Rebuild Ukraine with voluntary private investment by Russian oligarchs

The U.S. and other allies recently stepped up with new and unprecedented commitments to fortify Ukraine’s military defenses at a crucial point in its battle to defend against Vladimir Putin’s illegal invasion.

As the conflict grinds on, however, the devastation to Ukraine’s civilian infrastructure increases. Many houses, apartment buildings, businesses, power plants and public transportation systems have been reduced to rubble. The cost of financing postwar reconstruction, by some current estimates upwards of a half-trillion dollars, demands that multiple innovative funding sources and mechanisms be explored.

One novel concept deserves special attention: the creation of a new kind of private equity fund that could unlock tens of billions of dollars by incentivizing sanctioned Russian oligarchs to voluntarily invest a substantial portion of their wealth in Ukraine’s reconstruction, in exchange for lifting their individual sanctions.

It may surprise some in the West that most wealthy Russians believe Putin’s war was a grave mistake that has put their entire fortunes in danger. Some believe Russia’s invasion was immoral; others merely seek sanctions relief to protect some of their wealth from Putin’s grip. The most recent confirmed value of these individuals’ frozen assets is $58 billion, but the real amount stashed in Russia and around the world is likely far greater. A pilot program for the proposed fund would initially target a reasonable fraction of this money, up to $20 billion.

Structured like a traditional private equity firm, this enterprise would function as a development fund, investing solely in Ukraine for the benefit of residential redevelopment, energy facility and transportation infrastructure projects, among others.

Potential investors would be strictly vetted to assure compliance with the fund’s stringent rules and regulations, and approved by the Yermak-McFaul Group, the international commission of independent experts created at the initiative of Ukrainian President Volodymyr Zelensky to implement and monitor sanctions. The amount of each contribution would have to represent a significant percentage of each investor’s total wealth, anticipated to be in the multi-billion-dollar range.

Approved investors would have their existing sanctions lifted by Ukraine, allowing their committed investments to be transferred into the fund. Only after the war ends and the fund is dissolved — likely a decade or more into the future — would principal deposits and potential gains or losses be distributed. The fund would thus directly link investors’ long-term financial interests with Ukraine’s path to recovery.

The fund would be managed by an independent board of renowned world leaders including former heads of state, joined by business and social leaders of high repute and leading experts in relevant fields. Robust safeguards — including independent governance, strict fiscal accounting and full public transparency — would preclude malfeasance or misappropriation, and ensure that investments are limited to approved, high-priority civilian reconstruction projects. Fund management fees would be minimal.

Following best practices for public equity funds, investors would have no say in investment decisions. They would contractually agree to the reimposition of sanctions and confiscation of their entire investment in the event any of their activities are deemed to be directly or indirectly supportive of Putin, his political regime or the Russian military-industrial complex. That’s a powerful alternative to complex international economic concerns about funds seizure under current sanctions regimes.

All novel ideas face challenges. Some will warn of potential for undercutting existing sanctions; reluctance of public firms skittish about an infusion of “dirty money” in their stock; or the moral hazard of allowing any benefit to accrue to those even partly responsible for the damage the fund seeks to repair.

Yet there is ultimate justice in compelling not only the Russian state but Russian citizens to bear a significant portion of the cost of Ukraine’s reparations. Sourcing funds in this way may also help mitigate dangerous populist and isolationist opposition to, and politicization of, continued financial support for Ukraine within some allied countries.

Let’s be clear — there are no innocent kittens among these fat cats. All have helped Putin’s regime in various ways. But what skeptics may call a deal with the devil is more accurately viewed as a carrot-and-stick approach to elicit desired behavior from a defiant adversary. This plan is based on the goal of ensuring Ukraine’s ultimate triumph, rather than an emotional desire to seek retribution.

The fund would be no quick windfall for bad actors; it merely leverages their wealth. Much as a government might turn a rogue computer hacker into a valuable “hacker hunter,” or an intelligence agency might flip a contemptible spy into a helpful double agent in exchange for leniency, this proposal holds potential as a pioneering model for converting tainted gains into catalysts for sustainable recovery.

The private equity fund model deserves serious consideration as an additional approach to financing Ukraine’s revival and resurgence by incentivizing Russia’s elite class to voluntarily contribute. It is a bold, pragmatic response to the needs of a great nation and to the actions of the most dangerous and defiant tyrant of the 21st century.

Ilya Ponomarev is a Russian-Ukrainian entrepreneur, investor and leading Russian opposition figure, serving as Speaker of the shadow Russian parliament, known as the Congress of People’s Deputies. He is the author of “Does Putin Have to Die: The Story of How Russia Becomes a Democracy After Losing to Ukraine.”