​Minerals gamble: on the U.S.-Ukraine mineral deal

After painstaking negotiations, marked by inflammatory exchanges, Washington and Kyiv have signed an agreement that would grant the U.S. access to Ukraine’s critical mineral and oil and gas resources through a joint investment fund. Ukraine has claimed that it would lead to an equal economic partnership, while its actual impact remains uncertain. The idea of a minerals deal was proposed by Ukrainian President Volodymyr Zelenskyy last year to the Biden administration as part of his “victory plan”. His pitch was to open up Ukraine’s vast untapped critical minerals resources (which include lithium, graphite, uranium and titanium, besides rare earth minerals) in exchange for continued American military support and security guarantees. After Donald Trump assumed the presidency, he supported a minerals deal, but an entirely different one. He insisted that Kyiv repay the billions of dollars provided as military and economic assistance during the war by granting U.S. companies access to Ukraine’s resources. At one point, the disagreement escalated into a public spat at the Oval Office between Mr. Zelenskyy and Mr. Trump. But both sides pressed ahead, which culminated in the April 30 deal.

For Ukraine, the agreement represents an improvement over Mr. Trump’s previous proposals. There is no reference to aid as debt in the fine print. Under the deal, the United States-Ukraine Reconstruction Investment Fund will finance extraction projects in Ukraine’s resources. Kyiv will share 50% of the revenues from these projects towards the fund. While the agreement omits any reference to past U.S. aid, future American assistance will be considered as capital contributions to the fund — Ukraine will have to repay future aid through resource revenues. More importantly, although Mr. Zelenskyy originally envisioned a minerals deal as a pathway to securing security guarantees from the U.S., the final agreement offers no explicit American security commitments to Kyiv. Ukrainian officials have portrayed the deal, which needs to be ratified by Parliament, as a win-win. But it actually underscores Kyiv’s growing vulnerabilities in a war that shows no sign of abating. Mr. Zelenskyy and his generals are aware that if American support dries up, their embattled forces would be in peril. And Mr. Trump has already rejected Ukraine’s most pressing demand — firm security guarantees. Facing limited options, Ukraine has signed the agreement in the hope that it would at least ensure continued flow of U.S. military assistance in the form of U.S. investments to the fund. But Mr. Zelenskyy’s minerals gamble will pay off only if the Trump administration stays committed to helping end the war. If the war drags on, with Russia forces continuing to advance in the east, the minerals deal would mean little for Ukraine’s security.