2023-06-21 11:31:07
– Wall Street at the forefront of the “Ukrainian Marshall Plan”
US financiers have won the favor of President Zelenskiy for the reconstruction of Ukraine – but a conflict is brewing over the frozen oligarch billions.
Walter Niederberger of San Francisco
Posted today at 1:31 p.m
Zelensky during a video address in New York City in September 2022 at the New York Stock Exchange.
Foto: Michael M. Santiago (Getty Images)
An end to the war is not in sight, the economic destruction and the humanitarian catastrophe continue. However, the Ukrainian government has already laid important groundwork for later reconstruction. She has commissioned the largest asset manager in the world, the American BlackRock, and the Wall Street bank JP Morgan to prepare the construction financing. From the European side, on the other hand, grants from the European Reconstruction Bank are required for the time being.
“It is evident that American companies will be the engine that will once once more provide the impetus for global economic growth.”
Wolodimir Selenski
The World Bank estimated the cost of reconstruction at over $400 billion. But that was before the June 6 destruction of the Kachowa Dam, with catastrophic consequences for decades to come. For President Zelensky, however, it has been clear for months that the USA should take the lead in reconstruction. Just as the USA set up the Marshall Plan in 1948 and invested 173 billion dollars in the reconstruction of Europe at the current exchange rate, American capital, knowledge and connections are now to be used once more.
“It is clear that this will be the largest economic project of our time in Europe,” said Selenski in the spring. “It is evident that American companies will be the engine that will once once more provide the impetus for global economic growth.” All interested companies would have the opportunity “to grow big with Ukraine,” assured the President. However, only a cooperation with BlackRock, JP Morgan and Goldman Sachs, which have been internationally leading US financial houses for years, has been agreed with certainty.
Preferred look at lucrative orders
BlackRock and JP Morgan want their help to be understood as a donation, but realistically this gives them a head start over other investors and advisors because they can get a first, preferred look at potentially lucrative contracts in Ukraine. JP Morgan is also strengthening ties with a country it has helped raise more than $45 billion in capital and debt restructuring since 2010. BlackRock is to bring in the experience of setting up the Climate Finance Partnership and with the Saudi development fund.
The “Ukrainian Marshall Plan” is initially to be provided with preferential capital at low interest rates, which is to come from institutional investors, pension funds and the European Bank for Reconstruction. Europe has pledged 25 billion euros for this until 2032. According to Foreign Minister Ignazio Cassis, Switzerland wants to contribute around CHF 1.8 billion.
Philipp Hildebrand, Vice President of the Board of BlackRock, is in favor of “mixed financing”.
Foto: Laurent Gillieron (Keystone)
This type of financing corresponds to the concept of BlackRock. “Many of the long-term challenges can best be met through mixed financing,” says Philipp Hildebrand, former National Bank director and now Vice-Chairman of BlackRock. “We need these tools to be able to raise capital on a large scale.”
industry rehabilitation
First of all, Ukraine is hoping for a $40 billion tranche, said Rostislav Struma, Deputy President Zelensky. This is intended to rehabilitate the iron and steel industry. The aim is to become the world’s leading producer of steel made with renewable energies. “When we build from scratch, it makes sense to produce green with the latest technologies,” Struma told Archyde.com news agency. Steel and iron is an important economic pillar of Ukraine. In 2012, the industry contributed around ten percent to economic output, employed around 600,000 workers and caused 15 percent of climate-damaging gases. The new plants are also to be built far from the Russian-held Donbass Basin, where the old plants are still coal-fired.
The details of the recovery fund were to be discussed at a two-day conference in London on Wednesday and Thursday. US Secretary of State Antony Blinken pledged more than $1.3 billion in new aid to Ukraine, and EU Commission President Ursula von der Leyen announced support of €50 billion by 2027. British Prime Minister Rishi Sunak also announced investments from other companies, including BT, Virgin, Philips and Hyundai Engineering.
NATO security guarantee
The preparation of the fund should take 12 to 18 months. However, until some form of ceasefire is agreed, the fund will not be able to start. And in any case, according to JP Morgan, a security guarantee from NATO is needed.
Without such a guarantee, private investors would not get involved, says JP Morgan economist Ayomide Mejabi. It is even more urgent to bring the historically deeply rooted corruption in Ukraine under control. Whether Selenski can do that is controversial. So far, the Ukrainian president has not made any reliable statements, say US bankers.
Josef Ackermann, former CEO of Deutsche Bank, warns once morest using money from oligarchs.
Foto: Alexandra Wey (Keystone)
The focus at the London conference is on mixed public-private financing. But the conflict over the use of Russian funds for reconstruction resonates subliminally. In the US, both parties are now calling for the use of confiscated and frozen assets from oligarchs and the Russian central bank. How far Switzerland will go with it is an open question. In May, the Federal Council approved a motion by National Councilor Gerhard Andrej, according to which a “reparations mechanism” should be created in favor of Ukraine.
However, Josef Ackermann, former head of Deutsche Bank, recently warned once morest using funds from oligarchs, as this would be expropriation and damage the reputation of the Swiss financial center. In total, more than 300 billion francs from the Russian central bank have been frozen worldwide, 7.4 billion of them in Switzerland. In addition, 7.5 billion in oligarch funds are on hold in Switzerland. (with agency material)
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