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Reconstructing Ukraine: Private capital floods in

BlackRock and JPMorgan have been drafted in to raise private capital for Ukraine’s estimated $1 trillion reconstruction

Economic CrisisEuropeWar Zones

Britain’s Prime Minister Rishi Sunak introduces Ukrainian President Volodymyr Zelensky on the first day of the Ukraine Recovery Conference in London, June 21, 2023. Photo courtesy AP.

The 2023 Ukraine Recovery Conference (URC23) ended in London last Friday. It was a continuation of the cycle of meetings beginning in 2017.

The London URC aimed to build on the commitments agreed last year at Lugano, and the work of the Multi-Agency Donor Coordination Platform for Ukraine. It was attended by hundreds of corporate leaders and governments. The Lugano conference was the basis for the planned invasion of foreign capital and multinationals into Ukraine once the war was over.

However, as the war drags on, with many more thousands dying in battle and civilian infrastructure in Ukraine being decimated by Russian missiles (and parts of Russian territory now being hit), Western governments and multinationals are aiming to speed up the reconstruction of Ukraine as a bulwark within EU and NATO spheres even while the war continues.

The EU has now announced $50 billion in investment aid to Ukraine and the ubiquitous private equity company Blackrock and leading US bank JPMorgan have been drafted in to raise private capital for Ukraine’s reconstruction. They are ‘donating’ their services but will get first pick on any investment opportunities. “The fund is being set up to also give public and private sector investors the opportunity to invest into specific projects and sectors,” said Stefan Weiler, JPMorgan’s head of debt capital markets for central Europe, the Middle East and Africa. “There will be different sectoral funds that the fund identified as priorities for Ukraine. The aim is maximize capital participation.” The banks aim to raise public concessional money from governments to absorb initial losses and then get private capital to invest for the profitable investments.

The World Bank estimates the cost of Ukrainian recovery and reconstruction after the first year of Russia’s war at $411 billion or twice Ukraine’s prewar GDP. But that was before Kyiv’s counteroffensive even began, and before the disastrous destruction of the Kakhovka Dam. With Russia still targeting infrastructure, final costs might top $1 trillion.

The aim of the Ukraine government, the EU, the US government, the multilateral agencies and the American financial institutions now in charge of raising funds and allocating them for reconstruction is to restore the Ukrainian economy as a form of special economic zone, with public money to cover any potential losses for private capital. Ukraine will also be made free of trade unions, severe business tax regimes and regulations and any other major obstacles to profitable investments by Western capital in alliance with former Ukrainian oligarchs. As the Financial Times put it, “International public sector financing must be the bedrock of the reconstruction effort. But since the private sector is expected to play a central role not just in doing the work but helping to fund it, mobilization of private investment will be required on a scale with few precedents.”

Nearly 500 global businesses from 42 countries worth more than $5.2 trillion and representing 21 sectors have already signed the Ukraine Business Compact, pledging to support Ukraine’s recovery and reconstruction. As the Ukrainian government declared at URC23, “International partners will work between now and the URC24 in Germany to launch new business to business initiatives to build and grow private sector partnerships with Ukraine.”

Foreign businesses are demanding insurance cover for their projects (after all, a war is still going on) and they want governments to pay for this. Foreign aid and investment will also be subject to tight conditions supposedly to stop the chronic corruption that existed in Ukraine prior to the war. Unfortunately, there have been cases of such corruption since. For example, Ukraine’s National Anti-Corruption Bureau (NABU) and the Specialized Anti-Corruption Prosecutor’s Office (SAPO) found “large-scale corruption in the Supreme Court, in particular a scheme to obtain undue advantages by the leadership and judges,” with the head of the Supreme Court receiving a $2.7 million bribe.

The Ukraine government wants to create a capitalist free market economy within the EU and backed by NATO armoury. To do this, there is no role for public investment except as a ‘loss leader.’ There will be a free reign for capitalist companies, and the interests of labour, social and public services will be relegated.

As one Ukrainian commentator put it:

Zelensky’s party has pushed through laws that have effectively destroyed the right to collective bargaining as well as other labor protections in Ukraine. It has also implemented pension law reforms billed as “decommunizing” the social welfare system but in fact amounting to radical cutbacks. Both plans were drafted well before the Russian invasion, but the wartime state of emergency has greatly aided the party’s ability to implement its agenda—whose anti-labor animus has even run afoul of the normally moderate International Labour Organization. Instead of labor rights and social welfare, Zelensky and his advisors promote “smartphone courts” (a joint venture with Amazon) and other public-private partnerships. In effect, they see postwar Ukraine as a gigantic special economic zone on the fringes of Europe, where weak labor protections and lack of tariff barriers will incentivize investment from European multinationals.


What is significant is that during the war, the Ukrainian government has taken control of a vast range of large enterprises belonging to Ukraine’s oligarchs. There is every possibility that these enterprises will sold off to foreign companies with many in the military taking a cut.

Every party on Ukraine’s political left has been banned based on largely unproven claims of collaboration with Russia. Welfare state institutions inherited from the Soviet era have gone. There is supposed to be a general election in Ukraine in October. That is in doubt but even if it goes ahead, any opposition to the government’s current legislation and economic policy is unlikely to get a hearing.

The other issue facing Ukrainians in achieving reconstruction is that much of this aid from the West is made up of loans, not grants, and so Ukraine’s debt will be sky high for generations ahead. The loans are mostly long-term, or for 25 years (before the war the average of long-term loans was 15 years). And Ukraine will not have to repay its debt before 2033, according to the EU Council. This is an unprecedentedly long grace period. But even with preferential interest, servicing EU loans will be expensive. To solve this, Brussels came up with the mechanism of “interest subsidy.” The interest will be paid by EU countries instead of Ukraine. The “interest subsidy” was already applied to Ukrainian loans in 2022. However, in 2023, a new feature has been added to the conditions of the new EU €18 billion loan: the subsidy is activated only if there is “compliance with political prerequisites.” So if Ukraine steps out of line by, for example, proposing labour rights, increasing social spending, or refusing to privatize state assets, it would lose the right to these interest-free loans. According to the memorandum, in that case, the EU should stop the “interest subsidy.”

URC23 is preparing for a free market economy, which to quote the Ukrainian government’s own words, “confirms its commitment to deliver IMF programme conditions, including adopting reforms to enable fair and open competition, reduce barriers to entry to markets, and ensure fair judicial and regulatory procedures.” The new Ukraine Development Fund (UDF), to be run by BlackRock and JPMorgan, “will focus on mobilizing additional private capital and increasing the pipeline of bankable projects; offer flexible, tailored financing to fill early stage or structural financing gaps and de-risk private capital.” The UDF aims “to help address a $50 billion-plus universe for private capital targeted by the UDF and other institutions investing in Ukraine across five key economic sectors, including: tech, logistics and transport corridors, green energy, natural resources, infrastructure reconstruction, digitalization, agriculture and food, health and pharmaceuticals.”

There are rich pickings to be had, particularly in agriculture. Ukraine has more arable land for grain production that the whole of the size of Italy. If this land can be taken out of the hands of the smaller Ukrainian farmers and local oligarchs and sold to Western multinationals, the profits from food production will be immense. As the Financial Times put it:

There are already companies on the cusp of moving in—especially in the low-hanging-fruit industries of construction and materials, agricultural processing and logistics. One Ukrainian minister told me that these were ready to go if only war risk insurance got better. The government is also making plans for a public development fund, which would ‘crowd in’ private investor money by providing the cushion of a loss-absorbing public stake in commercial investments.


Ukraine could become a hub for Europe’s ‘green transformation,’ given the country’s natural advantages in becoming a big supplier of carbon-free energy, green metallurgy and hydrogen. It could become a world leader in digital technology to boost transparency and good economic management. The URC saw the launch of “Dream,” a digitized system for tracking all Ukrainian reconstruction projects from inception to completion, so donors anywhere in the world can see whose money is spent how and where. And of course, it will remain a major buyer of military equipment for the likes of the US arms manufacturers and contractors.

You could argue that Putin’s invasion has driven the Ukrainian people into the hands of a pro-free market, anti-labour government that will allow Western capital to take over Ukraine’s assets and exploit its diminished workforce. But maybe that was inevitable—from pro-Russian and pro-West oligarchs before the war—now to Western capital afterwards.

Michael Roberts is a Marxist economist based in London, England. He is the author of several books including The Great Recession: A Marxist view (2009), The Long Depression (2016), and Marx 200: A Review of Marx’s Economics 200 Years After His Birth (2018).

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