Trump Envisions Fabulous Returns in Russia. Investors Won’t Buy It.

President Donald Trump greets Russian President Vladimir Putin in Alaska on Aug. 15. The two leaders met to discuss ending Russia’s war in Ukraine. (Andrew Harnik/Getty Images)

About the author: Christopher Smart is managing partner of the Arbroath Group, an investment strategy consultancy, and was a senior economic policy advisor in the Obama administration.

As they push for peace between Russia and Ukraine, President Donald Trump and his team are dangling the prospect of an investment bonanza once the killing stops. The glittering potential returns—Oil! Rare earths! Artificial Intelligence!—are meant to overcome the grumbling of Ukrainians, Europeans, and Democrats about any deal that leans heavily in favor of Moscow. Trump’s negotiators are already shopping ideas on how frozen Russian assets might prime the pump for vast new financial flows rather than to fund Ukraine’s defense.

From the Donbas, to Gaza, to the Congo, Trump seems to believe that visions of fabulous returns will be enough to stop the fighting. But only the most audacious investors will commit capital to aggressors with such a tarnished global standing.

Beyond the business and reputational risks of investing in Russian President Vladimir Putin’s regime, investors would need to be completely confident that a peace plan will last. Any arrangement that leaves Ukraine vulnerable and Russia emboldened is a formula for a very short cease-fire.

There is a faint echo of Immanuel Kant’s Perpetual Peace when Trump’s top negotiator, Steve Witkoff, described the prospect of renewing investment and trade with Russia as “a bulwark against future conflicts.” His idea is that tying Western business interests with Russia’s will move both toward peace. But the prospect of great riches does little to address the motivations of either side of the conflict.

Ukraine wants to emerge from this conflict more secure than it was before Russia’s attacks. Putin wants to end the conflict with his neighbor less secure. Until Kyiv and Moscow strike that balance durably, not even Trump’s’s family will be drawing up plans for a new Trump Tower in either capital.

Of course, big petroleum players will jump back in as soon as sanctions are lifted. Exxon Mobil is already contemplating how it might return to the vast Sakhalin natural gas project that Russia expropriated in 2022. Major Trump donors are angling for potential deals, too, but these are essentially insiders selling to insiders.

A few brave hedge funds will scramble to scoop up underpriced assets when restrictions end. Early buyers will hope to get ahead of a larger and slower crowd of mainstream investors who will want to feel more comfortable with the country’s business risks before re-entering its $750 billion stock market.

That will take time. Foreign direct investment into Russia peaked in 2008. As the top U.S. Treasury official on Russia in the years that followed, I struggled mightily to drum up investment as President Barack Obama sought to reset relations. But slowing growth, rising corruption, and a few illegal asset seizures made it a tough sell long. And that was before Russia annexed Crimea in 2014.

Today’s investors will want to understand just how fast Russia’s growth can recover from its current stagnation (its gross domestic product is expected to increase by a meager 1.3% next year) and just how easily it can reorient an economy heavily skewed toward military production. Russia’s population is growing older and smaller. Many of its best and brightest fled when the war broke out.

They will also want to understand how friendly the Putin cronies who expropriated foreign-owned businesses will be to a wave of returning foreign investors. Russia’s prosecutor general has already promised to investigate any fresh investments from abroad to ensure they would benefit Russia.

Investors will also need to be mindful of their reputations back home, where Russia’s brand remains decidedly poor. CalPERS, the California pension giant, resisted pressure to sell its Russian holdings in 2022 to avoid locking in losses. But it is hardly likely to rush back. Likewise, Procter & Gamble, Coca-Cola, and others will think hard before they relink their reputations with Putin’s Russia.

But most important for anyone recommitting capital will be whether Putin and his successors have learned the wrong lessons from their war in Ukraine. Will they refrain from using military intimidation in the future, knowing what they gained this time? Will they really settle for anything short of complete control of the Ukrainian provinces Putin illegally incorporated into the Russian Federation? Will he really tolerate Ukraine pursuing European Union membership or selling arms to NATO?

Global investors and business leaders unexpectedly find their interests closely aligned with Ukraine’s. They may not dwell on the morality of Russia’s attacks, its violations of international law, or Ukraine’s lost territory. But they will think hard about the risks of renewed conflicts that will trigger more sanctions, more property losses, and more stains on their corporate reputations.

Trump’s logic is backward. There won’t be any investments to reinforce a peace deal unless there is a peace that looks convincing to investors. The more a settlement leaves Russia with the upper hand, the longer it will take to convince anyone of that.

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