There is no minerals deal
The world is chasing its tail over something that exists solely to soothe Trump
It’s been widely reported that the Ukraine “minerals deal” has its origins in an idea dreamed up by Volodymyr Zelenskyy to try to give the US a tangible reason for continuing to support Ukraine. Clearly it lodged in Trump’s mind as a ‘beautiful deal’ and it morphed to the point where Trump’s Treasury Secretary Scott Bessent was dispatched to Kyiv to demand $500 billion worth of minerals from the Ukrainians. As anyone who has read the supposedly final version of the deal will know, it has ended up being a joint reconstruction fund, with no numbers contained and no security guarantees attached. Nonetheless, its signing is seen as a key hurdle that needs to be crossed for the United States to consider supporting Ukraine in the future. In addition it is argued that the presence of American businesses on the ground in Ukraine will deter any future Russian attacks.
We can dismiss the latter point immediately: there were plenty of American businesses on the ground in Ukraine in 2014 and in 2022. These did not prevent Russia from invading Ukraine. But let’s look more closely at the presence of critical minerals and the prospect of monetising these for the benefit of US businesses (and also to pay for Ukraine’s reconstruction). I spoke today to someone who is an expert in geological resources exploration in the post-Soviet countries. He told me that Ukraine’s reserves of critical minerals need a lot of work for their presence and quality to be proven. Notably, Ukraine has the largest lithium reserves in Europe, but none of these have been tapped as yet. Ukraine’s rare earth deposits are even less well understood. Setting aside the question of territorial control (many of these minerals are in areas under Russian occupation so would not be covered by the minerals deal which specifically requires the Ukrainian government to partner in the exploitation), we are talking about mineral deposits that are many years and hundreds of millions of dollars away from being close to commercial extraction. And, as with all mining exploration, it is entirely possible that hundreds of millions of dollars will be spent and nothing of commercial value found at the end of it.
In addition, there are many other places in the world where such deposits are much closer to being ready for commercial exploitation. Why would miners flock to a war-torn country with uncertain political conditions when they can more easily get minerals in more straightforward and predictable settings? Finally, commodity prices make mining a difficult business. Lithium prices are currently at one of their lowest levels in recent years, having fallen 80 per cent from a peak in 2022, in response to oversupply and sagging demand for EVs. There are no circumstances in which there is going to be a rush for Ukrainian lithium of uncertain quality and quantity, whether or not Trump and Zelenskyy sign their deal. The same can be said for Rare Earths.
Since Trump doesn’t do details, I doubt he understands any of this, preferring to think there is money underground in Ukraine waiting to be dug up. If the deal were signed and a small trickle of mining prospectors came to Ukraine, it’s hard to imagine their marginal presence would act as much of a deterrent to Russia. Hence Zelenskyy’s insistence on security guarantees. The minerals deal is really a red herring.