Funds in exchange for reforms and “Build Back Better”: What to expect from Ukraine’s new head of Agency for Restoration and Development of Infrastructure?

On September 25, the EU, G7, and over 30 other countries signed a Joint Declaration on Support for Ukraine's Recovery and Reconstruction. The declaration outlines ongoing military, economic, and humanitarian assistance "both during the war and in peacetime." Besides dispelling Russia's hopes of winning through Ukraine's economic collapse, the declaration continues the freeze on Russian sovereign assets and commits to supporting Ukraine's macro-financial stability. This support comes with a long list of goals, including the implementation of key reforms.

Without delving into details, the reforms are comprehensive, covering the "economic, judicial, and anti-corruption" sectors, along with improvements in "corporate governance, defense, state administration, investment management, and law enforcement." It's an extensive task but crucial for Ukraine's reconstruction and recovery—not just to secure long-term support, as the declaration states, but for the country's overall future.

In essence, the scale of this undertaking depends on the continued goodwill of Western partners and Ukraine's capacity to deliver (or, in other words, to prove its worth). Given that these developments occurred during the Ukrainian delegation's visit to the US, opinions are divided, but the decision remains in the positive realm of expectations.

However, at the time the Declaration was published, the central executive body responsible for recovery and reconstruction was leaderless. Within just a few days, the State Agency for Reconstruction and Development of Infrastructure appointed a new head—Serhii Sukhomlyn, the former mayor of Zhytomyr. He now faces a tough challenge, as expectations for the agency are high.

What tends to happen in such situations? Society often splits into two polarized camps, with opinions quickly shifting and blending into each other. In this case, the debate revolves around two key narratives: "an effective manager with local experience has come to scale it nationally" versus "he mismanaged the city budget—now he has come for the state one." Naturally, both views have their supporters, which makes the situation cynically predictable.

In Ukrainian politics, dismissals and appointments are often made based on an unclear logic. However, unless proven otherwise, it's reasonable to assume that in Sukhomlyn's case, the main criteria were professionalism and competence, rather than convenience or, worse, ulterior motives.

What was before the appointment?

Sukhomlyn's official biography is concise: First Deputy Mayor of Zhytomyr (2014-2015) and twice elected mayor (2015-2024). In September of this year, he resigned early, a decision unanimously supported by the city council.

Residents of Zhytomyr reacted negatively to the news, praising Sukhomlyn's work as "very beneficial for the city," predicting that "they will miss him," and calling him one of the "probably best mayors" in the city's history. Even if we assume that this journalist-led survey reflects public sentiment, it's still situational and subjective, as the war has impacted the work of every city mayor.

In fact, municipal polls conducted by the Sociological Group "Rating" for the International Republican Institute (IRI) reveal a decline in support for Sukhomlyn's leadership. In 2023, 59% of Zhytomyr residents approved of his performance (compared to 58% in 2021), but by this spring, only 46% viewed it favorably. This shift might present an opportunity for a career change. Moreover, while 28% of respondents would re-elect him, 52% believe it's time for new leadership.

A month ago, an audit began in Zhytomyr as part of the certification process for the "European Energy Label" program, which evaluates a city's adherence to sustainable development principles across six key areas: development and territorial planning, municipal buildings, energy supply and distribution, mobility, internal organization, and communication. In 2019, Zhytomyr successfully completed this audit, but the current certification process is happening under much more difficult circumstances. Nonetheless, confirming the stability of the city's infrastructure during wartime is crucial for both the community's well-being and Zhytomyr's reputation within Ukraine and internationally. Preliminary assessments already show significant progress in the city's implementation of energy-saving technologies and improved energy resource management.

At last year's "Energy of Business" forum, Sukhomlyn was a key figure as Zhytomyr handled the first wave of blackouts better than many other regional centers and large cities. His focus on energy efficiency began long before the current crisis. Since 2014, the city has halved its gas consumption by modernizing equipment, and in 2018, it became the first city in Ukraine to switch to LED streetlights. In 2021, the city council approved a plan to achieve energy independence. By 2024, the city is set to add a biogas CHP plant, a solar power station for the water utility, a waste processing plant, and gas piston generators for the district heating system to its list of energy assets.

In addition to the implemented and planned distributed generation projects, Zhytomyr's energy autonomy also relies on carefully coordinated efforts, such as business-agreed hourly shutdown schedules and shift work during nights and weekends to lower base consumption levels. However, what worked in a single city is unlikely to be replicated nationwide, at least because the Recovery Agency does not have the necessary authority to enforce such measures.

This distinction is important in separating Sukhomlyn's achievements as a mayor from the expectations for him as head of the State Agency for Reconstruction. The successes of the Zhytomyr City Council as a local self-government body do not directly translate to the different dynamics and limitations of a state agency.

As mayor, Sukhomlyn succeeded in promoting energy independence, and in hindsight, this allows him to boast a bit. However, statements like "first the network—then the roads" don't fully align with the actual order of priorities. For instance, in July last year, activists protested the allocation of city funds for the reconstruction of roads, sidewalks, and squares instead of addressing the needs of the army. Following the scandal, $3,397,901 in capital expenditures from improvement programs were redirected to defense and military funding.

This incident reflects Sukhomlyn's adaptability, managerial flexibility, and willingness to respond to public demands. However, in his new role, he will undoubtedly face even greater public scrutiny and pressure. While protesters once poured fake blood on the steps of the city council, the work of the Recovery Agency will bring him much closer to the direct and real consequences of war.

Endless horizon

The previous head of the Agency, Mustafa Nayyem, resigned in June of this year, citing "constant opposition, resistance, and the creation of artificial obstacles" since last November. These challenges included the complete cancellation of the budget for road rehabilitation and maintenance projects, excessive delays in the approval of payments for defense structures and fortifications, which sometimes took months and led to a "war of amendments," and a 68% wage reduction affecting the majority of employees. 

Nayem's resignation came after the government denied his request to attend a reconstruction conference in Berlin. The government claimed this was due to concerns about reporting on "the installation of engineering and technical protection of the second level at critical infrastructure and energy facilities."

The true reasons behind Nayyem's dismissal will only be significant if the issues that led to it are passed on to his successor. While it is still uncertain, it is likely that Sukhomlyn will need to respond quickly to new challenges.

Sukhomlyn has repeatedly emphasized his strong interest in energy efficiency, asserting that he has a deep understanding of this area. It's reasonable to expect that this focus will guide his efforts as the new head of the Recovery and Reconstruction Agency. The importance of energy efficiency is far from theoretical, and his practical experience as mayor will be beneficial on a broader scale. However, the main challenge lies in the fact that this need now affects the entire country, introducing risks that may not be present within the confines of a single city.

In this context, we can attempt to predict the initial steps Sukhomlin may take. He outlined some of these in a recent interview, although his promotion was not yet clear at that time. He stated, "The movement towards energy independence is a complex process; this path cannot be completed in a year or two. To make progress, we need a strategy. We started with energy monitoring. It is essential to understand how much water, electricity, and other resources are used by each utility company, whether it's a heat utility or a water utility. Only then can we draft this strategy. Additionally, we must not forget that Ukraine is moving towards the European Union and needs to reduce CO2 emissions."

While developing a strategy, conducting energy monitoring, and auditing utility consumption and balance with respect to the Green transition are logical first steps, it remains unclear if the Agency will begin with these initiatives. This uncertainty arises partly because the Recovery Agency oversees 24 regional Services for the Recovery and Development of Infrastructure, along with the Autonomous Republic of Crimea and the city of Sevastopol, JSC "Automobile Roads of Ukraine," and 14 state enterprises.

​​On the other hand, Sukhomlyn may not face significant challenges in setting priorities, as the Agency itself has exhibited unbalanced approaches. Experts analyzing the departmental report for 2023 noted a disproportionate allocation of expenditures: out of a total of $1 990 285 960, the state agency allocated 53% for the repair and reconstruction of highways and road management, 16% for restoring infrastructure facilities, and less than 1% for housing restoration.

In addition to expressing gratitude for the trust placed in him, Sukhomlyn outlined the main priority areas for his work as the Head of the State Agency for Reconstruction and Development of Infrastructure on his Facebook page:

• Energy independence and protection of energy facilities.
• Providing housing for forced migrants who fled the war and lost their homes.
• Supporting military personnel and their families.
• Developing transport infrastructure, focused on enhancing military logistics and increasing the export potential of Ukrainian industry and agriculture.
• Ensuring transparency and accountability to meet societal and foreign partner expectations.
• Fostering close cooperation with international partners.

While these priorities may seem reminiscent of a "multitasker," the State Agency should indeed adopt such a multifaceted approach if it aims to fulfill its practical powers in a balanced manner, especially in terms of preparing rule-making initiatives. Sukhomlyn's politically honed communication skills between Zhytomyr and Kyiv will likely serve him well in this role. With recognition from Deputy Prime Minister for the Reconstruction of Ukraine Oleksii Kuleba, there are reasons to anticipate noteworthy outcomes from his leadership. He has a three-month window to demonstrate his effectiveness in this new position.