Substantial investment, especially in the energy sector, would be a major sign to the Russians that Ukraine and its Western partners are not willing to be subjugated to the dictates of Moscow.
Thus, the ongoing war in Ukraine should not dissuade western investment, but rather be seen as an opportunity for transformative change, away from a dominant oligarchy to a capitalistic market system based on free markets and the rule of law.
Even a cursory analysis of western investment during the war shows a dearth of investment or reluctance to invest in Ukraine’s long term economic viability by many Western countries.
It is shameful that much discussion about Ukraine almost solely focusses on the supply of weapons and ammunition to the detriment of needed investment in destroyed civilian infrastructure. Direct foreign investment in Ukraine can, and should be seen, as an act of confidence in Ukraine’s future as an essential and committed member of the Western economic system. Everyone talks about helping Ukraine, but few are willing to put their money where their mouth is.
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For example, the U.S. International Development Finance Corporation known as DFC, formerly OPIC, has a mandate to provide loans, loan guarantees, direct equity investments, and political risk insurance for private sector-led development projects, feasibility studies, and technical assistance.
DFC invests across several sectors including energy, healthcare, critical infrastructure, and technology, with the stated priorities of women empowerment, innovation, investment, and climate change.
Last April, DFC issued a press release together with USAID stating their intention to help identify projects in Ukraine that need DFC support.
Samantha Power, the USAID Administrator said, “Our work together will help spur private sector investments in Ukraine, which is key to the immediate economic recovery and to building a future for Ukraine that is stronger and more prosperous than before.”
These are nice platitudes, however, DFC has yet to invest in a single major project since the start of the 2022 Russian invasion. Though its stated priority is the rebuilding of Ukraine, it has not made a major investment commitment to Ukraine since 2022. Yes, the U.S. government has a fiduciary responsibility and while investing during a war is riskier, there are ample agricultural, energy, mining, manufacturing, and other investments in western Ukraine that could be supported.
Would Russian missiles target U.S. government investments? That remains to be seen. If Putin attempted this, he could risk a swift and brutal U.S. response. Nonetheless, the lack of investment is a blatant misunderstanding of the relevance and use of economic power to obtain a military victory over Russia.
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At the same time, a country such as Canada, which specializes in major infrastructure development and building, is only taking preliminary steps in investing in Ukraine’s transport sector, announcing that it is exploring the “possibility” of investment in Ukraine. In fact, EDC [Export Development Canada] has been missing in action in Ukraine for more than a decade.
Exploration of projects and talk of potential investment is laudable, however, the time for investment is now.
This is especially true when it comes to critical energy infrastructure.
It’s no secret that stable and consistent investment in Ukraine’s energy infrastructure will contribute to its long-term stability and prosperity.
An immediate commitment to investing in this sector would also overcome the thinking that the challenges facing Ukraine are to be thought of only in terms of responding to “critical needs.”
Thinking about investment, especially in the energy sector, should be thought of in terms of Ukraine becoming a leading energy provider in Europe. Ukraine can become a stable energy provider and leading source of carbon-neutral energy for its European partners.
Such strategic investment would reduce Russia’s oil revenues and it would also greatly hinder its fiscal capacity to fund its present and future wars of aggression.
Investment in Ukraine’s energy sector would also decrease Europe’s energy vulnerability. It would reduce market volatility in the European energy sector by decreasing Russia’s dominance across European energy markets.
Such investments would also provide a “victory” for it will prove to the Russians the futility of their “strategy of destruction” and will illustrate both Ukraine’s and its western partners’ unwillingness to submit to Moscow’s energy blackmail tactics.
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There is a model of investment in Ukraine during the war.
Denmark has shown resolve in their activities and investment in Mykolaiv, starting in 2022. Their partnership with the city and region provides an effective model for action even in wartime.
An analysis of their approach suggests some key ingredients for success.
First, the Danes picked a specific region for their efforts and focused on it.
They picked Mykolaiv Oblast based on their previous experience working with government officials and business leaders, especially in utilities, such as water supply. They focused on a region that they knew and had worked in before.
Next, the Danes did not fixate solely on “critical needs,” their focus was on the long term, dealing with infrastructure and fundamental business development.
They ensured that regional officials would have access to development experts and that this access to Western expertise would be an essential component of this international partnership.
They set up a dedicated source of investment funding, Danish national Ukraine Fund, overseen at the highest government level, ensuring stable and consistent funding.
And perhaps most important of all, they ensured political “buy in” by incorporating national political leadership into the investment and rebuilding process.
In summary, their focus was regional, their preoccupation transcended “critical needs” and focused on long term thinking.
Their emphasis was not only on “hard” projects, but they saw the importance of teaching and incorporating the fundamentals of transformative business development.
They made sure that regional leaders were exposed to Western practices and expert advice. They ensured long term financial viability by setting up a dedicated fund and they incorporated high level political leadership to provide project oversight and for ensuring the consistency of political commitment.
On a grander scale, immediate investment in the rebuilding Ukraine has other benefits as well.
Western investment in Ukraine would establish a foundation of Western values that would inform rebuilding efforts. It would greatly aid in the establishment of Western values and business practices in the country.
It would vastly aid in integration efforts with its European partners, while dissuading the malign influence of China, which happens to be Ukraine’s second largest trading partner.
Western investment will ensure the solidification of Ukraine’s commitment to Western values and practices, but it will also ensure that its rebuilding efforts would not have to rely on the largess of authoritarian governments which have proven to be intent on subjugation.
Western investment, especially in the highly important energy sector, will ensure that Ukraine will not only survive, but thrive.
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Read the original article on The New Voice of Ukraine
Section: Opinion
Author: Eric Malinowski
