Why is Ukraine negotiating a minerals deal with the US?

Kyiv and Washington are close to signing a deal over US access to Ukraine’s mineral deposits, a Ukrainian minister says.

Olga Stefanishyna, deputy prime minister for European and Euro-Atlantic integration, said on X that “negotiations have been very constructive, with nearly all key details finalised”.

She added that “we are committed to completing this swiftly to proceed with its signature”.

Zelensky first included the offer of an agreement on minerals in the so-called “victory plan” that he presented to Trump last September.

The idea was to offer the then presidential candidate a tangible reason for the US to continue supporting Ukraine.

On Monday former UK prime minister Boris Johnson told the BBC in Kyiv that such a deal was “the great prize” because it would secure “a United States commitment under Donald Trump to a free, sovereign and secure Ukraine”.

Kyiv estimates that about 5% of the world’s “critical raw materials” are in Ukraine. This includes some 19 million tonnes of proven reserves of graphite, which the Ukrainian Geological Survey state agency says makes the nation “one of the top five leading countries” for the supply of the mineral.

Graphite is used to make batteries for electric vehicles.

Ukraine also has a third of all European lithium deposits, the key component in current batteries. And prior to the Russian invasion, Ukraine’s global share of titanium production, a lightweight metal used in the construction of everything from aeroplanes to power stations, was 7%.

Further, Ukraine has significant deposits of rare earth metals. These are a group of 17 elements that are used to produce weapons, wind turbines, electronics and other products vital in the modern world.

Some of the mineral deposits, however, have been seized by Russia. According to Yulia Svyrydenko, Ukraine’s Minister of Economy, resources worth of $350bn (£277bn) remain in occupied territories today.

In 2022, SecDev, a geopolitical risk consultancy based in Canada, conducted an evaluation, which established that Russia had occupied 63% of Ukrainian coal mines, and half of its manganese, caesium, tantalum and rare earth deposits.

Dr Robert Muggah, principal of SecDev, says that such minerals add a “strategic and economic dimension” in Russia’s continued aggression. By seizing them, he says, Moscow denies access revenue for Ukraine, expands its own resource base and influences global supply chains.

Critical minerals “are the foundation of the 21st century economy,” Dr Muggah explains. They are key to renewable energy, military applications and industrial infrastructure. They play “a growing strategic role in geopolitics and geoeconomics”.

Additionally, the US is keen on a deal for Ukraine’s mineral resources because it wants to reduce dependency on China, which controls 75% of rare earth deposits in the world, according to the Geological Investment Group.

In December China banned the export of some rare earth minerals to the US, having previously limited mineral exports to the US the previous year.

Prior to Stefanishyna’s assertion that a deal was close, there appeared to be several sticking points.

Last Wednesday, Zelensky rejected US demands for a reported 50% share of its rare earth minerals – which Trump said would reflect the amount of aid the US had provided to Ukraine during its war with Russia.

“I can’t sell our state,” he said.

The provisions of a second draft of the deal on Sunday appeared to be even tougher than in the first document.

Instead of 50/50 revenue split, the revised draft suggested the US wanted full control, Zelensky told journalists at the press conference on Sunday.

Zelenzky is also said to want any deal to include security guarantees.

On Monday former UK prime minister Boris Johnson called an agreement for US access to Ukraine’s minerals “the great prize”.

He rejected suggestions the deal was a “rip-off” and said “what the Ukrainians get from this is a United States commitment under Donald Trump to a free, sovereign and secure Ukraine”.

Some commentators have described the US offer as “colonial” but Kyiv is interested in joint exploration of its resources.

Developing these mineral resources is extremely difficult and expensive, says Iryna Suprun, chief executive of the Geological Investment Group, a mining advisory firm based in Ukraine. She argues that if they can attract American investors to develop their natural resources, it will be highly beneficial for the country’s economy.

“We will get technologies that our mining industry lacks so much,” Ms Suprun explains. “We will get capital. That means more jobs, tax payments. We’ll receive revenue from the development of mineral deposits.”