Wall Street really wants to speculate in Ukraine, and a few of the top players are doing greater than sniffing around on the prospects.
The world’s largest money-management firm BlackRock continues to carry high-level meetings with the federal government, including President Volodymyr Zelensky. JPMorgan recently had bankers on the bottom scoping the situation as they dodged Russian missiles, I’m told.
The country is ripe for enormous private US investment to rebuild infrastructure destroyed in its conflict with Vladimir Putin. Zelensky is a rock star within the American media; the country is valiantly fighting off a foreign invader. The individuals are educated and resilient, which suggests returns might be nearly as good there as anywhere on the planet. Banker talk has a non-public investment fund at between $20 billion and $100 billion sooner or later in the longer term.
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 frontrunner, he still hasn’t demonstrated an understanding — or possibly a willingness — to fight corruption on the size obligatory to make investors comfortable, bankers tell me.
The meetings between a few 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 identical attention as President Biden’s surprise visit last week. The discussions have been taking place mostly in private and without much fanfare after they conclude.
But they’re revealing. The perilous nature of our continued engagement with this country doesn’t just involve a possible nuclear war with Russia but additionally an economic sinkhole if we’re not careful.
The firms are skeptical about investing in Ukraine until the war ends. SOPA Images/LightRocket via Getty Images
Wary of oligarchies
For starters, in these meetings, Zelensky seemed unabashed in his request for billions of dollars in private capital to start rebuilding his economy immediately. Yet he doesn’t seem to completely grasp what’s going to 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 presidency and large business that undermines the free-market forces of competition. Payoffs and graft are a part of the systema, and that’s all the time 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 method told me: “There aren’t any guarantees here.”
Then there’s the war, and Zelensky’s so-far unyielding determination to maintain fighting so as to retake all territory occupied by Putin’s forces.
Wall Street is hoping that Zelensky will compromise on land with Putin. Bloomberg via Getty Images
It’s a noble effort, to make sure, however it comes at a steep price. Bankers say private investment money won’t really flow until the war is over. They’d love Zelensky to compromise on land to make that occur; perhaps hand over on retaking Crimea or allow Putin to save lots of face and keep a couple of parts of the Donbas region within the east, that are nominally controlled by Russian separatists anyway.
There was some talk on Wall Street a couple of Ukrainian spring offensive and, if it’s successful in reclaiming some Russian-held territory, then Zelensky offering a possible cope with Putin so the reconstruction can begin. For now at the least, that was described as a possible 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’s an limitless supply of American money, despite america’ economic reality of massive and mounting debt (123% of GDP) and a looming recession that makes paying all our bills that way more difficult.
Last week, Sleepy Joe Biden told Zelensky that “freedom is priceless.” That will sound good, but common sense tells you that such blank checks often come on the expense of needs here at home.
Joe Biden pledged $2 billion to Ukraine on the one-year anniversary of Russia’s invasion. NurPhoto via Getty Images
Back within the US …
While Biden was cheering on the Ukrainian resistance, his administration was caught flatfooted coping with the train derailment in East Palestine, Ohio, and the accompanying environmental tragedy that engulfed the realm.
Residents were afraid to drink the water and lacked basic necessities while Biden was promising Zelensky one other $500 million on top of every part else.
It’s reasonable to ask without the specter of censor, how much is enough taxpayer money for Ukraine as this war enters its second yr.
Fortunately, there’s an answer being offered by Wall Street, though all of it will depend on Zelensky’s willingness to compromise with a sworn enemy, combined with a willingness to read up on the basics of a free-market economy.
