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Padmashree Anandhan
4 May 2025 |
The following note was first published as a part of The World This Week #308 &309 Vol 7 Nos 17 &18, 04 May 2025
What happened?
On 30 April, the US Treasury Secretary and Ukraine’s Economy Minister signed the critical minerals deal. According to Reuters, the deal includes the creation of the joint fund, in which Ukraine would receive half the profits. The agreement also includes providing the US with preferential access to any new Ukraine resources deal, but there will be no direct control over Ukraine’s minerals and natural resources.
On 01 May, Senior Russian security official Dmitry Medvedev said: “Trump has broken the Kyiv regime to the point where they will have to pay for U.S. aid with mineral resources.” "Now they (Ukrainians) will have to pay for military supplies with the national wealth of a disappearing country."
On 01 May, Ukraine’s President Zelenskyy announced finalising of minerals agreement with the US as a “historic” and significantly improved deal. He described it as an “equal partnership” to invite major investments, industrial modernization, and legal reforms in Ukraine.
The US-Ukraine agreement establishes a jointly managed Reconstruction Investment Fund to plough future incomes from Ukraine’s natural resources—such as critical minerals, oil, and gas—into post-war recovery and economic growth. Under a revenue-sharing model, Ukraine will contribute 50 per cent of net earnings from new resource projects, while present resource revenues are expected to protect current industries. The US pledges long-term financial support to Ukraine’s economy. However, the deal excludes explicit security guarantees, a concern for Ukraine given its anticipations for tougher assurances in exchange for giving resource access.
What is the background?
First, Ukraine’s minerals and its significance. Ukraine holds vast unexploited reserves of critical minerals including graphite, titanium and lithium. The US need them for developing its renewable energy, military technology, and infrastructure. They are essential for electric vehicle batteries, semiconductors, and military technologies. Ukraine holds about 20 per cent of global reserves. While most of these resources continue to be undeveloped and rare earth mining is not yet commercially operative, their strategic worth has grown amidst global supply chain worries and efforts to lessen dependency on China’s mineral supremacy.
Second, Trump’s push for the deal. His interest in a deal with Ukraine emerges from the need to secure access to Ukraine's unexploited critical minerals. Thereby, through collaboration, Trump can decrease US dependency on China for strategic resources, aligning with his economic agenda and “America First” policy.
Third, the difficult road to the deal. During October 2024 to April 2025, several high-level meetings were held between the US and Ukraine to finalise the framework of the deal. The negotiations began in the US in October 2024 where Ukraine’s ministers of energy and economy met with members of Trump’s foreign policy advisory team. A working group session in Kyiv in December 2024 was convened, discussing the resource valuations, revenue-sharing terms, and the structure of the proposed Reconstruction Investment Fund. In January, Zelenskyy and Trump met in private in Geneva during a regional security conference, which served as a key moment in aligning political intentions with economic terms. Throughout February and early March, additional technical negotiations were held to draft legal frameworks and simplify the omission of existing resource revenues. The rebuttal in the Oval Office between Trump and Zelenskyy stalled the talks. The final meeting held in April 2025 at the Vatican, where Trump and Zelenskyy met and aimed at settling existing disagreements, especially for security guarantees and governance of the investment fund.
What does it mean?
First, the deal assures Ukraine’s long-term reconstruction effort and economic stability. The signing of the deal marks a shift in the US’s approach to prioritize Ukraine’s economic recovery over military aid. Although the deal lacks a clear security guarantee, it is a step away from defence support. This would weaken Ukraine's position in the negotiation for peace and boost Russia’s position for its continued resistance against the West’s military. However, Ukraine’s vast mineral wealth to US investment, the deal would be a deterrent, aiding Ukraine’s economic future.
Second, potential geopolitical tension. The US presence in Ukraine through this deal increases the US influence, positioning it as a key partner in Ukraine's recovery and resource development. While direct military engagement in avoided, it provides a strategic grip in Eastern Europe, opposing Russian aggression and restraining European dominance in Ukraine’s reconstruction. Therefore, such increased economic engagement could heighten tensions with Russia, which may perceive it as further US intrusion, intensifying the geopolitical divide.
About the author
Padmashree Anandhan is Project Associate at NIAS
