Strictly Business

Trump is treating Ukraine like a private equity investment gone bad

A vulture swooping down on dying prey

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I have been struggling to think of what to say about the absolutely stunning collapse in Ukraine’s diplomatic position, and the larger radical shift in America’s relationship to Europe. Various commentators, including Noah Smith and Francis Fukuyama, have wondered whether, under the leadership of President Donald Trump, the United States has gone from being the leader of the free world to being an enthusiastic member of an authoritarian entente—at a minimum allied with Russia, maximally encompassing China, India, Turkey, India, Israel and the far-right parties of Europe. As I’ve turned things over and over in my mind, though, I think the best way to understand Trump’s move on Ukraine specifically is by thinking of Ukraine not as a cause that we’ve abandoned, but as a business venture that is no longer viable.

Leaving idealism entirely aside, America’s investment in Ukraine—which began well before Russia invaded—can be assessed as an investment. The hope of a positive return to this venture was relative diffuse; a free and prosperous Ukraine would be a far more valuable trading partner than a poor one subject to Moscow’s control, for example, but Ukraine’s most natural trading partners would be European, so most of the gain that didn’t accrue to the Ukrainians would accrue to our allies rather than directly to ourselves. But the real value of the investment lay in the way it frustrated the plans and generally weakened the position of an important rival. The value of Ukraine to Russia—in terms of manpower, natural resources, commercial ports and naval basing sites—is far more obvious than its value to the U.S., to the point where a poor Ukraine under Moscow’s effective control is probably more valuable to them than a free and prosperous Ukraine would be as a trading partner. So, inasmuch as America benefits from Russian weakness, the value of keeping Ukraine out of Russia’s orbit was obvious.

Russia understood this and aimed to prevent us from achieving our aims—but was unable to do so short of launching a war. Once Russia launched their war, though, American support provided an opportunity to weaken Russia directly, using up both manpower and materiel; to demonstrate the battlefield effectiveness of American weapons, and thereby improve both their quality and their market position; to extract other valuable concessions from America’s far more threatened European partners in exchange for our support for Ukraine; and, possibly, to build Ukraine itself into a new valuable military asset.

None of these hoped-for gains have been achieved. Russia has lost a lot of men in battle, and burned through a lot of tanks and artillery shells, and tying up Russia in Ukraine did probably prevent them from taking any action to salvage the Assad regime in Syria. But America’s support for Ukraine also pushed Russia into a closer relationship with our most potent rival—China—and once on a war footing Russia’s economy has proved more than capable of supplying their war machine indefinitely. America’s technological edge looked dramatic at the start of the war, but looks less so as the war has worn on, and competing arms manufacturers have demonstrated their own technological prowess, while America has revealed the weaknesses in our own approach. The extraordinary sanctions regime imposed early in the war has encouraged other countries to find ways to trade and bank outside the scope of Western control, weakening America’s hold on the world financial system. (This may be the most durable consequence of the war.) I’m hard pressed to name any important concessions America extracted from our European allies in consequence of our support for Ukraine. Most important of all, Ukraine itself looks decreasingly likely to become a valuable asset, because it is steadily losing the war.

Now, if you were a traditional foreign policy hand facing a situation of this sort, you’d look to extract yourself with minimal damage to your credibility, the principal currency of diplomacy. Even if you had to negotiate a humiliating denouement to the war, you’d try to make it look like you were working as hard as possible to get the most for Ukraine, because if you didn’t then in the future other countries wouldn’t trust you, and would be less willing to enter into relationships as allies or clients. Even after years of “Vietnamization” had largely extracted America from Indochina, and even though a North Vietnamese victory in the war would not have materially threatened American interests in any direct way, the collapse of South Vietnam was still widely viewed as a sign of American weakness, and therefore a dangerous blow to America’s standing.

But if you were the CEO of a large multinational conglomerate who’d acquired or entered into a strategic partnership with a smaller business, and that business started to fail and/or the original business rationale no longer obtained, maintaining your “credibility” in the marketplace wouldn’t be your primary consideration, if it were a consideration at all. You might have plowed enormous sums of money into the venture and still, on a dime, you might change your mind and decide that it was no longer worth the investment. And at the point you changed your mind, the right thing to do would be to act on that change. You might not only cut the business off, but start stripping it of whatever value it still had. If you behaved that way, the employees and clients of the company you betrayed might hate you forever—but if you’re exiting that business then you don’t care about them. Your shareholders, meanwhile, would likely applaud your decisiveness, and the market as a whole would treat you with respect for not throwing good money after bad, and doing whatever you had to do to get the most value out of the ill-fated venture before it failed.

That, it seems to me, is how President Trump is treating Ukraine. He’s not giving any consideration to what is best for Ukraine in the same way that he wouldn’t give any consideration to the interests of a business venture he had decided to shut down. On the contrary, he’s trying to strip it of whatever value it still has, even if it’s just mineral rights of questionable value. And, since the purpose of the original investment was to frustrate a rival, abandoning that investment potentially opens up new opportunities to change that relationship. Trump has conceded virtually everything that Russia wants—territory, neutrality, etc.—right off the bat not necessarily because he’s a terrible negotiator (though he’s proven to be one many times in the past), because he’s not negotiating on Ukraine’s behalf at all, but on his own, and if he’s already decided to abandon Ukraine then these concessions are nearly costless to him, and start the new relationship with Russia off on a whole new foot.

So doesn’t that mean we are aligning with Russia? I think it’s better to say that there are no alliances in Trump’s conception of the world, because there aren’t alliances in that sense in the business world. There are only deals.

A realist might say that international affairs has always worked that way under the surface, but I don’t think that’s entirely true. Countries may or may not pursue their interests coldly and without regard to lofty ideals—I don’t think that’s a correct description of reality, but let’s posit it for a moment—but their ability to pursue them with vigor is very much a function of their ability to channel idealism, because ideals are what motivate people to go to war, far more than the expectation of personal gain. And to be clear, by “ideals” I don’t mean necessarily things like making the world safe for democracy or spreading socialist revolution. Ordinary Ukrainians are fighting for their independence, the right to have their own identity and chart their own destiny—their ideal is nationalism, in other words, possibly the most motivating ideal in the world. It’s the same ideal that is motivating ordinary Russians to fight to make their country great again, and to rebuke Western arrogance since the end of the Cold War.

That’s not how it works in business. Yes, you might go work for a company because the job is exciting, or because they are doing what you think are important things in the world. But for the business itself, the bottom line is the bottom line, and if you lose sight of that then you’re not going to serve the business well. Countries in an age of mass politics and national armies can’t behave entirely like businesses because their ability to wage war—and therefore their ability to threaten to wage war—is in large part dependent on their ability to motivate their people to fight, and they won’t be motivated to do so just for a business deal. And countries that appear to be behaving in that a purely businesslike way will therefore be more readily deterred—and, in the extreme, lose their ventures.

Which is where Europe finds itself today. From one perspective, Europe’s weakness is a consequence of idealism, their belief that democracy and liberalism will inevitably triumph and that Brussels represents a post-conflict mode of governance that, if it spread globally, would make war obsolete. But for all its lofty rhetoric, the European Union is just a business deal. The challenge for Europe is to discover common ideals for which they are willing to fight. If they can’t find them, then they’ll be paying Danegeld forever. And what Trump’s abandonment of Ukraine is teaching them is that in the end it matters less who they are paying Danegeld to than that they are unable to get rid of the Dane.