Wall Street really wants to invest in Ukraine, and some of the top players are doing more than sniffing 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 to look into the situation as they dodged Russian missiles, I’m told.
The country is ripe for massive private investment in the US to rebuild infrastructure destroyed in its conflict with Vladimir Putin. Zelensky is a rock star in the American media. the country bravely fights a foreign invader. People are educated and resilient, which means returns could be as good there as anywhere on the planet. Banker talk has a private equity fund between $20 billion and $100 billion sometime in the future.
So what’s stopping private money from coming in now? A war that shows no signs of ending soon. Moreover, for all of Zelensky’s obvious talents as a leader, he has yet to show an understanding — or possibly a willingness — to fight corruption on the scale needed to make investors comfortable, bankers tell me.
Meetings between some of Wall Street’s top executives (think JPMorgan’s Jamie Dimon and BlackRock’s Larry Fink) and Ukrainian officials last month didn’t draw the same attention as President Biden’s surprise visit last week. The discussions ended mostly in private and without much fanfare when they were concluded.
But they are revealing. The dangerous nature of our continued involvement with this country includes not only a possible nuclear war with Russia, but also an economic sinkhole if we are not careful.
Beware of oligarchies
For starters, in these meetings, Zelensky seemed unrepentant in his request for billions of dollars in private capital to immediately begin rebuilding his economy. However, he does not seem to fully understand what would prevent such an investment. First, money will not flow to Ukraine (or any country) if it lines the pockets of a Russian-style oligarchy.
In Ukraine, this brand of crony capitalism goes by the name “system” or “oligarchy”. It is an alliance of government and big business that undermines the forces of free market competition. Payoffs and graft are part of the system and this is always a dead end for major private funds.
Zelensky said he understood the economic stakes of ending corruption. But actions speak louder 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 to recapture all the territory Putin’s forces have seized.
It’s a noble effort, to be sure, but it comes at a high price. Bankers say private investment money won’t really flow until the war is over. They would like Zelensky to compromise on land to make this happen. perhaps give up the recapture of Crimea or allow Putin to save face and keep some parts of the Donbas region in the east, which are nominally controlled by Russian separatists anyway.
There has been some talk on Wall Street of a spring offensive by Ukraine, and if successful in recapturing some Russian-held territory, then Zelensky is offering a possible deal with Putin to begin rebuilding. For now at least, this was described as a possible ban by Ukrainian officials. Zelensky’s approval rating is at 90%, bankers said. Sinks to 40% with land compromise.
This is where things really pay off. Bankers got the impression from these talks that Zelensky believes there is an endless supply of US money, despite the economic reality of a United States with huge and growing debt (123% of GDP) and a looming recession that is making all the bills pay us much more difficult.
Last week, a 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 to the US…
While Biden cheered the Ukrainian resistance, his administration was caught flat-footed in dealing with the East Palestine, Ohio, train derailment and accompanying environmental tragedy that engulfed the region.
Residents were afraid to drink the water and lacked basic necessities, while Biden promises Zelensky another $500 million on top of everything else.
It is reasonable to ask, without threat of censorship, how much taxpayer money is enough for Ukraine as this war enters its second year.
Fortunately, there is a solution offered by Wall Street, although it all depends on Zelensky’s willingness to compromise with a sworn enemy, combined with a willingness to read the fundamentals of a free market economy.