The European Bank of Reconstruction and Development (EBRD) has emerged as a critical financial lifeline for Ukraine during Russia’s full-scale invasion. In an exclusive interview with bne IntelliNews, EBRD’s Ukraine head, Arvid Tuerkner, discusses the bank’s activities in Ukraine, and why he has great hopes for the country’s postwar recovery.

From a cautious starting point – “we were slightly shocked to invest in a country at war, we had never done that before,” Tuerkner said – the EBRD has gone on to deploy €6.5bn in Ukraine’s wartime economy, making the bank the largest institutional investor in Ukraine. 

“Initially we had a kind of 50:50 rule. For a €100mn loan, €50mn guaranteed by donors, €50mn on our own balance sheet. But that changed after we understood that the risks are manageable,” said Tuerkner. 

In December 2023, the EBRD’s shareholders signed off on a €4bn capital increase to allow the bank to give Ukraine the financial support it requires. “Now we rely fully on the strength of our balance sheet. Last year was a record year,” said Tuerkner, with investments totalling €2.4bn.

The EBRD operates across five priority areas in Ukraine: vital infrastructure, energy security, private sector resilience, trade finance and food security. “We have these rather broad priorities because we want to be demand driven. And that's what we’ve done, and the demand has evolved over time,” said Tuerkner.

The clearest example of this changing demand has been Ukraine’s energy sector. Support for Ukraine’s energy sector has been the EBRD’s biggest single focus, with €2bn deployed so far and plans for a further €1bn in 2025. 

Initially the bank provided liquidity to energy companies: “People moved, people left the country, nobody paid their bills. So what was needed was cash to make sure it continued running.” 

As Russian began hitting Ukraine’s electricity grid in the autumn of 2022, this shifted to funding state-owned grid operator Ukrenergo as it scrambled to repair the damage. The EBRD began helping with the construction of air defence structures for the grid. 

“The amount of concrete which goes into one of them, which is completely useless, unless there are drones and missiles all the time, it's crazy. But Ukrenergo did a great job and 80-90% of their autotransformers are now protected,” said Tuerkner. 

Russia then started bombarding Ukraine’s energy generation facilities in 2023 and 2024, completely destroying many of Ukraine’s gas power plants. The EBRD responded with a concerted effort to fund the installation of decentralised power generation – small-scale gas generation facilities and renewable energy plants that are much harder to knock out in a single strike. 

Last year the EBRD did two major deals to fund the installation of small-scale gas-powered generation: an €80m loan to state oil and gas company Naftogaz for the installation of 100 MW of capacity, and a €180m loan to state railway company Ukrzaliznytsia for 270 MW.

“I'm quite proud because there was so much talk about it. But hardly anything was done other than extreme decentralisation – people putting solar panels on their balcony and so on,” said Tuerkner. 

On the renewables front, the bank last week closed a deal with Galnaftogaz for the construction of a 150-MW wind farm in western Ukraine. The EBRD put up €60m in loans, with the International Finance Corporation and the Black Sea Trade and Development Bank also contributing €60mn and €37mn respectively. 

Another major focus area has been working with Ukrainian banks to encourage lending to households, SMEs and municipal authorities for the installation of energy generation through its Energy Security Support Facility.   

“Because the banking sector is so liquid, the main instrument we have is portfolio risk sharing. Our engagement generates three to four times the volume of loans in the market. So with the lending we did over three years, we have generated €2.3bn loans in the market,” said Tuerkner. 

In a sign of the systemically important role the EBRD is playing, the bank’s portfolio risk-sharing programmes amount to 70% of the guarantees provided to the Ukrainian banking system, excluding the Ukrainian government. Including the government guarantee programmes the EBRD accounts for 39%, with government support at 40%. 

The Ukrainian economy is, however, showing signs of a major slowdown. After contracting by almost 30% in 2022, Ukraine’s GDP grew by 5% in 2023, with growth slowing to 2.9% in 2024. The prospects for growth this year in the absence of peace look dim.

“The whole economy is slowing down a bit because there's these major challenges on the labour market and with the energy situation,” said Tuerkner. 

As bne IntelliNews has reported, Ukraine is currently facing critical shortages of the power, labour and materials it needs for its economy. Whilst Ukraine got through the winter without power cuts, Tuerkner is far from complacent: “I don't think we are out of the woods. The winter was better than expected, luckily, because it was warm and Ukraine managed. But this summer might be like last summer. There were cuts all the time. Literally eight to ten hours per day.”

Above all, the war itself forecloses the possibility of investment happening on the scale that Ukraine desperately needs: “Investors are asking how can we reconstruct now when the risk of destruction is still very apparent,” said Tuerkner. 

It’s not all doom and gloom, however. Tuerkner remains resolutely optimistic about Ukraine’s future prospects: “Ukraine will boom once the reconstruction starts. There's enormous creativity in business already surviving in the current circumstances. Once there's a ceasefire and reconstruction starts, there will be an enormous amount of money coming to Ukraine.”