The deceptive US-Ukraine minerals deal
Trump, the so-called master of the deal, could be over-estimating what he would gain from this agreement.
Confirmation from Kyiv that it has agreed to the terms of a major minerals deal with Washington has transpired to be somewhat misleading.
Zelensky confirmed today that a vital ingredient is still missing from the text: an explicit security guarantee from Washington.
While Ukrainian officials say the framework is agreed, the deal is yet to be formally signed and its “success”, says Zelensky, who is flying to Washington on Friday, “will depend on our conversation with President Trump”.
Trump confirmed this evening that the two of them are "going to be signing an agreement, which will be a very big agreement” during their face-to-face meeting.
It seems Zelensky is hoping he can persuade the US president in person to add a security guarantee to the pact. Though it’s unclear what will happen if Trump doesn’t budge.
Is Ukraine at risk of signing a very bad deal?
First, it’s important to remember that the prospect of allowing allies to develop Ukraine’s vast natural resources was first raised by Zelensky himself. Last year, he proposed a minerals deal to offer Washington a financial incentive to continue supporting Ukraine.
As to whether he’s now at risk of getting a rum deal, it’s hard to say as the agreement is yet to be made public and it seems major details are still to be ironed out.
According to The FT, which has seen the final draft, a fund will be established into which Ukraine would contribute 50 per cent of proceeds from the “future monetisation” of state-owned mineral resources, including oil and gas, and associated logistics. The fund would also be able to invest in projects in Ukraine.
However, the agreement leaves crucial questions, such as the size of the US stake in the fund and the terms of “joint ownership” deals, to be thrashed out in follow-up agreements.
While there appears to be US resistance to adding any explicit line about security guarantees, Trump has suggested that giving Washington a financial stake in the country is protection in and of itself. “The US, with greater economic interest in Ukraine, provides a security shield,” he reasoned.
Though it would be foolish to count on that. If transactional Trump decides he has significant economic interest in Russia, where does that leave Ukraine? A danger perfectly illustrated earlier this week when Putin responded to news of a potential US-Ukraine minerals pact by inviting Washington to collaborate with Moscow on mining in Russia’s “new territories” - a reference to Ukraine’s mineral-rich eastern territories that Russia has occupied since launching its full-scale invasion three years ago.
As concern mounts that Zelensky could be bullied into signing a highly unfavourable pact on Friday, there is another possibility to consider: that Trump, the so-called master of the deal, could be over-estimating what he would gain from this agreement.
Note that, under the current proposal, Ukraine would contribute 50 per cent of proceeds from the “future monetisation” of state-owned mineral resources. According to The FT, the agreement would not cover mineral resources that already contribute to Ukrainian government coffers, including the existing activities of Naftogaz or Ukrnafta, Ukraine’s largest gas and oil producers.
Any efforts to engineer new mineral supply chains in Ukraine will be fraught with difficulties. Aside from obvious security concerns raised by the proximity of Russian forces, any would-be miners will first have to address the fact that a quarter of Ukraine's landmass is estimated to be contaminated with landmines.
Bloomberg’s Javier Blas has also challenged the narrative on what he provocatively labels Ukraine's “fantasy minerals”.
Trump - who has told reporters “I want the equivalent of like $500 billion worth of rare earths”- is in need of a chemistry lesson, says Blas, since he has conflated “rare earth minerals” with the much broader concept of “critical minerals.” While Ukraine does have underground deposits of critical minerals such as titanium and gallium, it has no significant rare-earth deposits other than small scandium mines.
If Zelensky has, as Blas claims “talked up - way, way up - the potential of the country’s mineral resources”, then Trump has certainly taken the bait.
Caitlin Allen
Deputy Editor
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