EBRD Investments in Ukraine

Effects of Russian Aggression in 2014 and 2022

Executive Summary

The EBRD is the only multilateral development bank which explicitly cites strenghtening democracy in its mandate (EBRD, Establishing Agreement, 1990). When Russia attacked Ukraine in 2014 after the pro-democratic Maidan-Revolution, this severely hit the Ukrainian economy and also affected the core principles of the EBRD. How did EBRD investment activity in Ukraine change after the beginning of this violent conflict in 2014? And what does this mean for the EBRD’s reaction to the full invasion in 2022? Exploring these questions leads to the conclusion that sector composition of investments has changed more than the volume of initiated projects. Investments in natural resources gained importance both immediately after 2014 and in 2022. While governance concerns severely limited investment after 2014, public sector investments form the majority of initiated projects in 2022-23 suggesting a mitigation of these concerns. The analysis lays the ground for a more thorough discussion of the EBRD’s investment response to a crisis that so clearly falls into its mandate of supporting reconstruction and democratization in Eastern European countries.

Key Take Aways

• The Ukrainian economy suffered substantially from the annexation of Crimea in 2014 and the full invasion beginning in 2022. In both instances of Russian aggression, the EBRD promised enhanced investment in Ukraine. However, new EBRD investment activity in the years immediately after 2014 did not increase substantially.

• Rather, the composition of EBRD investment in Ukraine changed. Both, after 2014 and after 2022, the share of investments in Natural Resources-projects increased significantly, in 2014 from 5 % to 22 % and in 2022 from 6 % to 31 %. The share of investment in transport projects, sank following the annexation of Crimea and the full invasion in 2022.

• EBRD concerns over corruption and intransparency have limited investment after 2014. In return, Ukraine’s significant reforms since 2014 plausibly contribute to an unusually high share of public sector investment in Ukraine since 2022. The share of public sector investments in Ukraine almost reversed from 33 % in 2017 to 2021 to 64 % in 2022-23.

Introduction

The European Bank for Reconstruction and Development was founded after the collapse of the Soviet Union with the aim to rebuild and reconstruct Central and Eastern European countries (EBRD, Establishing Agreement, 1990). In particular, the EBRD is committed to supporting these countries in strengthening their democracies as per Art. 1 of the founding agreement (EBRD, Establishing Agreement, 1990). Ukraine became a member of the EBRD in 1992 and has since been one of the most important recipients of EBRD investments (EBRD, Ukraine Overview, 2021). The Russian attacks on Eastern Ukraine in 2014 and Russia’s full invasion of Ukraine in 2022 have not only depressed Ukraine’s economy and increased its need for reconstruction spending (EBRD, Ukraine Overview, 2023) - Russia’s aggression against Ukraine also affected core principles of the EBRD. The largest effect on EBRD’s investment strategy was the freezing of any new projects in Russia in 2014, its largest investment recipient until then. In 2022, the EBRD suspended Russia’s access to the Bank’s resources (EBRD, Russia Overview, 2023). But what has changed in the EBRD’s activities in Ukraine? Has the destruction caused by Russia led to increased investment in Ukraine by the EBRD? And what can we say about the reaction to the full invasion in 2022 so far? Using data on EBRD investment in Ukraine and other recipient countries, I will highlight a few takeaways in the following brief.

Ukraine’s Economy and EBRD Investments in Ukraine

Russian Aggression depressed Ukraine’s economy severely, visible in the stark decreases in Ukraine’s GDP after 2014 (until about 2016) and 2022 according to the most recent World Economic Outlook data from the IMF (Figure 1). The conflict affects Ukraine’s economically important territory directly, with fighting covering territory responsible for 20% of GDP at the end of 2022 (EBRD Ukraine Overview, 2023). Additionally, it lowers producer and investor confidence more generally with long lasting effects as outlined in a Financial Times article on the consequences of the conflict that started in 2014 (Fingar, 2016 (FT)).

Code

#KEEP:
GDP_2 <- GDP_1 %>% 
  mutate(GDP_current_USD_bn = GDP_current_USD_mln/1000, 
         GDP_current_USD_bn_r = round(GDP_current_USD_bn, 2))

Ukraine_investments <- Ukraine_all_projects_6 %>%
  group_by(year) %>% 
  summarize(investments_bn = sum(ebrd_finance)/1000000000)

Ukraine_investments$investments_bn_r <- round(Ukraine_investments$investments_bn, 2)

GDP_2_sub <- GDP_2 %>% 
filter(year %in% c(2014, 2015, 2016, 2022, 2023))

Ukraine_investments_sub <- Ukraine_investments %>% 
  filter(year %in% c(2014, 2015, 2016, 2022, 2023))

# KEEP
# GDP plot
GDP_plot_1 <- ggplot(GDP_2, aes(x = year, y = GDP_current_USD_bn_r)) +
  geom_col(aes(text = paste0(year , " GDP: ", GDP_current_USD_bn_r, " Bn [USD]")),fill = "grey") +
  geom_smooth(se = FALSE, color = "darkgrey", size = .5) +
  geom_col(data = GDP_2_sub, aes(x = year, y = GDP_current_USD_bn_r, text = paste0(year, " GDP: ", GDP_current_USD_bn_r, " Bn [USD]")), fill = "darkred", alpha = .4) +
theme_minimal() 

GDP_widget_1 <- ggplotly(GDP_plot_1, tooltip = c("text")) %>%
  layout(hovermode = "closest", 
          title = 'Figure 1: Ukrainian GDP per Year (current USD)',
         xaxis = list(title = '', range = c(1992, 2025)) ,
    yaxis = list(title = 'GDP in Bn USD', range = c(0, 225)),
    margin = list(b = 80, t = 100) ,
    annotations = list(
      list(x = 2015, y = 210, xref = 'x', yref = 'y', text = 'Annexation of Crimea', showarrow = FALSE),
      list(x = 2015, y = 220, xref = 'x', yref = 'y', text = '2014', showarrow = FALSE),
      list(x = 2022.5, y = 210, xref = 'x', yref = 'y', text = 'Full Invasion', showarrow = FALSE),
      list(x = 2022.5, y = 220, xref = 'x', yref = 'y', text = '2022', showarrow = FALSE), 
      list(xref = "paper", yref = "paper", xanchor = "right", x = 1, y = -0.2, showarrow = FALSE, text = "Data from WEO, IMF (2023) | Calculations by Bentje Böer", 
    font = list(size = 12, color = "black")
    )))

  saveWidget(GDP_widget_1, "./processed_02/GDP_widget_1.html")
GDP_widget_1

Figure 1: Ukraine’s economy suffered substantially from the Russian aggression in 2014 and 2022.

The case for increased investment by the EBRD seems clear, but according to the EBRD’s database, the investment volume of new EBRD projects in Ukraine did not increase substantially in the direct aftermath of 2014 (Figure 2). Even though EBRD leadership announced a significant increase and planned investments of €1 Bn per year following 2014 (Nasralla, 2014), this ambitious increase is not reflected in the volume of newly signed investment projects. In fact, 2014 and 2016 were the years with the lowest signed investment volumes in Ukraine since the early 2000s. Investment volume of all Ukrainian projects initiated in 2016 amounted to less than half the volume of projects initiated in 2013. What did change, however, was the composition of the EBRD’s investment portfolio in Ukraine.

Code

# KEEP:
# EBRD plot
  EBRD_plot_1 <- ggplot(Ukraine_investments, aes(x = year, y = investments_bn_r)) +
  geom_col(aes(text = paste0(year , " Investments: ", investments_bn_r, " Bn [EUR]")),fill = "grey") +
  geom_smooth(se = FALSE, color = "darkgrey", size = .5) +
  geom_col(data = Ukraine_investments_sub, aes(x = Ukraine_investments_sub$year, y = Ukraine_investments_sub$investments_bn_r, text = paste0(year, " Investments: ", investments_bn_r, " Bn [EUR]")), fill = "darkred", alpha = .4) +
  ylim(0, 1.900) +
  theme_minimal()
  
  EBRD_widget_1 <- ggplotly(EBRD_plot_1, tooltip = c("text")) %>%
  layout(hovermode = "closest", 
          title = 'Figure 2: Signed EBRD Investment Volume in Ukraine per Year',
         xaxis = list(title = '', range = c(1992, 2025)),
    yaxis = list(title = 'Investment in Bn EUR', range = c(0, 1.9)),
    margin = list(b = 80, t = 100),
    annotations = list(
      list(x = 2014.5, y = 1, xref = 'x', yref = 'y', text = 'Annexation of Crimea', showarrow = FALSE),
      list(x = 2015, y = 1.1, xref = 'x', yref = 'y', text = '2014', showarrow = FALSE),
      list(x = 2022.5, y = 1, xref = 'x', yref = 'y', text = 'Full Invasion', showarrow = FALSE),
      list(x = 2022.5, y = 1.1, xref = 'x', yref = 'y', text = '2022', showarrow = FALSE), 
      list(xref = "paper", yref = "paper", xanchor = "right", x = 1, y = -0.2, showarrow = FALSE, text = "Data from EBRD (2023) | Calculations by Bentje Böer", 
    font = list(size = 12, color = "black")
    )))
  
  saveWidget(EBRD_widget_1, "./processed_02/EBRD_widget_1.html")
EBRD_widget_1

Figure 2: Even though the EBRD announced strong investment support both in 2014 and in 2022, the volume of new signed investment projects did not increase significantly in the two years after 2014.

Composition of EBRD Investments in Ukraine

The composition of EBRD investments in Ukraine changed drastically both after 2014 and after the full invasion in 2022. EBRD investment tilted heavily towards natural resources in both cases, while investment in transport projects for example decreased substantially (Figures 3.a and 3.b). This refocusing of investment on natural resources responds to increased energy security concerns in the face of Russian aggression (Shalal and Polityuk, 2022). The share of EBRD investments in Ukraine directed to natural resources surged from normal EBRD levels of about 5-6% before 2014 and between 2017 and 2021 to 22 and 31 % in the years after 2014 and 2023 respectively (Figures 3.a and 3.b). Both times it involved investments in the state owned company Naftogaz, which owns the largest gas storage facilities in Europe and supplies much of Ukraine’s natural gas (Naftogaz, 2023, and Shalal and Polityuk, 2022). This aligns with two objectives of the EBRD, enhancing Ukraine’s energy security and supporting Western European countries’ energy independence from Russia (EBRD, Donor Support, 2023). Naftogaz aims to increase production over the coming year and even hopes to be able to deliver to Western European countries as they struggle to decouple energy supply from Russia (Shalal and Polityuk, 2022). As much as this would serve European and Ukrainian goals to become independent from Russian gas, large losses in 2022, a war-time gas export ban, and the location of most gas fields in proximity to front lines make these ambitions less likely (Shalal and Polityuk, 2022). The investment thus will rather support Ukrainian energy security and mitigate the effects from the losses incurred due to Russia’s seizure of Naftogaz’ assets. Similarly, the large investment in Ukraine’s energy transmission system operator Ukrenergo in 2022 will support energy security within Ukraine (EBRD, Ukraine Overview, 2023), rather than in European neighbours.

Code

# KEEP
# alternative to animation: dotplot/lollipop chart
Ukraine_sectors_by_frames <- read.csv("./processed_02/Ukraine_sectors_by_frames.csv")

Ukraine_lolli_14 <- Ukraine_sectors_by_frames %>% 
  filter(time_frame == "2010-13" | time_frame == "2014-16") %>% 
  pivot_wider(
    names_from = time_frame, 
    values_from = sector_share
  ) 
Ukraine_lolli_14$`2014-16` <- ifelse(is.na(Ukraine_lolli_14$`2014-16`), 0, Ukraine_lolli_14$`2014-16`)

Ukraine_lolli_14 <- Ukraine_lolli_14 %>% 
  rowwise() %>% 
  mutate(diff = `2014-16`- `2010-13`) %>% 
  arrange(diff) %>% 
  mutate(sector = factor(sector, sector))

Ukraine_lolli_14$type <- ifelse(Ukraine_lolli_14$sector %in% c("Equity Funds",
                                                               "Property and Tourism",
                                                               "Telecommunications, Media and Technology",
                                                               "Insurance, Pension, Mutual Funds",
                                                               "Municipal and Environmental Infrastructure",
                                                               "Leasing Finance"
                                                               ), 
                               "segment", "arrow")

write_csv(Ukraine_lolli_14, "./processed_02/Ukraine_lolli_14.csv")

Code

# KEEP
# decluttered 14 plot
annotation_arrow_14 <- data.frame(
  x = c(5, 22, 24, 39, 6, 17, 2, 19),
  y= c("Natural Resources", "Natural Resources", "Agribusiness",  "Agribusiness", "Transport", "Transport", "Energy", "Energy"),
  label = c("5 %", "22 %", "24 %", "39 %", "6 %", "17 %", "2 %", "19 %"),
  color = c("black", "darkred", "black", "darkred", "darkred", "black", "darkred", "black")
)

Ukraine_lolliplot_14 <- ggplot(Ukraine_lolli_14) +
  geom_segment(aes(x = `2010-13`, xend= `2014-16`, y= sector, yend= sector), 
               arrow = arrow(length = unit(0.15, "cm"), end = "last"),
               color="black", 
               size = .6) +
  geom_point(aes(x= `2010-13`, y= sector, color = "2010-2013"), size=3) +
  geom_point(aes(x= `2014-16`, y= sector, color = "2014-2016"), size=3, alpha = .6 ) +
  geom_text(data = annotation_arrow_14, aes(x = x, y = y, label = label), color = annotation_arrow_14$color, size = 2.5, angle = 0, vjust = -.8) +
  labs(
    title = str_wrap("Figure 3.a: Shares of EBRD Investments per Sector"),
    subtitle = "Ukraine - before and after 2014", 
    y = "",
    x = str_wrap("Share of EBRD Investment in Ukraine"), 
    caption = "Data from EBRD (2023) | Calculations by Bentje Böer"
  ) +
  scale_color_manual(name = "Timeframe", 
                     values = c("2010-2013" = "black", "2014-2016" = "darkred")) +
  scale_x_continuous(breaks = c(0, 10, 20, 30, 40), labels = c("0 %", "10 %", "20 %", "30 %", "40 %")) + 
   scale_y_discrete(labels = c(expression(bold("Energy")), expression(bold("Transport")), "Manufacturing and Services", "Leasing Finance", "Municipal and Environmental Infrastructure", "Insurance, Pension, Mutual Funds", "Telecommunications, Media and Technology", "Property and Tourism", "Equity Funds", "Financial Institutions", expression(bold("Agribusiness")), expression(bold("Natural Resources"))))+
  theme_minimal()

Ukraine_lolliplot_14

Figure 3.a: Shares of EBRD investment in natural resources and agribusiness increased immediately after 2014, while shares of investment in transport and energy projects decreased notably.

Code

# KEEP
Ukraine_lolli_22 <- Ukraine_sectors_by_frames %>% 
  filter(time_frame == "2017-21" | time_frame == "2022-23") %>% 
  pivot_wider(
    names_from = time_frame, 
    values_from = sector_share
  ) %>% 
  rename()
Ukraine_lolli_22$`2022-23` <- ifelse(is.na(Ukraine_lolli_22$`2022-23`), 0, Ukraine_lolli_22$`2022-23`)
insurance_row <- data.frame(sector = "Insurance, Pension, Mutual Funds") 
insurance_row$`2017-21` <- 0 
insurance_row$`2022-23` <- 0

Ukraine_lolli_22 <- rbind(Ukraine_lolli_22, insurance_row)

Ukraine_diff_14 <- Ukraine_lolli_14 %>% select(sector, diff)

Ukraine_lolli_22 <- Ukraine_lolli_22 %>% left_join(Ukraine_diff_14, by = "sector")

Ukraine_lolli_22 <- Ukraine_lolli_22 %>% 
  rowwise() %>% 
  arrange(diff) %>% 
  mutate(sector = factor(sector, sector))


#write_csv(Ukraine_lolli_22, "./processed_02/Ukraine_lolli_22.csv")

Code

# KEEP
# decluttered 22 plot
# Ukraine_lolli_22 <- read.csv("./processed_02/Ukraine_lolli_22.csv")

annotation_arrow_22 <- data.frame(
  x = c(6, 31, 12, 18, 0, 15, 11, 31),
  y= c("Natural Resources", "Natural Resources", "Agribusiness",  "Agribusiness", "Transport", "Transport", "Energy", "Energy"),
  label = c("6 %", "31 %", "12 %", "18 %", "0 %", "15 %", "11 %", "31 %"),
  color = c("black", "darkred", "darkred", "black", "darkred", "black", "black", "darkred" )
)

ggplot(Ukraine_lolli_22) +
  geom_segment(data = Ukraine_lolli_22, aes(x = `2017-21`, xend= `2022-23`, y= sector, yend= sector), 
               arrow = arrow(length = unit(0.15, "cm"), end = "last"),
               color="black", 
               size = .6) +
  geom_point(aes(x= `2017-21`, y= sector, color = "2017-2021"), size=3) +
  geom_point(aes(x= `2022-23`, y= sector, color = "2022-2023"), size=3, alpha = .6 ) +
  geom_text(data = annotation_arrow_22, aes(x = x, y = y, label = label), color = annotation_arrow_22$color, size = 2.5, angle = 0, vjust = -.7) +
  labs(
    title = str_wrap("Figure 3.b: Shares of EBRD Investments per Sector"),
    subtitle = "Ukraine - before and since 2022", 
    y = "",
    x = str_wrap("Share of EBRD Investment in Ukraine"), 
    caption = "Data from EBRD (2023) | Calculations by Bentje Böer"
  ) +
  scale_color_manual(name = "Timeframe", 
                     values = c("2017-2021" = "black", "2022-2023" = "darkred")) +
  scale_x_continuous(breaks = c(0, 10, 20, 30, 40), labels = c("0 %", "10 %", "20 %", "30 %", "40 %")) +
  scale_y_discrete(labels = c(expression(bold("Energy")), expression(bold("Transport")), "Manufacturing and Services", "Leasing Finance", "Municipal and Environmental Infrastructure", "Insurance, Pension, Mutual Funds", "Telecommunications, Media and Technology", "Property and Tourism", "Equity Funds", "Financial Institutions", expression(bold("Agribusiness")), expression(bold("Natural Resources"))))+
  theme_minimal()

Figure 3.b: Shares of EBRD investment in natural resources and energy increased since 2022, while investment shares of transport and agribusiness decreased.

While the increased focus on energy security is aligned with EBRD’s long term strategy for Ukraine (EBRD Country Strategy Ukraine, 2018), the decrease in newly signed transport projects due to conflict and destruction presents a deviation from one of the EBRD’s key priorities in Ukraine: strengthening infrastructure that connects Ukraine better to other (Western) European countries (Usov, 2014). Particularly after the annexation of Crimea in 2014, rebuilding and extending the road system in Ukraine has become a major aim of EBRD investment (Usov, 2014). The transport system, however, also exemplifies the difficulties faced by the EBRD when scaling up investment in Ukraine after 2014, as outlined by former EBRD director Chakrabati: Weak administrative capacities and serious corruption concerns constrained ambitious EBRD goals in the aftermath of 2014 (Nasralla, 2014).

EBRD Investment in the Ukrainian Private and Public Sector

Governance concerns have limited EBRD investment in the aftermath of 2014, but significant reforms and ongoing anti-corruption programs may have changed the outlook for EBRD’s response to the full invasion in 2022. According to former EBRD president Chakrabati, the inefficiency and intransparency of the public sector severely slowed down the EBRD’s response in 2014 (Nasralla 2014). However, since 2014, Ukraine has implemented substantial governance reforms in the public sector and continues to fight corruption during the war (OECD, 2022). This has been recognized by the EBRD (EBRD, Country Strategy 2018-2023, 2018) and plausibly contributes to the relative comfort in what amounts to a reversal of private-to-public investment shares by the EBRD after 2022 (Figure 4). While the public sector share of total EBRD investment in Ukraine was about a third over the years from 2010 to 2021, it jumped to 64% in 2022-23. Even though the public sector share of EBRD investments in all other countries presented an upward trend, slowly growing from 18 to 28 % between 2010 and 2021, the investment share in the public sector in Ukraine in 2022 cannot be explained by this trend. Much of this large increase in public sector investment is due to the crucial energy security projects mentioned above. The extraordinary increase in public sector investment might signal greater trust in the governance of the Ukrainian public sector from the EBRD. Among the many other determinants of EBRD investment in Ukraine, transparent administrative capacity is the factor that has arguably changed the most since 2014. Depending on the robustness of the reforms implemented since 2014, greater public sector capacities might allow for a more substantial increase in EBRD investment this time compared to its response to the conflict in 2014.

Code

# KEEP
priv_pub_ac <- EBRD_ac_inv_wo_U %>% 
  group_by(year, project_type) %>% 
  summarize(inv = sum(ebrd_finance))

priv_pub_ac <- priv_pub_ac %>% 
  group_by(year) %>% 
  mutate(total_year = sum(inv),
         share_of_year = inv/total_year*100)

priv_pub_ac_10_13 <- priv_pub_ac %>% 
  filter(year %in% c(2010, 2011, 2012, 2013)) %>% 
  group_by(project_type) %>% 
  mutate(time_frame = "years_10_to_13",
         scope = "all_except_Ukraine",
         mean = mean(share_of_year)) %>% 
  select(project_type, time_frame, mean) %>% 
  slice(1)

priv_pub_ac_14_16 <- priv_pub_ac %>% 
  filter(year %in% c(2014, 2015, 2016)) %>% 
  group_by(project_type) %>% 
  mutate(time_frame = "years_14_to_16", 
          scope = "all_except_Ukraine",
         mean = mean(share_of_year)) %>% 
  select(project_type, time_frame, mean) %>% 
  slice(1)

priv_pub_ac_17_21 <- priv_pub_ac %>% 
  filter(year %in% c(2017, 2018, 2019, 2020, 2021)) %>% 
  group_by(project_type) %>% 
  mutate(time_frame = "years_17_to_21",
          scope = "all_except_Ukraine",
         mean = mean(share_of_year)) %>% 
  select(project_type, time_frame, mean) %>% 
  slice(1)

priv_pub_ac_10_21 <- priv_pub_ac_10_13 %>% 
  rbind(priv_pub_ac_14_16) %>% 
  rbind(priv_pub_ac_17_21) %>% 
  filter(project_type == "State")

# Ukrainian
# only Ukraine 2022 2023
priv_pub_U_22 <- Ukraine_all_projects_6 %>% 
  filter(year == 2022 |year == 2023) %>% 
  group_by(project_type) %>% 
  summarize(inv = sum(ebrd_finance)) %>% 
  mutate(total_project_type = sum(inv), 
           share_of_type_inv = inv/total_project_type*100, 
         time_frame = "years_22_to_23") %>% 
  rename(mean = share_of_type_inv) %>% 
   select(project_type, time_frame, mean) %>% 
  slice(1:2)


# only Ukraine 2014-2016
priv_pub_U_14 <- Ukraine_all_projects_6 %>% 
  filter(year == 2014 |year == 2015 |year == 2016) %>% 
  group_by(project_type) %>% 
  summarize(inv = sum(ebrd_finance)) %>% 
  mutate(total_project_type = sum(inv), 
           share_of_type_inv = inv/total_project_type*100, 
          time_frame = "years_14_to_16") %>% 
  rename(mean = share_of_type_inv) %>% 
   select(project_type, time_frame, mean) %>% 
  slice(1:2)

# only Ukraine 2010-2013
priv_pub_U_10 <- Ukraine_all_projects_6 %>% 
  filter(year %in% c(2010, 2011, 2012, 2013)) %>% 
  group_by(project_type) %>% 
  summarize(inv = sum(ebrd_finance)) %>% 
  mutate(total_project_type = sum(inv), 
           share_of_type_inv = inv/total_project_type*100, 
          time_frame = "years_10_to_13") %>% 
  rename(mean = share_of_type_inv) %>% 
   select(project_type, time_frame, mean) %>% 
  slice(1:2)

# only Ukraine 2017-21
priv_pub_U_17 <- Ukraine_all_projects_6 %>% 
  filter(year %in% c(2017, 2018, 2019, 2020, 2021)) %>% 
  group_by(project_type) %>% 
  summarize(inv = sum(ebrd_finance)) %>% 
  mutate(total_project_type = sum(inv), 
           share_of_type_inv = inv/total_project_type*100, 
          time_frame = "years_17_to_21") %>% 
  rename(mean = share_of_type_inv) %>% 
   select(project_type, time_frame, mean) %>% 
  slice(1:2)

priv_pub_U_10_22 <- priv_pub_U_10 %>% 
  rbind(priv_pub_U_14) %>% 
  rbind(priv_pub_U_17) %>% 
  rbind(priv_pub_U_22) %>% 
  mutate(project_type = ifelse(project_type == "State", "Public", project_type))

color_priv <- c("Private" = "lightgrey", "Public" = "firebrick4")

ggplot(priv_pub_U_10_22) +
  geom_col(data = priv_pub_U_10_22, aes(x = time_frame, y = mean, fill = project_type), alpha = .6) +
  geom_point(data = priv_pub_ac_10_21, aes(x = time_frame, y = mean)) +
  geom_line(data = priv_pub_ac_10_21, aes(x = time_frame, y = mean, group = project_type)) +
   annotate("text", x = c("years_10_to_13", "years_14_to_16", "years_17_to_21", "years_22_to_23", "years_22_to_23"), y = c(37, 26, 31.5, 62, 15),   label = c("39 %", "28 %", "33 %", "64 %", "EBRD in Ukraine"), color = "white", size = 3) +
  annotate("text", x = c("years_10_to_13", "years_14_to_16", "years_17_to_21", "years_22_to_23"), y = c(14, 13, 24, 10),   label = c("18 %", "17 %", "28 %", "Other EBRD"), color = "black", size = 3) +
 scale_fill_manual(name = "Sector Share", values = color_priv) + 
  scale_y_continuous(breaks = c(0, 25, 50, 75, 100), labels = c("0 %", "25 %", "50 %", "75 %", "100 %")) +
  scale_x_discrete(breaks = c("years_10_to_13", "years_14_to_16", "years_17_to_21", "years_22_to_23"), labels = c("2010-2013", "2014-2016", "2017-2021", "2022-2023" )) +
  labs(
    title = "Figure 4: Share of Public Sector Investment by the EBRD", 
    subtitle = "EBRD projects in Ukraine vs in all other countries", 
    x = "", 
    y = "Public Sector Share", 
    caption = "Data from EBRD (2023) | Calculations by Bentje Böer"
  ) +
  theme_minimal() 

Figure 4: The share of public sector investment of total EBRD investment in Ukraine has almost reversed in 2022-23, plausibly supported by greater trust in good governance compared to 2014-16.

Conclusion

Russia’s aggression towards Ukraine not only increased the need for reconstruction spending by the EBRD but also attacked the EBRD’s core democratic principles. As a consequence, the EBRD was and is determined to decisively support Ukraine. However, governance and administrative capacity concerns limited the EBRD’s planned increase in investments in Ukraine after 2014. Newly signed investments did not increase compared to the years before 2014, but the composition of investment projects changed markedly. Natural resources gained in importance, while the share of transport projects decreased. A similar pattern emerges after the full invasion in 2022. Energy security concerns dominate investments. Importantly, the share of investment in public sector projects almost reversed between 2017-2021 and 2022-2023. If this points to greater trust in governance and administrative capacity, this suggests that the EBRD’s response to Russian aggression in 2022 will be less constrained by the factors that limited its response in 2014 and could allow it to support Ukraine more comprehensively.

Data Sources:

EBRD Data (2023): I have constructed a dataset from EBRD’s project summaries for Ukraine and an overview of all EBRD investments from 1990 to 2021. The data cleaning process is documented here: https://rpubs.com/beboer/1028442

The underlying data is available here:

EBRD (2021): EBRD Investments - All Countries 1990-2021. https://www.ebrd.com/work-with-us/project-finance/ebrd-investments.xlsx

EBRD (2023): Project Summaries. https://www.ebrd.com/work-with-us/project-finance/project-summary-documents.html?c37=on&keywordSearch=

IMF World Economic Outlook Data April 2023 (2023): https://www.imf.org/imf/weodatabase/downloadreport?c=926,&s=NGDPD,&sy=1992&ey=2028&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1&wsid=2fb5afa3-4132-476c-bef6-4437bf76cea3

References:

EBRD Country Strategy (2018): Country Strategy 2018-2023. https://www.ebrd.com/sites/Satellite?c=Content&cid=1395238439329&d=&pagename=EBRD%2FContent%2FDownloadDocument

EBRD, Donor Support (2023): Donor Support. https://www.ebrd.com/what-we-do/war-on-ukraine/donor-support.html

EBRD, Establishing Agreement (1990): Agreement Establishing the European Bank for Reconstruction and Development. https://www.ebrd.com/documents/comms-and-bis/pdf-basic-documents-of-ebrd-2013-agreement.pdf

EBRD, Ukraine Overview (2023): Ukraine Overview. https://www.ebrd.com/where-we-are/ukraine/overview.html

EBRD, Russia Overview (2023): Russia Overview. https://www.ebrd.com/where-we-are/russia/overview.html

Fingar, Courtney (2016): Ukraine FDI failing to recover despite business-friendly reform. https://www-ft-com.ezp.lib.cam.ac.uk/content/f9022604-bc94-11e6-8b45-b8b81dd5d080

Naftogaz (2023): About Naftogaz. https://www.naftogaz.com/en/about-naftogaz

Nasralla, Shadia (2014): Ukraine Crisis EBRD. https://www.reuters.com/article/ukraine-crisis-ebrd-idUSL6N0TE16O20141124

OECD (2022): Public Governance in Ukraine. https://www.oecd.org/ukraine-hub/policy-responses/public-governance-in-ukraine-c8cbf0f4/

Pyrkalo, Svitlana (2014): EBRD finances Key Gas Pipeline in Ukraine. https://www.ebrd.com/news/2014/ebrd-finances-key-gas-pipeline-in-ukraine-.html

Shalal, Andrea and Polityuk, Pavel (2022): Ukraine’s Naftogaz hopes supply Europe with Gas Next Heating Season, CEO. https://www.reuters.com/business/energy/ukraines-naftogaz-hopes-supply-europe-with-gas-next-heating-season-ceo-2022-09-02/

Usov, Anton (2014): EBRD steps up lending to Ukraine as part of International Support Package. https://www.ebrd.com/news/2014/ebrd-steps-up-lending-to-ukraine-as-part-of-international-support-package.html