Last week, the Trump administration signed an agreement with Ukraine which gives it privileged access to the natural resources of Ukraine.
Some media have described the agreement like Ukrainian President Volodymyr Zelensky “Cavillé” to the requests of US President Donald Trump.
But we see the agreement as the result of an intelligent negotiation on the part of the president of Ukraine in wartime.
So what does the agreement for Ukraine mean? And will this help strengthen American mineral supply chains?
The richness of Ukraine’s natural resources
Ukraine is home to 5% of the world’s critical mineral wealth, including 22 of the 34 minerals identified by the European Union as a vital for the defense, construction and manufacturing of high technology.
However, there is a big difference between resources (which is in the ground) and reservations (which can be operated commercially). The proven mineral reserves of Ukraine are limited.
In addition, Ukraine has a mineral wealth estimated at around 14.8 billions of dollars (23 billions of dollars), but more than half of this are in the territories currently occupied by Russia.
What does New Deal mean for Ukraine?
American support for conflicts abroad is generally to guarantee American economic interests – often in the form of exploitation of resources. From the Middle East to Asia, US interventions abroad allowed American companies to access other countries, oil, gas and minerals.
But the first iteration of the Ukrainian mineral agreement, which Zelensky rejected in February, had been a seizure of resources particularly cheeky by the Trump government. He forced Ukraine to yield sovereignty over its land and its resources to a country (in the United States), in order to defend itself against the attacks of another (Russia).
MSTYSLAV Cherno / AP
These terms were very operators in a country fighting against a military occupation of several years. In addition, they violated the Constitution of Ukraine, which puts the property of the natural resources of Ukraine in the hands of the Ukrainian people. If Zelensky to accept this, he should have faced a huge public reaction.
In comparison, the New Deal resembles a strategic and (potentially) commercial victory for Ukraine.
First, this agreement is fairer, and it is aligned with the short and medium term interests of Ukraine. Zelenksy describes it as an “equal partnership” which will modernize Ukraine.
In the words, Ukraine will set up an investment fund for reconstruction of the United States – Ukraine for foreign investments in the country’s economy, which will be governed by the two countries.
Ukraine will contribute 50% of income from royalties and licenses to develop critical minerals, oil and gas reserves, while the United States can make its contributions in kind, for example through military assistance or technological transfers.
Ukraine maintains ownership of its natural resources and its state companies. And license agreements will not require substantial changes in the laws of the country or do not disrupt their future integration with Europe.
Above all, there is no mention of retroactive debts for American military assistance already received by Ukraine. This would have created a dangerous precedent, allowing other nations to seek to claim similar debts from Ukraine.
Finally, the agreement also points out the Trump administration’s commitment to “a free, sovereign and prosperous Ukraine” – although always without any security guarantee.
Profits can be long to come
Unsurprisingly, the Trump administration and the conservative media in the United States have managed to agree as a victory.
For too long, Trump supports, Ukraine has benefited from military assistance funded by taxpayers and such assistance now has a price. The administration has described the agreement to the Americans as a profit company which can recover the funds spent in defense of Ukrainian interests.
But in reality, the benefits are far away.
The terms of the agreement clearly indicate that the fund’s investment will be addressed to new resource projects. Existing operations and projects belonging to the State will not fall under the terms of the agreement.
Operating projects generally operate on time. The transition from exploration to production is a slow, high risk and extremely expensive process. This can often take more than a decade.
Add to this complexity that some experts are skeptical of Ukraine even has extremely precious reserves. And put promising deposits on the market will require major investments.
EFREM LUKATSKY / AP
Which may be more important
It is possible, however, that profits are a secondary calculation for the United States. China boxing is likely to be – if not more – important.
Like the other Western nations, the United States is desperate to diversify its critical mineral supply chains.
China does not only control a large part of the rare land deposits known in the world, it also has a monopoly on the treatment of the most critical minerals used in green and defense energy technologies.
The United States fears that China can armed its market domination against strategic rivals. This is why Western governments are increasingly making the resilience of the mineral supply chain at the heart of their foreign policy and their defense strategies.
Given the proximity of Beijing to Moscow and their in -depth cooperation on natural resources, the American -Ukrainian agreement could prevent Russia – and, by extension, China – from access to Ukrainian minerals. The terms of the agreement are explicit: “States and people who have acted negatively towards Ukraine must not benefit from its reconstruction”.
Finally, the performance of “the agreement” counts as much in Trump. Having Zelensky signed on the dotted line is the progress in itself, plays well towards the base of Trump at home and puts pressure on the Russian president Vladimir Putin to come to the table.
Thus, the agreement is a victory for Zelensky because it gives the United States participation in an independent Ukraine. But even if the critical mineral reserves of Ukraine are less precious than expected, it may not have any importance for Trump.
