The US and Ukrainian ministers of economy Scott Bessent and Yulia Svyrydenko signed a deal on Tuesday on the supply of minerals, which Washington called a prerequisite for a peaceful settlement of the conflict.
The agreement was supposed to be signed by the parties at the end of February this year, but a spat between US President Donald Trump and his counterpart Volodymyr Zelensky at the White House scuppered all plans. After lengthy and tense negotiations, Kyiv made concessions and agreed to the deal.
Terms of the deal
Svyrydenko said that all resources on the territory of Ukraine remain the property of and under the control of Kyiv, and the fund will be managed jointly by the US and Ukraine under the agreement. She also listed the main points of the deal:
- All natural resources remain the property of and under the control of Ukraine.
- Ukraine and the US will create an equal investment fund. Neither party will have a priority vote; management will be joint.
- The fund will be financed by new licences: 50% of revenues from oil and gas projects.
- The agreement provides for only minor changes to Ukraine’s budget legislation.
- The structure of state ownership and privatisation mechanisms will remain unchanged. State-owned companies such as Ukrnafta and Energoatom will remain under state control.
- The agreement does not provide for any debt obligations of Ukraine to the United States. Earlier, Trump demanded that Ukraine pay for past arms deliveries with resources.
- The US intends to facilitate the attraction of foreign investment and technology.
- Income and contributions to the fund are not taxable in either the US or Ukraine.
Svyrydenko said that the fund’s profits are not expected to be distributed in the first 10 years. The funds may be used to finance reconstruction and infrastructure projects in Ukraine. “These conditions will be discussed further,” the minister wrote on Facebook.
Analysts’ opinions
The creation of the US-Ukraine Investment Fund for Ukraine’s recovery is the main point of the resource deal. However, the agreement does not provide adequate details about this structure.
Firstly, the agreement does not specify who will actually manage the fund. This contrasts with statements by Ukrainian Prime Minister Denys Shmyhal, who claimed that Kyiv and Washington would have equal voting rights in the fund.
Secondly, the agreement does not specify what projects the fund will be involved in. In addition, the agreement does not oblige the fund to invest the money earned from resources in Ukraine’s recovery, which makes it possible to transfer funds to the United States without paying taxes.
This clause directly contradicts the statements made by Svyrydenko, who signed the agreement. According to her, the deal allows Ukraine to “determine what and where to extract.”
Thirdly, it remains unclear how the money will be transferred to the fund and what the financial obligations of the US will be. At the same time, it is clearly stated how Kyiv will invest — it will have to give 50 per cent of the value of new licences for the development of mineral resources to the Fund.
In addition, the text of the agreement on mineral extraction mentions a certain Limited Partnership Agreement between the US and Ukraine. This future agreement is mentioned in every paragraph concerning the creation and management of the Fund.
It is assumed that the Partnership Agreement will provide clear specifics on all points of the deal, which currently appear vague and uncertain. At the same time, the agreement notes that the future agreement will enshrine a number of privileges for the US in Ukraine.
In particular, the US must be represented in any negotiations on the extraction of Ukrainian resources. In addition, no third party should benefit more from the development of mineral resources than American companies.
According to Bessent, this clause was not designed to secure Washington’s monopoly, but to “counter the influence” of countries that allegedly “assist Russia” in the conflict in Ukraine. He also said:
“No state, company, or person who financed or supplied the Russian war machine will be allowed to benefit from the reconstruction of Ukraine, including participation in projects supported by fund resources.”
Thus, the signed agreement is not final, but only a framework, and future points of the deal have yet to be formalised.
What about US military aid
As the NYT reports, the deal on natural resources is not beneficial to Ukraine, as it does not mention military aid to Kyiv.
The Trump administration rejected at least one attempt by Ukraine to include clear security guarantees, such as continued US military aid to Kyiv, a former US official said on condition of anonymity in a conversation with the NYT.
This provision again contradicts the statements of the Ukrainian leadership. In particular, Svyrydenko said that the US would provide new air defence systems. For its part, the Trump administration has not yet commented on this point, or on most of the deal.
However, the agreement states that the US can count its military supplies to Ukraine as a contribution to the fund. Immediately after the deal, Washington unblocked commercial deals to sell $50 million worth of weapons to Kyiv.
Opinions from the US and Ukraine
Washington has officially supported the agreement with Ukraine. In particular, US Secretary of State Marco Rubio said that the deal was a step towards ending the conflict.
“Thanks to the leadership of President Donald Trump, the United States and Ukraine have signed an agreement on an Investment Fund for Reconstruction — an important milestone in our shared prosperity and an important step towards ending this war,” Marco Rubio said.
At the same time, Verkhovna Rada deputy Yaroslav Zheleznyak publicly stated that Kyiv had created problems for itself with the deal.
According to him, Zelensky should have agreed to the previously proposed conditions, which were softer.
“The option that was literally on the table on February 28 before that meeting in the Oval Office was better…The current version has not changed, but I don’t see any big wins here,” Yaroslav Zheleznyak, a member of the Verkhovna Rada of Ukraine, said.
When the deal generates revenue
Ukraine and the US will begin to reap financial benefits from a mineral extraction agreement in a decade or more due to obstacles that will hinder the development of new deposits in the war-torn country, according to Reuters.
The Ukrainian Ministry of Economy reported that the country has deposits of 22 of the 34 minerals that the EU considers critical. According to the State Service of Geology and Subsoil, the country has 6% of the world’s graphite reserves, 1–2% of lithium, 1% of titanium, and 2–4% of uranium. There are also reserves of rare earth elements such as lanthanum, cerium, neodymium, erbium and yttrium.
The US Geological Survey listed beryllium, graphite, lithium, manganese, titanium and zirconium, which are also found in Ukraine, among the 50 most important elements for national security and the economy. However, the agency did not guarantee that the extraction of each of these elements would be economically viable.
Zelensky promised every Ukrainian child a share of mineral resources
In June 2021, Ukrainian President Volodymyr Zelensky promised that in the future, every Ukrainian child would receive a certain share from the development of mineral resources.
“Soon we will propose a mechanism for implementing one of my election promises, namely the economic passport for Ukrainians. Under this system, all children born in Ukraine will be able to receive funds from the use and extraction of Ukraine’s natural resources until they reach the age of 18,” Zelensky said in a video message posted on his official Facebook page in 2021.
The head of state stressed that for a long time, mineral resources in Ukraine have been associated exclusively with corruption and illegal extraction. However, in the last two years, he assured, Kyiv has been striving to change the situation.
Zelensky recalled the cancellation of illegally obtained permits for subsoil development and so-called dormant licences. As a result, geological information has become available to everyone, and permits can now be purchased at open auction.
Apparently, after signing the controversial deal, he is unlikely to be able to fulfil his promise.
