Ukraine

With more than 600,000km² of land and around 41 million inhabitants, Ukraine is one of the largest countries in Europe and neighbours the EU, Moldova, Belarus and Russia. In the south it borders on the Black Sea, and its ports there are of enormous economic importance for handling foreign trade. Ukraine is one of the world’s biggest grain exporters as “Europe’s breadbasket” and thus makes a major contribution to ensuring the nutrition of the world’s population.

Since the collapse of the Soviet Union, the country has been gradually converging with the West. Under the European Neighbourhood Policy and the Eastern Partnership, Ukraine has already gained access to select areas of the EU single market in exchange for binding commitments on domestic reforms and the adoption of EU standards with the signing of the DCFTA Association Agreement. Furthermore, at the end of June 2022, it was officially granted the status of EU candidate. Stability and sustained positive development in Ukraine are therefore essential preconditions for ensuring stability, prosperity and security in the EU and at its external borders.

Ukraine is still characterised by post-Soviet heritage, even 30 years after the Soviet Union collapsed. Structural and institutional deficiencies are evident in almost all areas of the economy, institutions and politics; infrastructure is outdated and in poor condition; and while life expectancy and education levels largely correspond to regional peers, per capita income is significantly lower and poverty is widespread.

In the wake of the Euromaidan protests that occurred at the end of 2013 and the associated fall of the pro-Russian government under Viktor Yanukovych, military conflicts with separatist forces supported by Russia began in the east of the country at the beginning of 2014. This conflict resulted in a widespread loss of control of the two eastern oblasts of Donetsk and Luhansk and continued tensions along the contact line in Ukraine. Around the same time Russia annexed Crimea, although the annexation was not recognised under international law. This conflict was never settled or resolved and culminated in a large-scale Russian invasion of Ukraine in February 2022 with the aim of overthrowing the Ukrainian government and gaining control of or more influence over the country.

Russia’s war of aggression resulted in far-reaching and very serious consequences, although these vary greatly from region to region. Against the backdrop of the destruction of cities and entire areas in the east and south of the country, combined with a large number of victims in the civilian population and the massive slump in the economy and supply, the living conditions of the population deteriorated to such an extent that millions of Ukrainians were forced to flee their homes. So far, more than 11 million people have fled abroad, 7 million of them into the EU. Furthermore, the internal displacement that has been an issue since 2014 has intensified, leading to around a further 7 million people settling primarily in the safer western regions of the country. This intra-Ukrainian internal displacement is overburdening the supply structures in the western part of the country; there is a lack of accommodation, water supply, healthcare and facilities as well as other welfare facilities.

The Ukrainian government is striving to meet all these complex challenges within the limits of what is possible. Efforts include supporting the economy and the banking system, procuring weapons for defence and supplying the population. As Ukraine is a relatively poor country, it relies on the support of other governments and institutions to cope with these tasks.

In recent years, German-Ukrainian cooperation has focused on improving energy efficiency in government buildings and energy transmission, on more sustainable economic development, on nature conservation and on supporting internally displaced persons since 2014.

However, the Russian war of aggression had a huge impact on cooperation with Ukraine and KfW’s work. Due to military activity in large parts of the country, some projects could not be implemented as intended and some had to be redirected. Priorities in the context of supporting the country have also changed significantly, with the current focus on emergency response and the functionality of the state.

At present, KfW’s work is focused on the following key sectors:

• Peace and social cohesion – housing for internally displaced persons. Creation of temporary accommodation as well as longer-term housing for internally displaced persons, especially in the west and centre of the country
• Climate and energy, Just Transition – energy supply. Modernisation and repair work on substations, for a more energy efficient and stable electricity supply in the country and to establish connectivity to the EU electricity market
• Sustainable economic development, vocational training and employment – provision of financing and interest subsidies for small and medium-sized enterprises, strengthening the economy and promoting employment and income
• Health, social protection and population policy – renovation of medical facilities and procurement of urgently needed medical goods and equipment; securing water supply and sanitation facilities in various larger and smaller cities and municipalities
• Functionality of the state – provision of budgetary support to the state to secure core government functions and to provide basic services for internally displaced persons in particular
• Reconstruction – KfW is already taking a close look at the approaches and options for rebuilding the country, but their implementation will depend heavily on developments in the war.

On behalf of the German Federal Government and the European Union, KfW Development Bank is currently implementing 34 projects with a total volume of over EUR 1.2 billion. To this end, KfW cooperates with many partners, such as municipalities, regional development institutions, banks and trusts, as well as international organisations (IOM, UNICEF). The political importance of the future of this country also means that commitments and the number of projects and initiatives are constantly increasing.

Under the European Neighbourhood Policy and the Eastern Partnership, Ukraine is an important development policy objective for both Germany and the EU. Due to the war, there are major developmental challenges in which Ukraine is currently being supported by emergency aid measures and measures to rebuild the country will be taken up in the future.

Project information – Housing for internally displaced persons