US-Ukraine minerals deal

Context

Ukraine and the United States are all set to finalize a significant deal that would give the United States access to Ukraine’s rare earth minerals, essential for producing modern technologies, including electric vehicle batteries, wind turbines, and military equipment.

Key Terms of the Agreement:

Ukraine is home to 5% of the world’s critical raw materials, including substantial reserves of graphite, lithium, and titanium.
These minerals are crucial for producing products like electric vehicle batteries, electronics, and defense technologies.
Ukraine is one of the top five global suppliers of graphite, with an estimated 19 million tonnes of proven reserves.
Now, these minerals will be available for U.S. investment, with the potential for future commercial exploitation.
Investment Fund for Reconstruction: Ukraine and the U.S. have agreed to set up an "investment fund" for the reconstruction of Ukraine, to be managed jointly. Ukraine will contribute 50% of the future revenues from these resources into the fund. The primary goal of this fund is to invest in various reconstruction projects within Ukraine, benefiting both the U.S. and Ukraine.

Implications for Global Geoeconomics:

Strategic Importance of Rare Earth Minerals: Rare earth minerals have become increasingly important for modern industries, particularly in the production of technologies related to renewable energy, electric vehicles, and defense systems. The U.S. and China are currently locked in a strategic competition for control over these resources. This deal marks Ukraine’s mineral wealth as an important asset in the broader global competition, with the U.S. seeking to reduce its dependency on China, which dominates global rare earth supplies.
Potential for Broader Economic Engagement: The deal reflects a broader trend of resource-based diplomacy, where access to strategic minerals and resources becomes a key factor in international relations. This move by Ukraine, along with its efforts to align with the U.S., underscores its pivot towards Western alliances for both economic and security reasons.

Fact Box

Rare Earth Metals (REEs)

Rare Earth Elements (REEs), also known as rare earth metals or rare earth oxides, are a group of 17 silvery-white, soft heavy metals that are crucial for many modern technologies. Despite their name, rare earth metals are not particularly rare in the Earth's crust but are difficult to find in large, concentrated deposits.
The 17 rare earth elements are: Lanthanum (La), Cerium (Ce), Praseodymium (Pr), Neodymium (Nd), Promethium (Pm), Samarium (Sm), Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Holmium (Ho), Erbium (Er) Thulium (Tm), Ytterbium (Yb), Lutetium (Lu)
- Scandium (Sc) – Not part of the lanthanide series but often included because it occurs with them in the same deposits.
- Yttrium (Y) – Similarly, included due to its occurrence with lanthanides.
Rare earth metals are essential for producing a wide range of products and technologies, including:
- Electric vehicles (batteries)
- Wind turbines (magnets)
- Smartphones (screens, magnets)
- Computers (hard drives, screens)
- Military equipment (lasers, radar, missiles)
- LED lights (lighting)
- Medical equipment (MRI machines)

China’s Dominance in the Rare Earth Industry

China plays a dominant role in the global rare earth market.

In 2010, China controlled 92% of global rare earth production. By 2020, this share decreased to 58%, as other countries started mining their own rare earth resources.
However, China still holds a dominant position, producing 85% of the world’s refined rare earths in 2020.

The strategic race India can’t lose

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