What’s the minerals deal that Ukraine has agreed to negotiate with US and why?

Ukraine and the US are nearing an agreement granting American access to Ukraine’s mineral resources.

Discussions between US and Ukrainian officials regarding continued American military assistance in exchange for access to Ukraine’s valuable mineral resources have progressed after initial challenges.

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Notably, Kyiv views this as a means to secure long-term support for its defence against Russia .

Ukraine is under increasing pressure from the US administration to finalise the agreement, which has become a centre point of the widening divide between the US and Ukrainian presidents.

Both Kyiv and Washington share an interest in granting US access to Ukraine’s underground resources. However, Ukrainian President Volodymyr Zelenskyy has insisted that any such agreement must include concrete security assurances.

“Ukrainian and US teams are in the final stages of negotiations regarding the minerals agreement. The negotiations have been very constructive, with nearly all key details finalised,” deputy prime minister for European and Euro-Atlantic integration Olha Stefanishyna posted on X.

But what exactly is the deal?

Let’s take a look:

A look at details of the deal

Ukraine has proposed an agreement with Donald Trump to supply the US with rare earth elements, which are essential for various advanced technologies.

Trump recently reiterated his desire for such a deal, which was originally suggested by Zelenskyy last autumn as a strategic move to strengthen Kyiv’s position in future negotiations with Moscow.

The US president has insisted that Ukraine provide $500 billion worth of critical raw materials as compensation for American aid given under the previous administration of Joe Biden.

Zelenskyy, however, argues that Ukraine has received $67 billion in military assistance and $31.5 billion in direct budgetary support from Washington. He firmly rejected the notion that Biden-era aid should be treated as a loan.

Considering past assistance as debt, Zelenskyy argues, would create a “Pandora’s box” that could set a precedent forcing Kyiv to repay all its allies.

“We do not recognise the debt,” he stated. “It will not be in the final format of the agreement.”

His refusal to sign an initial draft earlier this month led to frustration in the White House.

Trump’s special envoy to the Middle East, Steve Witkoff, told CNN’s State of the Union that he expects an agreement to be reached this week, enabling the US to play a larger role in Ukraine’s mineral sector.

Both sides appear to be making progress, increasing the likelihood of a deal being finalised soon.

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Let’s take a look at Ukraine’s rare earth industry and how a deal might come together:

What are rare earth elements?

Rare earth elements are a set of 17 elements that are essential to many kinds of consumer technology, including mobile phones, hard drives and electric and hybrid vehicles.

It’s unclear if Trump is seeking specific elements in Ukraine, which also has other minerals to offer.

“It can be lithium. It can be titanium, uranium, many others,” Yermak said. “It’s a lot.”

China, Trump’s chief geopolitical adversary, is the world’s largest producer of rare earth elements. Both the US and Europe have sought to reduce their dependence on Beijing.

For Ukraine, such a deal would ensure that its biggest and most consequential ally doesn’t freeze military support. That would be devastating for the country, which has been at war for nearly three years after Russia’s full-scale invasion on Feb. 24, 2022.

The idea also comes at a time when reliable and uninterrupted access to critical minerals is increasingly hard to come by globally.

What is the state of the Ukrainian minerals industry?

Ukraine’s rare earth elements are largely untapped because of the war and because of state policies regulating the mineral industry. The country also lacks good information to guide the development of rare earth mining.

Geological data is thin because mineral reserves are scattered across Ukraine, and existing studies are considered largely inadequate. The industry’s true potential is clouded by insufficient research, according to businessmen and analysts.

In general, the outlook for Ukrainian natural resources is promising. The country’s reserves of titanium, a key component for the aerospace, medical and automotive industries, are believed to be among Europe’s largest. Ukraine also holds some of Europe’s largest known reserves of lithium, which is required to produce batteries, ceramics and glass.

In 2021, the Ukrainian mineral industry accounted for 6.1% of the country’s gross domestic product and 30% of exports.

An estimated 40% of Ukraine’s metallic mineral resources are inaccessible because of Russian occupation, according to data from We Build Ukraine, a Kyiv-based think tank. Ukraine has argued that it’s in Trump’s interest to develop the remainder before Russian advances capture more.

The European Commission, the executive branch of the European Union, identified Ukraine as a potential supplier for more than 20 critical raw materials and concluded that if the country joins the 27-nation EU, it could strengthen the European economy.

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What happens next?

Negotiations over a mineral deal between US and Ukrainian officials have deepened in recent days as Kyiv has resisted initial proposals over their lack of specific assurances for Ukraine’s security.

Trump administration officials have pressured Zelenskyy to accept a deal where Ukraine would divert $500 billion in profits from exploited minerals to Washington as compensation for its wartime support.

But Zelenskyy has rejected the offer, saying that while Kyiv welcomes partnering with the US on minerals, he would not sign off on an agreement “that will be paid off by ten generations of Ukrainians.”

In a sign that negotiations on a deal were moving forward, Zelenskyy on Sunday told a forum in Kyiv marking the three-year anniversary of Russia’s invasion that the U.S.’ request for $500 billion had been taken “off the table.”

While US companies have expressed interest in partnering with Ukraine on minerals, striking a formal deal will likely require new legislation, geological surveys and deeper negotiations on specific terms.

It’s unclear what kind of security guarantees companies would require to risk working in Ukraine, even in the event of a ceasefire. And no one knows for sure what kind of financing agreements would underpin contracts between Ukraine and US companies.

With inputs from AP