Ukraine’s extensive underground mineral resources lie at the center of an economic agreement that the country is currently finalizing negotiations for with the US.
Approval of this agreement is deemed vital for US backing in efforts to conclude Russia’s ongoing three-year conflict with Ukraine.
Nevertheless, the intricate terms of the deal have led to tensions between the US and Ukraine in recent weeks.
Background to the deal
Volodymyr Zelensky asserted that the terms lacked the security guarantees he desired.
Upon taking office, US President Donald Trump embraced the proposal. However, his suggestion that the US take control of $500 billion (€477 billion) in mineral resources from Ukraine to offset wartime aid was turned down by the Ukrainian president.
President Zelensky maintained that the terms did not include the security assurances he sought and were not aligned with Ukraine’s interests.
“I will not sign a document for which ten generations of Ukrainians will bear the cost,” Mr. Zelensky emphasized.
He also challenged Mr. Trump’s assertion that the US had expended $350 billion on Ukraine’s war efforts.
Research conducted by the Kiel Institute for the World Economy indicates that the actual figure is closer to $120 billion.
Recently, discussions have continued towards a more acceptable version of the agreement, with Ukrainian Deputy Prime Minister Olga Stefanishyna confirming that both parties were “close” to a resolution as of yesterday.
In a post on X, she expressed that signing the deal would “showcase our commitment for decades to come.”
Later that day, the US President indicated intentions to meet with his Ukrainian counterpart at the White House this week or next to finalize the arrangement.
Ukraine’s mineral reserves
Main mineral sites in Ukraine (Source: The Conflict and Environment Observatory/ISW Critical Threats)
Notably, Ukraine is home to one of Europe’s largest deposits of critical minerals, essential for a variety of industries, including technology, aerospace, defense, and energy.
For the US, access to these resources would help diminish its reliance on China, which is the world’s foremost exporter of critical minerals.
An analysis from The Kyiv School of Economics (KSE) reveals that Ukraine possesses 116 valuable types of minerals across approximately 20,000 locations.
Most of these mineral deposits remain unexplored, with only 15% actively mined before the Russian invasion.
Among Ukraine’s valuable minerals are graphite, essential for nuclear power stations and batteries; titanium, used in aerospace, defense, and industry; lithium, a vital component in electric vehicle batteries; and rare earth minerals, utilized in various electronic products.
The KSE indicates that Ukraine holds the largest titanium reserves in Europe and one-third of the continent’s lithium reserves.
However, up to 20% of the country’s resources, including nearly half of its rare earth deposits, are currently under Russian occupation in eastern Ukraine, as President Zelensky noted in a Reuters interview on February 7.
How the deal would work
The specific details of the deal remain unpublished at this stage.
However, Axios reports that the draft agreement proposes the creation of a “Reconstruction Investment Fund,” which would be co-managed by the US and Ukraine.
This fund is intended to invest in projects within Ukraine and attract investment to enhance development, including in sectors such as mining and ports.
The draft seen by Axios expresses a commitment to a free Ukraine, but does not detail any US military obligations.
Challenges for potential investors
Concerns have arisen regarding the investment and expertise necessary to explore and exploit Ukraine’s extensive mineral resources.
Dr. Jakob Kullik, a political scientist specializing in the geopolitics of critical minerals, commented that while the deal may appear politically appealing, its practical advantages for the United States are less certain.
“A significant challenge for the US is that there are not many American companies capable of mining and processing these rare earth elements, as Chinese firms have dominated this sector for the past two decades,” he stated.
Moreover, the possibility of continued conflict and land expropriation in Ukraine may deter potential investors.
According to the Centre for Strategic and International Studies, developing a mine typically takes an average of 18 years and costs between $500 million (€477 million) and $1 billion (€954 million) to establish.
Analysts assert that confidence in Ukraine’s political and economic stability will be crucial, given the significant and long-term nature of the investments involved.
