Abu Dhabi state-owned investors indicated their interest in backing the war-torn Ukrainian economy as representatives of the funds joined a top-level bilateral meeting at the weekend, at which the Ukrainian government announced its intentions to set up a sovereign wealth fund.

Unperturbed by the raging conflict that damaged critical infrastructure such as the Kakhovka hydroelectric dam, ADIA and ADQ representatives were present at the meeting between Ukraine’s Deputy Prime Minister and Minister of Economy Yuliia Svyrydenko and the UAE’s Head of the Office of International Affairs and Environment Minister Mariam Almheiri. Delegates discussed the immediate need to stabilize the financial system in the short-term and post-conflict reconstruction and trade partnerships in the long-term.

Hoping to win UAE backing, Deputy Minister of Economy Oleksandr Hryban presented Kyiv’s plans for a Ukrainian Development Fund, which is being developed by the Ministry and the President's Office with the advisory support from BlackRock. UAE-based consulting firm Contango, which acts as a business development partner for ADQ’s portfolio companies, signed a co-operation agreement with the State Property Fund of Ukraine (SPFU) to provide strategic consulting services to support future economic transformation, including the creation an SWF.

Post-conflict reconstruction will require significant investment in the rehabilitation of electricity generation, transport infrastructure and seaports, which have all faced the brunt of conflict.

Before the Russian invasion, Abu Dhabi’s sovereign wealth was planning to play a leading role in Ukraine’s economic development. In February 2021, Masdar, the green energy company set up by Abu Dhabi’s second biggest sovereign wealth fund, Mubadala, signed a deal with DTEK, Ukraine’s largest private power producer, to examine potential clean energy investments. Ukraine was aiming to increase its share of renewables to 25% by 2035. DTEK Renewables was to lead the drive as the largest investor in green energy in Ukraine, with a portfolio of 1GW of solar and wind capacities already under its belt.

Ukraine has wind energy potential estimated at 30,000GW with over half the land area suitable for wind farms. Solar energy has also driven growth, assisted by feed-in tariffs. Before the war, hydropower provided 7% of power generation, supported by state-led investment.

The UAE’s sovereign wealth sector is estimated at more than US$2 trillion, of which Abu Dhabi’s SWFs represent 70% of combined AUM. These funds not only play a significant role in the emirate’s economic life and financial security, like other funds in the Gulf region they often serve to reinforce the UAE’s soft power.

Although maintaining an official line of neutrality between Russia and Ukraine in the conflict, the UAE has provided 230 tonnes of humanitarian aid and financial support for the reconstruction of orphanages. As part of a US$100 million aid program, the UAE supplied 2,500 power generators to Ukraine to address its energy crisis. Yet, the Gulf state has been criticized for not taking sufficient action against the use of its banking sector by Russian businesses seeking to dodge Western sanctions and, alongside India and China, abstaining in the initial UN Security Council vote in February 2022 calling for the withdrawal of Russian troops from Ukrainian territory.

Related funds ADIA ADQ Mubadala
Related tags Geopolitics