Wall Street really wants to invest in Ukraine, and some of the top players are doing more than sniffing around at the prospects.
The world’s largest money-management firm BlackRock continues to hold high-level meetings with the government, including President Volodymyr Zelensky. JPMorgan recently had bankers on the ground scoping the situation as they dodged Russian missiles, I am told.
The country is ripe for massive private US investment to rebuild infrastructure destroyed in its conflict with Vladimir Putin. Zelensky is a rock star in the American media; the country is valiantly fighting off a foreign invader. The people are educated and resilient, which means returns could be as good there as any place on the planet. Banker talk has a private investment fund at between $20 billion and $100 billion at some point in the future.
So what’s stopping the private money from coming in now? A war that shows no signs of ending anytime soon. Plus, for all of Zelensky’s obvious talents as a leader, he still hasn’t demonstrated an understanding — or possibly a willingness — to fight corruption on the scale necessary to make investors comfortable, bankers tell me.
The meetings between some of Wall Street’s top executives (think Jamie Dimon of JPMorgan and Larry Fink of BlackRock) and Ukraine officials over the past month didn’t garner the same attention as President Biden’s surprise visit last week. The discussions have been going down mostly in private and without much fanfare when they conclude.
But they are revealing. The perilous nature of our continued engagement with this country doesn’t just involve a possible nuclear war with Russia but also an economic sinkhole if we’re not careful.
Wary of oligarchies
For starters, in these meetings, Zelensky seemed unabashed in his request for billions of dollars in private capital to begin rebuilding his economy immediately. Yet he doesn’t seem to fully grasp what will prevent such an investment. First, money won’t flow to Ukraine (or any country) if it seeds the pockets of a Russian-style oligarchy.
In Ukraine, that brand of crony capitalism goes by the names “systema” or “oligarkhiya.” It’s an alliance of government and big business that undermines the free-market forces of competition. Payoffs and graft are part of the systema, and that’s always a dead end for significant private capital.
Zelensky said he understood the economic stakes of ending corruption. But deeds go further than words, which is why one banker involved in the process told me: “There are no guarantees here.”
Then there’s the war, and Zelensky’s so-far unyielding determination to keep fighting in order to retake all territory occupied by Putin’s forces.
It’s a noble effort, to be sure, but it comes at a steep price. Bankers say private investment money won’t really flow until the war is over. They would love Zelensky to compromise on land to make that happen; maybe give up on retaking Crimea or allow Putin to save face and keep a few parts of the Donbas region in the east, which are nominally controlled by Russian separatists anyway.
There was some talk on Wall Street about a Ukrainian spring offensive and, if it’s successful in reclaiming some Russian-held territory, then Zelensky offering a possible deal with Putin so the reconstruction can begin. For now at least, that was described as a likely no-go by Ukrainian officials; Zelensky’s approval rating is at 90%, the bankers were told. It sinks to 40% with a land compromise.
Here’s where things get particularly fraught. Bankers got the impression from these conversations that Zelensky believes there is an endless supply of American money, despite the United States’ economic reality of massive and mounting debt (123% of GDP) and a looming recession that makes paying all our bills that much more difficult.
Last week, Sleepy Joe Biden told Zelensky that “freedom is priceless.” That may sound good, but common sense tells you that such blank checks often come at the expense of needs here at home.
Back in the US …
While Biden was cheering on the Ukrainian resistance, his administration was caught flatfooted dealing with the train derailment in East Palestine, Ohio, and the accompanying environmental tragedy that engulfed the area.
Residents were afraid to drink the water and lacked basic necessities while Biden was promising Zelensky another $500 million on top of everything else.
It’s reasonable to ask without the threat of censor, how much is enough taxpayer money for Ukraine as this war enters its second year.
Fortunately, there is a solution being offered by Wall Street, though it all depends on Zelensky’s willingness to compromise with a sworn enemy, combined with a willingness to read up on the fundamentals of a free-market economy.