Us-Ukraine Minerals Deal Explained

The US and Ukraine on Wednesday signed a mineral deal that is expected to give Washington access to Kyiv's valuable mineral resources while providing the country with some assurance of continued American support in its war with Russia.

As part of the agreement, the two countries will set up the US-Ukraine Reconstruction Investment Fund, with plans to invest collectively for speeding up Ukraine’s economic recovery, said a statement by the US Department of the Treasury. Details of the total size of the fund were not revealed.

The deal was supposed to have been signed during Ukrainian President Volodymyr Zelenskyy's visit to the US in February. But negotiations fell through after US President Donald Trump accused Mr Zelenskyy of not being grateful enough for American assistance.

Analysts said the deal is mutually beneficial.

“For Ukraine, the deal brings much-needed US investment to support its recovery and growth while maintaining control over its resources," Joseph Dahrieh, managing principal at brokerage Tickmill told The National.

"For the US, it reduces reliance on China for critical minerals and increases its influence in eastern Europe."

The Russia-Ukraine war, now in its fourth year, has devastated Ukraine’s economy, with heavy damage to its infrastructure and housing.

Ukraine will need at least $524 billion over the next decade to repair and rebuild the country, the World Bank said in a recent report. Reconstruction of the housing sector is estimated at $84 billion, transport at $78 billion, and energy and extractives sector at $68 billion.

The country’s economy, which contracted by 28.8 per cent in 2022 following Russia’s invasion, is projected to have expanded by 3.5 per cent last year, according to the International Monetary Fund. It is forecast to grow between 2 per cent to 3 per cent this year.

The US International Development Finance Corporation (DFC), a US government entity, will also be involved in managing the fund along with the UK Treasury Department and Ukraine government, the statement said.

DFC, with a global investment portfolio worth $49 billion, partners with the private sector to mobilise capital for strategic investments around the world. It invests in sectors including infrastructure and critical minerals, energy, food security and agriculture.

“President Trump envisioned this partnership between the American people and the Ukrainian people to show both sides’ commitment to lasting peace and prosperity in Ukraine,” said US Treasury Secretary Scott Bessent.

Details of US, Ukraine fund

Ukrainian First Deputy Prime Minister and Economy Minister Yulia Svyrydenko said in a post on X that the fund will help Kyiv attract international investment.

“The implementation of the agreement will allow both countries to expand their economic potential through equal co-operation and investment. The agreement does not contain any mention of any debt obligations of Ukraine to the United States,” she said.

“We expect that for the first 10 years, the fund's profits and revenues will not be distributed, but can only be invested in Ukraine − in new projects or reconstruction."

The US has heavily supported Ukraine in its war with Russia. Washington has been Kyiv's single largest military donor with aid of more than €64 billion ($72 billion) since the war began in February 2022, according to the Kiel Institute think tank in Germany.

Importance of critical raw minerals

Ukraine is rich in natural resources including critical minerals, which are used in consumer electronics, electric vehicles and military applications, among others.

The country has 22 of the 50 strategic materials identified by the US as critical, and 25 out of the 34 recognised by the EU as critically important. Particularly, Ukraine holds very competitive reserves of graphite, lithium, titanium, zirconium, beryllium and uranium, according to the Ukrainian Geological Survey website.

Global rare-earth mining is currently dominated by China, which is locked in a trade war with the US after Mr Trump's sharp tariff increases.

Ukraine also has reserves of gold, uranium, cobalt, nickel and zinc, among other minerals.

“Ukraine has the largest reserves in Europe of titanium, lithium, and uranium and holds about 5 per cent of global rare-earth reserves, making the country an important partner for energy, defence, and clean technology supply chains,” Mr Dahrieh said.

The deal could offer the US a stable source of critical materials needed for defence, clean energy, and high-tech industries, he added.

Source: THENATIONALNEWS