The Financial Times had a bizarrely long article earlier this week about the departure of Mustafa Nayyem, recently the Chairman of Ukraine’s Restoration and Infrastructure Development, which elicited commentary from Alexander Mercouris (I had also noticed when I had encountered the piece that it was clearly excessive relative to the event). There have been more articles on Nayyem quitting, such as Bloomberg speculating that it was the result of Nayyem not being allowed to participate in “Ukraine Recovery Conference” held in Berlin earlier this week.

The reason for this humble blog turning to what would seem to be a palace intrigue is that it serves as an excuse to discuss what an embarrassingly ridiculous idea this Ukraine reconstruction scheme is, even as a pretext for looting. I’ve found it hard to rouse myself to give this patently dopey program the shellacking it deserves.

Even though the excessive press coverage of in this departure looks, as Mercouris argued, to be another element in of the campaign to dirty up Zelensky’s image, I believe another reason is to pre-position the failure of this destined-to-be-stillborn recovery fundraising scam.1

Yes, there are always greater fools. And the US and EU will no doubt want (and perhaps will) throw some funds Ukraine’s way for appearance’s sake and for the enrichment of some well-placed interests. But the very fact that the promoters are having a conference, as opposed to road shows hawking particular, erm, “opportunities,” shows that this initiative is even more pie in the sky that Zelensky’s Switzerland peace conference, which is suffering an embarrassing number of high-level no-shows.

Mercouris believed that June 10 Financial Times article, Ukraine’s top reconstruction official quits in new blow for Zelenskyy, which went on and on and on about how “Western partners” were losing confidence due to Nayyem’s and other departures, signaled that Zelensky’s days were numbered.

The positioning of the story is particularly disingenuous. As Mecouris pointed out it was on Nayyem’s watch that the funds provided by the West to build defense lines in Kharkiv went poof, with no fortifications built, and few to no mines laid. Collective West politicians and the press were alarmed by the pace of Russian advances in Kharkiv, which was at least in part due to the lack of fortifications. Recall that this Russian success triggered the US escalation of authorizing limited long-range missile strikes, ostensively to target Russian forces supporting the Kharkiv advance.

In other words, a summary firing of Nayyem is fully warranted. Yet the Financial Times article no where mentions the Kharviv defense line funds looting! It instead paints Nayyem as a victim, with Zelensky moving step-by-step to force him out and Nayyem departing before his ouster became official. This section shows that the pink paper was either taking dictation or choosing to mislead:

The void left by Nayyem and the absence of an infrastructure minister are likely to prompt questions about Kyiv’s ability and commitment to protect its critical infrastructure as Russian forces continue to conduct air strikes on Ukraine’s power plants and mount offensives in the country’s east. Two agency officials responsible for anti-corruption policy and procurement resigned with Nayyem on Monday.

The guy who at least screwed up and more likely got a big cut of the missing defense line funds is leaving, and the Financial Times depicts this is a huge loss? Wellie, since the Western press is regularly saying black is white as far as Ukraine is concerned, I suppose this misdirection should come as no surprise.

As Mercouris had pointed out in early programs, Zelensky appeared to be purging his government of officials close to America. This makes sense as a survival strategy: it makes it harder for the US to oust him if they don’t have a decent roster of people in the government they regard as loyal. It may also somewhat reduce the flow of information. The unseemly level of whinging in the Financial Times article confirms the idea that Nayyem was perceived to be in their camp.

Kyiv Post indicates that Nayyem and the US almost certainly go way back. From Infrastructure Head Who Triggered Revolution of Dignity Resigns:2

Nayyem, 42, had served as a parliamentarian since 2014 and has been credited with triggering the Euromaidan protest in 2013. On Nov. 21 of that year, Nayyem posted on his Facebook page a call to gather on Kyiv’s “Maidan,” as Independence Square is known, in order to protest then-President Viktor Yanukovych’s decision to back out of an association agreement with the European Union. Within three months Viktor Yanukovych would flee Kyiv.

Now finally to my pet theory, that a second reason for the bizarre effort to pump Nayyem up is to blame the soon-to-be-obvious failure of the reconstruction fundraising on his exit, as opposed to the fact that it was destined to be a non-starter.

We’ll give just a few reasons. Readers are encouraged to add to this list.

Having the private sector build basic infrastructure is a bad idea. Even strong-form small government types generally concede this point. Among the reasons is that the additional costs and fees that a private sector developer would incur would serve as a tax on commmerce, hurting the competitiveness of businesses. Look in the US how many infrastructure deals went bankrupt (toll roads are universal for structural reasons) or hurt local businesses (the infamous Chicago parking meter deal).

So anyone looking at investments in Ukraine that depended on working infrastructure would wonder if it would get done, and even if it did, if the costs would choke their operations.

Can Ukraine keep the lights on? This is totally out of control of the West, let alone investors. Russia is on course to completely or nearly completely destroy it. Russia can keep rinsing and repeating in the absence of a negotiated end to the war, something the West cannot stomach signing.

Western officials have gotten the memo that having the power system restored is foundational, but have lost the plot that they need to come to terms with Russia for that to happen. From a June 11 Financial Times article:

Ukrainian officials have called on western partners to provide billions in aid for their country’s battered energy sector…

Chancellor Olaf Scholz said the World Bank had estimated that rebuilding and modernising Ukraine would require investments of nearly $500bn over the next ten years.

But energy is the main focus. “It is trumping everything,” said Arvid Tuerkner, managing director for Ukraine at the European Bank for Reconstruction and Development (EBRD). “It always comes back to energy.”…

But Russia’s relentless air bombardment was rendering much of the reconstruction effort futile. “On average it takes two-three months to restore a unit and it’s operational for just three weeks before the next strike,” he said.

The bright ideas in the article include increasing energy imports (when the first phase of the grid attacks included taking out transmission lines) and increasing air defenses (which no one seems able to admit is impossible).

Much better distressed country investment propositions found no almost no buyers. Remember the great Greek asset sale of 2015? That seemed promising enough that the organizers held a road show in London. But even though Greece was only a very depressed economy, with more IMF tender ministrations in the offing, the only thing that sold was the port of Pireaus.

Looting is easier said than done in a war zone. The West had a grand old time pilfering post USSR Russia. Its enterprises were intact even if suffering from underinvestment. The bargains were phenomenal: I know one investor who bought aluminum assets for pennies on the dollar. Oh, and not only did the government enable the plunder, but many well-placed Russians believed the con that neoliberal shock therapy would be salutary, so there was no pushback.

By contrast, people like Lindsay Graham (a policy negative indicator) who blather on about $10 to $12 trillion of mineral assets in Ukraine need to look at a map. 85% of Ukraine’s frackable gas in eastern oblasts, either currently or sure to be controlled by Russia. As of August 2023, per DW, Russia had already seized key iron ore deposits. Another big deposit they hadn’t yet is in the Kryvyi Rih area, which Russia is sure to take if it captures Odessa (it’s on the best train route from the east into Odessa). Russia as of then had taken 80% of Ukraine’s black coal. Russia already controls two of the four major lithium deposit areas.

And how will any mineral wealth be transported out, even generously assuming electricity, if Russia controls Ukraine’s Black Sea and keeps knocking its western rail lines out of commission?

So Nayyem’s high profile departure is actually a convenient face-saver. The bankers tasked with the thankless reconstruction fundraising project are not doubt quietly thanking Zelensky.


1 But, but, but, a reader might say….why would big famous firms like BlackRock be so visibly involved with a venture like this if the odds of it delivering much are not very hot? On the deal/new product side of big finance, most deals do not get done. A key to success in those businesses is figuring out how to focus your energies on things that are likely to get closed.

However, there are many things institutions like to chase because they have motives beyond the immediate kill. One is wanting to be seen as on the cutting edge. Another, very much in play here, is building relationships with powerful people. A third is to make sure that your firm is seen as a key player in at least your major lines of business. You want to see every opportunity in your space even if you don’t necessarily want to pursue it.

This effort has gotten a good bit of press attention and quite a few top Eurocrats attend its meetings. The reconstruction chimera is the big pretext for seizing Russian assets (when from the gleam in von der Leyen’s eye, punishing Russia is the motive). It also allows officials to associate themselves with an upbeat Ukraine story/ That econstruction fund in the “must take the call” category for big financiers, even though they know it belongs in the Hall of Hollow Mandates.

2 Forgive me for not running down whether Nayyem got National Endowment for Democracy funding. But he almost certainly did from Soros’ Open Democracy. I was in the room when Chrystia Freeland interviewed George Soros in 2015. Soros bragged that Open Democracy had given a grant to every senior official in the new Ukraine government, either directly or to an immediate family member.

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