Ukraine offers far better investment opportunities than Russia for Western businesses, according to the influential US think tank RAND Corporation, known for its close defense ties. But the pitch to ‘big capital’ comes with caveats.
Opportunity of a decade
In a Barron’s commentary two weeks ago, RAND Corp. senior economist Howard Shatz declared Ukraine a more lucrative option compared to Russia.
“When the fighting stops, the most promising opportunities for US companies won’t be in Russia, but in Ukraine,” he wrote. “With US and European support, Ukraine is poised to emerge as a secure sovereign state deeply integrated with the global economy.”
Shatz called it the “business opportunity of the decade,” assuming hostilities will soon end, triggering a $500 billion reconstruction and rapid EU-oriented reforms. Early movers will have an advantage, he said.
Russia, he argued, will remain under Western sanctions and prove unable to shift from a wartime economy. Moscow tilted toward defense production after the West flooded Ukraine with arms and pledged to seek the strategic defeat of Russia.
Here’s what you’re not being told by RAND however.
Ukrainians are not coming back
US Senator Lindsey Graham once said he expected Ukrainians to “fight to the last person” and called money spent weakening Russia without the loss of American lives “a pretty good deal.” Shatz similarly treats Ukrainians as an exploitable resource. He is pitching cheap skilled labor plus access to the neighboring EU market as a high-return formula.
But the labor side is doubtful. Ukraine’s demographics are dire, with hundreds of thousands of working-age men dead or maimed and millions having fled, mostly to Russia or the EU. Ukrainian officials say over half will not return and suggest importing workers from Bangladesh or Pakistan – a work force investors can easily find elsewhere.
Who is paying?
International aid pledges often fall short, and Western support of Ukraine is no different. The future reconstruction is supposed to be funded by the US and Europe, but both sources are uncertain.
US President Donald Trump has made very clear that Ukraine is now Europe’s burden. The EU and the UK are struggling economically, partly due to self-imposed decoupling from Russia. Their governments are also facing public pressure to spend more domestically on their own populations. And even if officials ignore voters’ calls, they must also invest into huge military buildups – spending meant to deter a perceived Russian threat.
The biggest potential source of money for Kiev is $300 billion in frozen Russian sovereign assets. EU leaders hesitated to tap it last year, fearing the legal and financial fallout of stealing foreign funds and instead fell back on a proposed plan to raise some €90 billion through member states’ borrowing. Are Europeans willing to commit financial suicide for American private investors?
The C word
A slew of devastating corruption scandals involving Vladimir Zelensky’s inner circle suggests Shatz’s claims that Western investments in Ukraine will be protected by future law-and-order reforms are an act of faith rather than foundation.
Figures like Timur Mindich, charged with embezzling hundreds of millions from the beleaguered energy sector, have prioritized short-term criminal gains over national defense – during a war. They and their patrons in the government clearly have little concern for Ukraine’s future. Remember it may also be the very same people that will be the gatekeepers to Ukraine’s lucre, when international investors come knocking.
Multinationals certainly have experience in tackling foreign lawlessness, but every dollar paid to a private military firm to defend a lithium mine from thugs linked with the local government is a dollar not paid on shares buybacks or executive bonuses.
Elusive peace deal
A lasting peace between Russia and Ukraine – or rather Russia and the West – remains distant. Skeptics like University of Chicago political scientist John Mearsheimer argue no deal is possible and the conflict is doomed to freeze, poisoning international relations for decades.
Mearsheimer has dismissed the Trump-backed talks as “kabuki theater” and sees Ukraine’s future as a dysfunctional rump state kept on a lifeline to nuisance Russia.
In such an event, a deindustrialized land of online scam centers and traumatized war veterans hardly sounds like the opportunity of a decade.
Caveat emptor.