BlackRock in Ukraine: investment in recovery

Ukraine’s post-war financing needs until 2032 will vary between $350-750 billion. What functions will the American investment giant BlackRock take in Ukraine after the war?

The President of Ukraine, Volodymyr Zelenskyi, and the CEO of BlackRock, Larry Fink, agreed to cooperate with the aim of rebuilding the economy of our country, in particular, by directing international investments to the most promising industries.

The first meeting between Zelenskyi and Fink took place in September 2022. They discussed the attraction of public and private investments in Ukraine to restore the country after the extremely destructive invasion of the Russian Federation.

After that, BlackRock, one of the world’s largest investment managers, began to provide advisory support to Ukraine in the development of an investment structure. The goal is to create opportunities for public and private investors to participate in the future reconstruction and recovery of the economy.

In November 2022, BlackRock Financial Markets Advisory and the Ministry of Economy of Ukraine signed a memorandum of understanding.

At the end of 2022, another online meeting between Volodymyr Zelenskyi and Larry Fink took place. At that time, the participation of the American investment brand in the work on the structuring of funds intended for the restoration of Ukraine was discussed.

In a message on the official website of the President of Ukraine, a message appeared that Zelenskyi and Fink “agreed to focus in the near future on coordinating the efforts of all potential investors and participants in the restoration of our country, directing investments to the most relevant and effective sectors of the Ukrainian economy.”

It is expected that several top managers of the American company will visit Ukraine in the near future.

What functions will BlackRock take on in Ukraine

Mark Bubek, head of corporate communications at BlackRock Continental Europe, said that the most pressing task of the Americans is to create a special investment structure (company/fund) in Ukraine for the further attraction of foreign investments.

This system should interest private investors to direct their own capital to the reconstruction and restoration of the Ukrainian economy (after our victory), as well as help them in this.

Bubek added that today he advises Ukraine on a free basis.

According to him, Ukraine’s post-war financing needs until 2032 will vary between $350-750 billion. A significant part of this money will be directed to recovery, reconstruction, modernization, and, as today, will be met mostly through direct state expenditures.

He noted that in our case, in order to attract private investment, it will most likely be necessary to create new tools and show creativity. This process is quite difficult and is accompanied by various serious obstacles (in particular, the obvious risks associated with hostilities).

By attracting international private capital to the reconstruction program, Ukraine will be able to use available money from governments, potential donors and other organizations.

Mark also said that the funding would, in particular, go to agriculture, energy, manufacturing, information technology and infrastructure damaged by occupation forces.

What is the role of BlackRock in Ukraine?

According to Ukrainian experts, our cooperation with BlackRock can be characterized by the popular term Public Private Partnership (PPP) — public-private partnership.

As noted by Ivan Svitek, the chairman of the board of Yunex Bank, it is about attracting funds from private investors to state-scale projects, primarily infrastructure projects: power plants, roads, schools (such centers may be the ultimate goal of PPP).

Mykhailo Demkiv, financial analyst of the ICU group, added that the lack of investment projects will be felt quite acutely, and this is a fact. He emphasized that it is extremely risky to build specific business plans in such conditions, where a rocket of the occupiers can fall on the enterprise at any moment. Because of this, private investments will come already in the post-war period.

According to financiers, BlackRock’s participation in this direction is quite important, as they will be able to help attract investments even under the most difficult conditions. In particular, thanks to a powerful reputation.

Some experts claim that for the successful implementation of the plan, Ukraine also needs to form a reliable legislative framework. It is expected that American consultants will also take part in working out this process.

Ivan Svitek explained that there should be control over the intended use of the funds involved, monitoring of the project at each stage, protection against corruption schemes, clearly prescribed methods of monetization and guarantees of compliance with the specified (signed) conditions.

If we work out the internal rules correctly and ensure strict control over the use of funds, foreign investors will still be able to trust the Ukrainian side and direct the flow of finances in our direction.

The fact that all the preparatory processes started during the war cannot but please the experts. All this takes time, and post-war reconstruction must begin immediately after the end of hostilities.

About BlackRock

BlackRock Inc. is the world’s largest investment company by number of assets, with headquarters in New York. By the beginning of 2023, more than 1,000 funds with assets of $8.6 trillion are under its management. Despite the fact that this volume decreased by 14% in 2022, it still represents a third of the US GDP ($25.3 trillion in 2022), or about 287 budgets of Ukraine for the current year (at the average annual exchange rate set in the budget for this year — 42.2 hryvnias/$).

The investment giant was founded in 1988 by eight partners, led by Lawrence Fink. The company was originally part of the Blackstone Group. The modern name BlackRock appeared only in 1992, and 6 years later the company was registered as a corporation and became a public enterprise.

BlackRock Inc. has been recognized many times as the best investment brand in the world according to various criteria. In particular, Willis Towers Watson experts assessed not only the actual achievements of the company, but also its powerful prospects.

Despite all the positives, BlackRock was also affected by the global crisis. According to the report for the fourth quarter, the company’s net income in October-December 2022 decreased from $1.64 billion to $1.36 billion (from $10.63 to $8.64 per share), compared to the same period in 2021.

The company’s net profit for the past year decreased by 12% to $5.18 billion. The amount of assets under management decreased by 14% (despite the fact that it increased from $7.96 trillion to $8.6 trillion in the last quarter).

In January of this year, BlackRock’s management announced that it plans to lay off 500 employees (that’s about 3% of the workforce) amid an “unprecedented market situation.”

This article is the translation of the original article, published by InVenture.