The views expressed by contributors are their own and not the view of The Hill

Protecting America’s financial assistance to rebuild Ukraine

AP Photo/Evgeniy Maloletka
Emergency workers clear the rubble after a Russian rocket hit a multistory building, leaving many people under debris, in the southeastern city of Dnipro, Ukraine, on Jan. 14, 2023.

Before the United States provides financial assistance for the reconstruction of Ukraine, Congress needs to obligate some of the funds to create a U.S.-led investment screening mechanism in Ukraine. Not only will this help cut down on illegal activities and fraud, but it also will keep U.S. taxpayer money out of the banks of America’s economic adversary: China. 

If some U.S. lawmakers are struggling with the idea of Ukraine receiving aid to rebuild while American infrastructure lacks adequate funding, imagine their response if they learn this money went to a company run by the Chinese Communist Party (CCP). Establishing a foreign investment screening mechanism in Ukraine is the best way to prevent this and to protect the assets of the next “Marshall Plan.”

Once Russian missiles stop landing in Ukraine, much of the world will come together to help rebuild the war-torn country. It’s the right thing to do and a critical geo-economic and strategic move for the United States and Europe. It’s impossible to predict how much and for how long the U.S. will give financial assistance to Ukraine for its rebuilding, but it most likely will be a considerable amount of money over many years. The World Bank estimated in June that it will cost around $350 billion to rebuild Ukraine but has since raised that estimate to $500 billion to $600 billion. To say that number has significantly increased would be an understatement. 

Whatever the final number, there is certain to be tremendous financial support from various governments, multilateral institutions (e.g., European Bank for Reconstruction and Development), nonprofits, and the private sector.

To protect America’s money and Ukraine’s long-term economic outlook, Congress should set aside specific funds in the reconstruction package to support a foreign investment screening regime in Ukraine, akin to the Committee on Foreign Investment in the United States (CFIUS). This money would enable U.S. agencies and business intelligence resources to directly support our European counterparts as we jointly train Ukrainian investment screeners to protect the country’s fledgling economy.

Attaching an investment screening mechanism to aid packages ensures it will be established for the life cycle of the rebuilding assistance; will help prevent U.S. (and European) financial support from potentially reaching China or other adversarial nations; and will support a broader objective that U.S. dollars are going to employ Ukrainians. China is primed to aggressively pursue business opportunities in the rebuilding efforts. It also has an atrocious track record of cutting out local laborers and businesses in favor of its own citizens. This would be structurally detrimental to Ukraine’s economy and U.S. financial assistance, and must be mitigated early on.

Or, in an even more painful scenario, a crafty Russian oligarch is able to win a contract to rebuild a train depot by obfuscating his ownership through a series of shell companies. Not only would this financially enrich someone who may have enabled this unjust war to begin with, but it would be the type of political catastrophe that slows or entirely derails the reconstruction efforts.

This screening regime would be separate from what the FBI, Department of Justice and Inspectors General (OIG) will need to do to stop corruption, money laundering, fraud and the other types of financial malfeasance that plague Ukraine’s history. OIGs are not positioned, nor authorized, to review investments for geopolitical or geoeconomic risk like a foreign direct investment screening regime is; however, a screening mechanism might enhance the business intelligence capabilities, which are useful to an OIG.

To drastically reduce the chance of these outcomes, Congress needs to put up guardrails around U.S. financial assistance to ensure nothing of the sort can happen. Such a critical regulatory mechanism would serve as both an insurance policy and legal backstop for U.S. taxpayer money, as well as a supplement to future economic security initiatives. Moreover, Ukraine is not currently postured to screen the companies submitting funds to build its roads, hospitals, telecommunications and energy infrastructure, or buy up its critical real estate. 

There will be no quicker way to freeze financial aid than to learn that U.S. taxpayer dollars were paid to Huawei to develop Ukraine’s communications network or the China Road and Bridge Corporation to build a highway to Kyiv. The idea of U.S. taxpayer money finding its way to Beijing while China flirts with a Ukraine-esque invasion of Taiwan is unthinkable.

Because it is hard to imagine getting the Russians to pay for what they are doing to Ukraine, the rest of the world will need to step up. However, let’s do it smartly and implement a tool we know how to use to make sure we protect the resources we are committing to this noble cause.

David Rader was deputy director of the Global Investment & Economic Security Directorate at the Department of Defense, where he oversaw the DOD Committee on Foreign Investment in the United States (CFIUS) office and supported various economic-focused initiatives at the National Security Council. Follow him on Twitter @drader_dc.

Tags investment screening Ukraine rebuilding effort Ukraine war US aid to Ukraine

More Finance News

See All
See all Hill.TV See all Video

Most Popular

Load more

Video

See all Video