Wall Street eyeing Ukraine

Wall Street really wants to invest in Ukraine, and some top players are doing more than sniffing around.

The world’s largest wealth management firm, BlackRock, continues to hold high-level meetings with the government, including with President Volodymyr Zelensky. I was told that JPMorgan bankers had recently been out on the ground to study the situation while dodging Russian missiles.

The country is ripe for major US private investment to rebuild infrastructure destroyed by the conflict with Vladimir Putin. Zelensky is a rock star in the American media; country valiantly fights off a foreign invader. The people here are educated and cheerful, which means that the returns here can be as good as anywhere else on the planet. Banker Talk has a private equity fund of between $20 billion and $100 billion at some point in the future.

So what is preventing the flow of private money now? A war that is not going to end anytime soon. Also, for all of Zelenskiy’s apparent leadership talents, he still hasn’t demonstrated the understanding—or perhaps the willingness—to fight corruption on the scale necessary for the convenience of investors, bankers tell me.

Meetings between some of Wall Street’s top leaders (think JPMorgan’s Jamie Dimon and BlackRock’s Larry Fink) with Ukrainian officials over the past month have not attracted the same attention as President Biden’s surprise visit last week. The discussions were conducted mostly in private and with little fanfare when they were concluded.

But they are indicative. The dangerous nature of our further interaction with this country entails not only a possible nuclear war with Russia, but also an economic vortex if we are not careful.

Be careful with the oligarchy

First, in these meetings, Zelensky seemed unabashed in his request for billions of dollars in private capital to immediately start rebuilding his economy. However, he doesn’t seem to fully understand what could get in the way of such an investment. First, money will not flow into Ukraine (or any other country) if it fills the pockets of a Russian-style oligarchy.

In Ukraine, this kind of crony capitalism is called “system” or “oligarchy”. It is an alliance between government and big business that undermines the forces of free market competition. Payoffs and bribes are part of the system, and this is always a dead end for big private capital.

Zelenskiy said he understands the economic stakes of rooting out corruption. But actions speak louder than words, which is why one banker involved in the process told me, “There are no guarantees here.”

Then comes the war and Zelensky’s unwavering determination to keep fighting to reclaim all the territory occupied by Putin’s forces.

Of course, this is a noble effort, but it comes at a cost. Bankers say private investment money won’t flow until the war is over. They would like Zelensky to compromise on land to make it happen; maybe refuse to return Crimea, or let Putin save face and keep a few parts of the Donbass in the east that are already nominally controlled by Russian separatists.

There was talk on Wall Street of Ukraine’s spring offensive, and if some of the Russian-held territory can be recaptured, Zelenskiy is offering a possible deal with Putin so that rebuilding can begin. At least for now, Ukrainian officials have called it a likely failure; Zelenskiy’s approval rating is 90%, the bankers were told. It is reduced to 40% when the land is ceded.

This is where things get particularly fraught. The bankers are under the impression from these conversations that Zelensky believes there is an endless supply of American money, despite the economic reality of the United States with a huge and growing debt (123% of GDP) and a looming recession that makes paying all of our bills much more difficult. difficult.

Sleepy Joe Biden told Zelensky last week that “freedom is priceless.” This may sound good, but common sense tells you that such blank checks are often paid for by needs here at home.

Back in the USA…

While Biden was cheering on the Ukrainian resistance, his administration was caught off guard by the train derailment in East Palestine, Ohio, and the accompanying environmental tragedy that engulfed the area.

Residents were afraid to drink water and lacked basic necessities, and Biden promised Zelensky another $500 million on top of everything else.

It is reasonable to ask, without the threat of censorship, how much Ukraine has enough taxpayer money when this war has been going on for the second year.

Fortunately, Wall Street is offering a solution, although it all depends on Zelenskiy’s willingness to compromise with a nemesis, combined with a willingness to learn the basics of a market economy.