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Ukraine and the US have struck a deal on the joint development of the country’s mineral resources through a “reconstruction investment fund”.
The agreement, dated February 25 and first obtained by the Financial Times, is a lot less onerous and sweeping than Washington’s initial proposal.
An earlier reference to a possible $500bn of revenues from mineral extraction has been dropped. Nor is there any explicit US guarantee of Ukrainian security that Kyiv wanted in return for sharing profits from its valuable natural resources.
While Ukrainian negotiators were able to narrow down the scope of the deal and push back on some of the more onerous terms demanded by the Trump administration, several crucial details have yet to be decided.
Where will revenues from Ukrainian mineral extraction go?
Kyiv and Washington will set up a “joint investment fund” into which Ukraine will pay 50 per cent of all revenues earned from the “future monetisation” of natural resources owned by the Ukrainian government.
In theory, the fund will invest in Ukraine’s postwar reconstruction and economic development, potentially across all sectors not just natural resources.
Will the US own and control the fund?
It will be jointly owned and managed by the US and Ukrainian governments but, crucially, further details of ownership and governance will be hammered out at a later stage in a “fund agreement”. In its opening bid, the US had pushed for 100 per cent ownership and full decision-making rights.
Instead, the deal says the “maximum percentage of ownership of the fund’s equity” held by the US and “the decision-making authority” will be “to the extent permissible under US laws”. This may be because US agencies may face limits on their participation in such a fund.
For example, if it were the US International Development Finance Corporation managing the US interest in this fund, under existing legislation its equity investments would be capped at 30 per cent ownership of any project.
Neither the US nor Ukraine will be able to sell any share of the fund without the other’s consent.
Will revenues be invested in Ukraine or paid out to the US?
This is also vague and will be decided in the fund agreement.
The deal says the fund will collect and reinvest revenues “at least annually in Ukraine to promote the safety, security and prosperity of Ukraine”.
But it does not stipulate that all revenues will be reinvested and it adds that the subsequent fund agreement will “provide for future distributions”.
What Ukrainian resources are covered by the agreement?
Ukraine has large deposits of critical minerals, including lithium, graphite, cobalt, titanium and some rare earths. It also has reserves of oil, gas and coal. All of these are covered by the agreement — as long as they are owned “directly or indirectly” by the Ukrainian government — as well as associated logistics.
However, deposits that are already contributing to government coffers in taxes, royalties or licence fees are not covered by the deal. That would exclude the current operations of Ukrnafta and Naftogaz, the state-owned oil and gas companies, which are perhaps the most lucrative of all Ukraine’s extractive industries.
Ukraine’s deposits have also not undergone significant exploration or development — processes that take years even under stable jurisdictions. There is also a lack of data on the quality of the reserves, which is crucial information for investors before committing millions to new mines. A large proportion of deposits lie in territory controlled by Russian forces.
Exploiting Ukraine’s critical minerals would require vast investments. The fund could, in theory, finance some of those, but it will start from zero unless the US actually puts money in upfront. It would also take years for projects to yield taxable operating profits.
Did Ukraine get the security guarantees it asked for?
US President Donald Trump has described the minerals deal as a way of getting “payback” for previous US aid to Ukraine. He has bandied around vast earnings from the scheme, from $350bn to $500bn. Given the difficulties of commercialising these deposits, it is likely to yield only a fraction of that.
Trump’s administration has argued that the mere presence of US economic interests in Ukraine would be enough to prevent future Russian military aggression. President Volodymyr Zelenskyy demanded clearer guarantees of future US military assistance and security guarantees in the deal. He did not get them.
“It does not contain all the security guarantees Ukraine wanted, but I wanted at least one sentence mentioning guarantees — and it is there,” he said on Wednesday.
Senior Ukrainian officials involved in the negotiations told the FT they had come under immense pressure from the Trump administration to finalise the accord.
They hope that when Zelenskyy and Trump sign it at the White House on Friday, it could open the door to more detailed talks about military assistance and further guarantees as part of the US president’s push to end Russia’s war.
On Wednesday, however, Trump said at the first cabinet meeting of his second term: “I’m not going to make security guarantees beyond very much.”
Additional reporting by Joseph Cotterill
Read the full article here
