium-caliber munitions made in and for Ukraine. Another is working on the very first joint venture between an American and Ukrainian defense company. The United States wants to unleash more joint Ukrainian-American defense production on Ukraine’s soil. That’s why we just announced a $2 billion first of its kind Ukrainian defense enterprise fund that will provide more financing for production, repair, and maintenance.  

The bigger economic picture is also encouraging. Despite Russia’s war and having 17 percent of its territory occupied, Ukraine’s GDP grew 5 percent in 2023 and is on track to grow another 4 ½ percent this year. Investment is up 17 percent, tax revenues surged 25 percent in January, and more than 37,000 new businesses were registered in Ukraine in 2023—more than the number in 2021 before the war. American companies beyond the defense sector are helping coauthor this recovery. McDonald’s added more stores in Ukraine and served over 100 million Ukrainians just last year, sourcing 70 percent of its beef, dairy, vegetables, and sunflower oil from inside Ukraine. ADM and Cargill are investing in agricultural projects and reinvesting profits back into Ukraine’s rich, black soil. So things are happening. That’s why there are over fifty American companies that are going to be in Berlin for the recovery conference to talk about their investments and even expansions in Ukraine. 

While all this is important and it’s positive, we cannot be naïve about the challenges Ukraine faces. And these are not just challenges on the battlefield. We do believe Ukraine can and will win, with support of a huge coalition on Ukraine’s side. But we have to be clear eyed about what it will take for the country to win not just the war, but also set itself up for the future. So let me describe what I think it will take. To win for the long term, there are five essential elements the Ukrainians, together with the international community, must tackle head on. Elements that must be at the center of our discussions at the Ukraine recovery conference in Berlin.  

They include air defense systems needed to protect the border and over major population centers. A culture that embraces rule of law and rejects corruption. A government that has the capacity to define bankable projects for investment and provide cohesive cross-ministry planning. A global marketplace offering risk management tools that will make investment decisions easier. And, finally, sufficient capital, especially the use of Russian sovereign assets, to finance this vision. Taken together, these five elements can be rocket fuel that powers not just Ukraine’s true economic recovery, but also its journey to become a prosperous, democratic, independent country integrated into the EU and NATO, which is exactly what its people crave.  

So let me lay out each of these a little—in a little bit greater detail, as each are key U.S. priorities as we head to Berlin. First, air defense. Just look at Kyiv. When you look at Kyiv, you can see what the future can hold for Ukraine. So you get off the train from Poland and you find a bustling European city that has thriving industry, kids going to school, parents going to work, folks going shopping, a bustling nightlife, and even regular traffic jams. It’s become—(laughs)—it’s become Ukraine’s economic beacon, made possible by the protective umbrella of air defense. The same is starting to happen in Odesa. In order to generate breakout economic activity, create jobs that draw back the Ukrainian diaspora, and attract private sector investment, it’s essential that we and our allies figure out how to provide sufficient air protection to Ukraine’s centers of commercial activity, like Kharkiv, Dnipro, Lviv, and beyond. Security is essential to attracting large-scale investment. We all know that, but it is—takes a lot of work to make it a reality.  

Second, Ukraine’s defenses against corruption must be just as strong as its military defenses. Eight in ten Ukrainian say they believe more must be done about corruption. And we must help them. This means a judiciary protected from outside interference. This means a press free from political influence or pressure. This means digital customs and other tax collection systems. This means an independent, empowered, well-resourced anticorruption investigators, prosecutors, and judges. This means strengthening the rule of law for everyone. So when I speak to American CEOs, particularly those in the most crucial sectors like defense and energy, the first point they raise with me, after asking about the war, is always the need to fast track reforms and address corruption. American taxpayers and Congress also justifiably demand reform.  

I’m pleased to report that Ukraine’s made progress on its reform agenda, including making some very tough decisions. In just the last six months, for example, Ukraine has passed legislation regarding asset declaration—so, think of its politicians declaring the assets they own—antimonopoly regulation, judicial discipline reform, and corporate governance. I truly believe these efforts, and more, are essential to change the culture in Ukraine. But they will ultimately be just as much a part of the Zelensky government’s legacy as winning the war itself. He understands fighting corruption is linked to Ukraine’s secure, prosperous, Western future. So this requires not just changes in laws, but a fundamental systems and cultural change.  

Meanwhile, even as we support Ukraine to strengthen its defenses and deepen its reforms, we need to help Ukraine set up the ability to prioritize and prepare projects for investment and reconstruction. The estimates to rebuild Ukraine by the World Bank are around $500 billion. There has never in history been such a significant need. To do this successfully and efficiently, coordination will be essential. So just think, unlike the Marshall Plan where one actor, the United States, was driving the reconstruction of many countries across Western Europe, this is a case where many countries, businesses, people, are driving reconstruction of one nation—Ukraine. Obviously, that makes coordination more challenging, though it allows us to bring to bear unprecedented amounts of funding, creativity, expertise, and experience to the challenge.  

What we need now is to lash Ukraine’s ingenuity to a cross-ministerial process that will prioritize and prepare the country for reconstruction. It’s essential to power the country into the future. It’s essential to attract investors and significant capital. It’s essential to having sufficient resources, labor, raw materials, and more to actually build the Ukraine of the future. This mechanism needs to be several things at once—Ukrainian led, community driven, and nationally coordinated. At the same time, it must also be internationally backed, grounded in data, and supported by the best global engineering and planning prowess the world has to offer.  

It’s a tall order, but creating this capability is essential. If we can get these pieces in place and ensure cross-ministerial political consensus around the right structure, plan, and people, then Ukraine can realize a robust recovery. The mechanism can do many things—establish reconstruction goals, identify and prioritize investments, determine financing, ensure the availability of sufficient inputs and resources, set standards, and guarantee Euro-Atlantic level of openness and transparency. These are all things both Ukrainians and the international community are going to want and need for sufficient investment to occur.  

Critical to Ukraine realizing its forward-looking economy and its dream of being part of the EU is how it develops its overall energy, transportation, and communication infrastructure. For the country to have decentralized energy generation and storage, utilizing gas, nuclear power, and renewables, for it to have rail, roads, ports, shipping, and air transportation, as well as for to have digital and ICT communication systems, all seamlessly linked to the EU, to the single market, and the global economy, will require the kind of coordinating effort that I am describing here.  

Without a cross-ministerial mechanism to coordinate the planning, engineering, resource management, and financing of these foundational investments, it’s not going to be possible for Ukraine to achieve its vision outlined in the Ukraine plan and elsewhere. We, governments and the private sector, must work together with Ukraine to broaden its private sector and, frankly, its public sector absorptive capacity. This is going to take hard work, feasibility studies, technical engineering, and business plans. But it will help ideas and concepts become realizable projects that can and will draw investment. Helping Ukraine build out this absorptive capacity is essential and will increase the number of bankable projects—something that is sorely needed.  

Fourth, Ukraine’s full-scale recovery will also require that we help the private sector manage risk. And, yes, this too is already happening. The U.S. Development Finance Corporation, DFC, is active and expanding its political risk portfolio for Ukraine. The European Bank for Reconstruction and Development, EBRD, is leading the development of a facility to provide coverage against war-related risks. The private sector is also involved. Marsh McLennan’s unity facility, for example, is a $50 million war risk insurance program covering ships transporting grain through the Black Sea. It’s one of the main reasons Ukraine’s Black Sea export routes have now expanded to prewar levels, hitting 13 million tons of exports in April alone.  

But more must be done. Ukraine’s insurance premium market is just 3 percent—just 3 percent—of Poland’s. We are pushing for new lines of war risk insurance, for energy, cargo, land transportation, and elsewhere. In fact, in Berlin we plan to announce ways to put new capital to work to provide war risk insurance for small- and medium-sized businesses. We all know that without a robust insurance market, robust investment is not possible.  

Finally, we have to tap into new sources of capital that can finance the public and private sector reconstruction. On the private sector side, we must find ways to unlock more catalytic and working capital. The thirst is there. One major American bank has added seventy-five new business clients, a 15 percent increase in its client base, since February of 2022. But Ukraine needs so much more. To meet the needs, there needs to be more lending through banks, through the international financial institutions, and elsewhere at interest rates that recognize the risk but yet also make investment profitable.  

In addition, for Ukraine’s reconstruction there’s one crucial step that must be taken as a moral, legal, and practical matter. Russia must be made to pay. Our Congress has given us the power to seize Russian assets in the United States, understanding what Putin—understanding that what Putin has destroyed, Russia should and must pay for the rebuilding. And we intend to use this power, working with the G-7 by pulling forward profits and interest on frozen assets, which is a first step. This can and will unlock billions of dollars and send a powerful message to Putin that time is not on his side. So taken together, these five efforts can provide the basis for Ukraine’s economic recovery and its economy of the future. These are workstreams on which we must focus in Berlin. They are essential to fortify Ukraine’s remarkable and underappreciated un-breakability.  

So as I close, I want to talk about the story of a company called Esper Bionics that makes artificial limbs. And I visited them two weeks ago and Kyiv. There’s a Ukrainian soldier named Valera Kucherenko, who came for Esper’s help after he lost both of his hands to a grenade attack last October. They gave him two bionic hands. And Valera has said that he was glad the prosthetics were made in a way that would allow him to return to the army to continue fighting for his country. When Ukrainians lose their hands, they build new ones and return to fight. And that is what is happening all over the country across the economy at this very moment. It’s just incredible.  

That is what I have seen personally over and over again. So when we say that Ukraine can and will win with our help, it’s Valera that I think about. The country is literally full of Valeras, not grabbing headlines but using every ounce of their determination and ingenuity to fight and to win. And we must help them. Thank you very much. (Applause.)