US-Ukraine Mineral Resource Deal and Its Implications

US President Donald Trump recently accused Ukraine of "breaking" a deal related to the use of its mineral resources. Although the deal was never signed, Trump’s comments highlight the growing geopolitical and economic importance of Ukraine's mineral reserves, which play a crucial role in global manufacturing, including for high-tech and defense industries.

What are Critical Minerals?

• Critical minerals are elements crucial for national security and economic development, particularly in industries like defense, electronics, clean energy, and infrastructure.
• Rare Earth Elements (REEs) and critical minerals are essential for manufacturing high-end products such as weapon systems, electrical vehicles (EVs), electronic gadgets, and semiconductors.
• There are 17 rare earth elements (REEs) such as lanthanum, yttrium, and scandium, which are indispensable for advanced technologies.
• Critical minerals, defined by a country's needs, are minerals that are vital for these sectors but are difficult to access, often due to geographical or political constraints.

Ukraine’s Mineral Resources:

• Ukraine possesses a significant quantity of mineral resources, making it an attractive partner in global supply chains for critical minerals. Ukraine holds:
  • 22 of the 50 strategic minerals identified as critical by the United States.
  • 25 out of the 34 critical minerals recognized by the European Union (EU).
• Among these, Ukraine is particularly rich in five key minerals:
  • Graphite
  • Lithium
  • Titanium
  • Beryllium
  • Uranium
• These minerals are vital for the production of high-tech weapons, clean energy solutions (such as EV batteries), and electronic devices. The importance of these resources has made Ukraine a target for global powers, especially in the context of US-China competition over critical minerals.

Why Does the US Want Ukraine's Mineral Resources?

The US's interest in Ukraine’s mineral resources stems from both economic and security reasons:

• China’s dominance in critical minerals, such as rare earths, poses a risk to US technological and defense industries. Access to Ukraine’s resources would diversify and secure the US supply chain.
• National security: If the US were granted access to these resources, it would ensure access to raw materials necessary for defense and technology industries, reducing dependency on China and strengthening its geopolitical position.

What Did Trump Propose?

• The US proposed a deal where it would be granted access to 50% of Ukraine’s critical mineral resources in exchange for the military and economic support the US has already provided in Ukraine’s fight against Russian aggression. The key points of the proposal are:

• The US would gain economic stakes in Ukraine, such as mining rights and other resources, effectively controlling access to a large portion of Ukraine’s critical minerals.
• In return, the US would provide continued military and economic support, with the goal of ensuring Ukraine's defense against Russia, and thereby ensuring its resources' security.
• Why Was the Deal Rejected by Ukraine?: Ukraine was open to negotiations but sought more favorable terms. The deal proposed by the US was perceived as insufficiently protective of Ukraine’s sovereignty and long-term interests. Zelenskyy emphasized that the deal was not ready to protect Ukraine’s interests adequately, and hence, no formal agreement was signed during the Munich Security Conference.

Challenges for the US Proposal:

There are several obstacles to the successful execution of this deal, including:

• Legal and Constitutional Issues: Ukraine's Constitution states that subsoil resources belong to Ukrainians. Thus, any agreement involving mineral extraction would have to comply with Ukrainian law and respect its sovereignty.
• Uncertainty Over Resource Availability: Much of the critical mineral data is outdated. Many geological surveys were conducted during the Soviet era, and the exact quantity and quality of the resources remain unclear.
  • Large-scale extraction has not occurred, and much of Ukraine’s mineral reserves remain underexplored.
• Existing EU Deal: Ukraine already has an agreement with the European Union to extract and process its raw materials. This deal, signed in July 2021, establishes a strategic partnership between the two parties for the shared development of Ukraine’s mineral resources.
• Russian Occupation of Key Resource Areas: A significant portion of Ukraine’s critical mineral resources is located in regions currently under Russian occupation, including important deposits of lithium. This complicates access and extraction and reduces the resources available to Ukraine.