(Bloomberg) -- The UK is drawing up a war-risk insurance scheme that it hopes will convince investment companies as well as tech, energy and defense firms to back Ukraine’s reconstruction with billions in aid, people familiar with the plans said.
Britain is hosting a Ukraine Recovery Conference in London on June 21-22, aiming to secure the backing of world leaders and executives for proposals to fund the rebuilding of the country after the war. Discussions between the UK and Ukraine’s allies in the run-up to the meeting have focused on how to encourage investment by getting governments to take on the cost of war risk insurance, the people said.
The Russian invasion, in its 16th month, has devastated Ukraine’s infrastructure, strangled the nation’s export economy and killed or displaced millions of people. This week a dam breach triggered catastrophic flooding just as authorities in Kyiv were turning to a counteroffensive to retake Russia’s territorial gains.
The danger of war damage, as well as longer-term political and economic instability, have seen the costs of insuring investments in Ukraine shoot up, often pricing out both investors and private insurers. Ukrainian President Volodymyr Zelenskiy has called on allies to come up with a mechanism to underwrite investment.
The World Bank has estimated the cost of reconstruction for Ukraine will be some $411 billion, with $14 billion needed for critical spending in 2023. That figure may climb after intensified fighting and dam break this week.
Read More: Dam Breached in the Dead of Night Upstages Ukraine Offensive
The UK wants to demonstrate progress on an insurance scheme this month, the people familiar said. While governments are likely to pledge some new direct financing for Ukraine, private investments underwritten by governments would be a cheaper way to raise additional funds.
Efforts are also underway to lobby countries that are not directly aligned with Ukraine to help with reconstruction. The UK is trying to convince Saudi Arabia and Turkey to take part in the conference, according to the people, believing that would represent a diplomatic win and send a message to Moscow.
Saudi Arabia hasn’t joined the west in imposing sanctions on Russia, though Zelenskiy attended an Arab summit in the nation in May as Crown Prince Mohammed bin Salman attempts to make the country a major diplomatic power. Turkish President Recep Tayyip Erdogan has sought to be a mediator for peace in Ukraine, though has also stayed out of the sanctions push.
Japan is keen to play a significant role in terms of both financing and technical expertise following its own natural disasters, especially given its lack of military donations, another person familiar said.
However, it hasn’t been easy to secure concrete commitments or financial pledges for the conference, with officials working down to the wire to convince other governments and private companies to take part, the people familiar added.
Britain’s Foreign Office didn’t immediately respond to a request for comment.
Britain wants private-sector firms to sign a business compact agreeing to invest in Ukraine, although it will likely stop short of each signatory making a definitive cash commitment, the people said.
The European Bank for Reconstruction and Development has signaled it is planning to boost capital for Ukraine by as much as €5 billion ($5.4 billion) by the end of this year.
--With assistance from Daryna Krasnolutska.
©2023 Bloomberg L.P.
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