Odesa, Ukraine/Tulcea, Romania (CI Ukraine) – [Updated on October 2, 2024 to add interview with former US Secretary Mike Pompeo and comments from the US Secretary of the Navy, Carlos Del Toro] Fincantieri—Europe’s largest shipbuilder, based in Italy’s Trieste—is quietly working to transform defunct Ukraine government-owned shipyards in the Black Sea port of Odesa into a state-of-the-art manufacturing hub that will seek to build some of the world’s most advanced commercial vessels.

Expansion into Odesa seems like a logical next step for the Italian company following its success in building next-generation commercial ships for its Norwegian subsidiary VARD in Tulcea, Romania. Fincantieri employs some 4,500 workers in Tulcea and Braila, near the Moldovan border.

[Carlyle co-chairman and co-founder David Rubenstein speaks with Capitol Intelligence/CI Ukraine using CI Glass on how Carlyle and Blackstone of Stephen Schwarzman are leading private sector investment and support for Ukraine at the Library of Congress annual National Book Festival in Washington, DC on August 24, 2024]

“Tulcea (and Braila) have emerged as he most strategic maritime infrastructure in the region,” a source close to Fincantieri said. “Currently operating at full capacity, these shipyards are producing some of the most technologically advanced specialized vessels on the market.”

Once a sleepy tourist destination, Tulcea on the Danube Delta is now a center of geopolitical interest after becoming the main transport hub for Ukrainian agriculture exports after Russia seized the Sea of Azov following its unprovoked invasion of Ukraine on Feb. 24, 2022.

Tulcea has also been the news as Russia continues to send explosive drones to the area to disrupt shipping, with drones crossing or crashing into Romanian territory – a serious military and diplomatic escalation as Romania is both a member of NATO and the European Union.

“The Danube here is in a curvy S shape, so the Russian drones cross in and out of Romanian territory,” said Ciprian Safca, a river ferry captain and Tulcea regional councilor, adding.   “Russian drones now come in groups of five or so.  They decided (Romania military) it was better to let them pass then try to shoot them down and potentially miss one or two.”

The Russian drones have failed to dampen Fincantieri’s commitment to northeast Romania and its plans for Odesa.  Fincantieri could well become the largest foreign investor in Ukraine’s history if goes ahead with its plan to build a next generation shipyard in Odesa.

The Fincantieri project would even exceed, in terms of total investment and employees, the Neptune deep-sea grain cargo port built and operated by Minneapolis, Minnesota-based US food giant Cargill at the TIS Seaport outside of Odesa.

The Neptune port was completed in 2018, with an investment of $150 million from the World Bank’s International Finance Corporation and the European Bank for Reconstruction and Development.

In fact, the IFC and the World Bank’s insurance group, MIGA, have already made it known to Fincantieri that is eager to provide project finance and political risk insurance for the project while the United States International Development Finance Corporation (US DFC) is willing to provide war risk insurance.

Workers at Neptune said the cargo port has been operating at full capacity (Neptune handles circa 10% of Ukraine’s grain production) since October last year and has neven been a target of Russian attacks.

Diplomatic sources said the Putin regime is loathed to bomb the port as it would be considered seen as a direct attack on US interests.

While Cargill maybe too big a foe for Russian President Vladimir Putin, he did inflict his revenge on the Odesa-based developer of Neptune, Andrey Stavnitser, by obliterating Stavnitser’s newly rebuilt 19-story Odesa Kempinski luxury hotel on the Odesa harbor in a targeted missile attack on September 25, 2023.

As emerging market specialists love to note, no one guards an empty bank. That security resources are made available to protect valuable assets and not vice versa.  Despite being a company best known for building gargantuan cruise ships for the likes of Carnival, Fincantieri is also a major naval defense contractor.

Apart from building naval frigates for the US Navy, Fincantieri recently acquired an “Underwater Armaments Systems” company Whitehead Alenia Sistemi Subacquei S.p.A. from Italian defense company Leonardo capable of protecting the port of Odesa from Russian submarines, naval drones and torpedoes.

[US Navy Deputy Chief of Naval Operations and Director of Naval Intelligence Vice Admiral Karl O. Thomas filmed by Capitol Intelligence/CI Ukraine using CI Glass with Deputy Chief of Space Operations for Intelligence for US Space Force, Maj Gen Gregory Gagnon; national Security Agency Deputy Director for Combat Support USMC BGen William “Will” Wilburn, Jr on Ukraine war and challenges at Service Intelligence Priorities Plenary session during AFSEA and INSA Intelligence and National Security Summit in Bethesda, Maryland on August 27, 2024]

Speaking to this reporter at the AFCEA and INSA Intelligence & National Security Summit, both US Army Major General Timothy Brown of the United States Army Intelligence and Security Command and Deputy Chief of Naval Operations for Information Warfare US Navy Vice Admiral Karl O. Thomas agreed Fincantieri’s civilian and military capabilities for Odesa are extremely important for Ukraine, and the region, at this moment in time.

There has been heated debate in Washington concerning the seeming inability of major US defense contractors to provide war material on a “just in time” rather than a “just not in time basis” as witnessed by the ongoing conflict in Ukraine.

However, US Secretary of Navy Carlos del Toro is probably the US civilian military leader most committed to Ukraine’s military victory over Russia and understands the importance of private sector investment to the country.

Odesa, it seems, is destined to play an even more critical role in the future as the US plans to move a large part of its armed forces in Germany to a military base under construction to Constanta, the Romanian Black Sea port some 124 kilometers south of Tulcea.

Fincantieri plans are certainly music to the ears of Ukraine Finance Minister Sergey Marchenko, who is currently pushing an aggressive program of privatizing Ukraine state-owned assets to both fully liberalize the Ukrainian economy and at the same time lower the country’s foreign debt obligations, especially those held by state-owned enterprises.

Fincantieri, coupled with the foreign investments made in Odesa by Cargill and Dubai’s DP Port, can bring around an economic renaissance to Odesa not seen since it was a free port in 1819 to 1859 and whose wealthy merchants and exporters made the city one of the most cosmopolitan in Europe.

Today’s wealthy merchants include Stephen A. Schwarzman, the co-chairman and co-founder of US private equity giant Blackstone private equity group and Carlyle co-founder and co-Chairman David M. Rubenstein.

Schwarzman is widely expected to be appointed US Commerce Secretary in a second Trump presidency while Rubenstein could be named US Treasury Secretary or Secretary of State if Kamala Harris wins the presidency.

Schwarzman has already directed his staff to target investment into Ukraine private sector companies such a video cloud gaming giant Boosteroid while Rubenstein has used his considerable political and economic influence to rally support for Ukraine among US and world leaders.

Currently, there are rumors on Wall Street that KKR co-founder Henry Kravis may be preparing a takeover offer for VEON, the $2 billion listed NASDAQ company that owns Ukraine’s largest mobile phone operator Kyivstar.

[Former US Secretary of State and VEON independent board member Mike Pompeo speaks to Capitol Intelligence/CI Ukraine using Glass on a friendly takeover bid for Nasdaq listed VEON [Nasdaq:VEON] Kyivstar and that sanctioned Russian oligarch Mikhail Fridman has n influence over the company ahead of speaking at the Hudson Institute in Washington, DC on September 17, 2024.]

The potential KKR move, welcomed by Ukraine and G7 members, would effectively remove VEON minority investor — sanctioned Russian oligarch Mikhail Fridman– from the company and most importantly, from Ukraine.

It is also understood that Paul Singer, the principal of activist hedge fund Elliott Management, is also looking at making a move on VEON. VEON Chairman Augie K Fabela and VEON indepedent board member and former US Secretary of State, Mike Pompeo, have yet to comment at time of publication,

While Ukraine has effectively pushed out the Russian fleet from the Black Sea, similar to Bolsheviks pushing out the Tsarist fleet to Bizerte, Tunisia in 1920, it will be new foreign investment by the likes of Fincantieri,

Blackstone, Carlyle and KKR that will determine whether the new economic outlook of Europe will be positive or negative for the decades to come.

By PK Semler in Odesa, Ukraine and Tulcea, Romania. For more information, email pks@capitolintelgroup.com

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