The Mineral Deal: Benefits and Risks for Ukraine

On May 8, 2025, the Verkhovna Rada, the national parliament of Ukraine, ratified an agreement with the USA setting up a joint investment recovery fund, referred to as “the mineral deal” in the media. On May 12, the Ukrainian president signed the document into law. According to its terms, Ukraine undertakes to allocate 50 percent of the revenues from new licenses for natural resource extraction to the joint fund. The document does not specify the extent to which the USA will contribute, except for an initial contribution of $25 million and possible future military assistance.

The Deal’s Background

The deal on the distribution of revenues from Ukrainian mineral resources has had a history of tense negotiations under heavy pressure from President Trump’s administration. The American demands have been compared to reparations paid by the losing side to the winners in a war, and described as “extortion” and “blatant colonial exploitation” that would deal a fatal blow to Ukraine’s sovereignty.

Trump spoke about Ukraine’s alleged debt for weapons and financial aid supplied by the previous US administration, citing an estimate of 300 billion dollars. According to him, the resource agreement was necessary to compensate the United States for these expenses. The Ukrainian authorities objected that no account had been taken of the fact that the bulk of military aid received from the Biden administration since 2022 was in non-refundable grants.

Ukraine estimates the amount of US assistance since February 24, 2022, at $90 billion. The Institute for World Economics in Kiel estimated US aid to Ukraine at about $127 billion.

The situation grew even more absurd because the idea of extracting rare earth metals was presented to Trump by the Zelensky administration itself. The “Victory Plan” published by the Office of the President in the fall of 2024 offered strategic partners, primarily the United States, the opportunity to conclude “a special agreement on joint protection of the country’s critical resources, joint investment and use of its economic potential.” The text referred to “natural resources and critical metals worth trillions of dollars. In particular, these include uranium, titanium, lithium, graphite and other strategically valuable resources that provide a significant advantage in global competition.”

President Zelensky, keen on making quick and dramatic decisions, probably hoped to entice the new administration to continue military and financial assistance to Ukraine. However, as is often the case with hasty decisions, their long-term consequences fell short of the original intent. Ultimately, Trump made the continuation of the Ukraine-U.S. military partnership — vital for the country on the battlefield — contingent on the mineral deal.

Although the deal does not correspond to Trump’s original design and Ukraine does not have to recognize the non-existent debt, the investment partnership set forth by the deal effectively requires Ukraine to share its future revenues from resource extraction with the United States.

‍Key features

The agreement sets up a joint fund whose architecture, according to the Ukrainian negotiator, Deputy Economy Minister Taras Kachka, “does not fully fit into the government’s framework,” being “appropriate in the corporate world.”

For this reason, according to the official, the parties have split the arrangements: there is a framework agreement containing general principles and ratified by parliament, and additional, technical accords to be concluded between the Ukrainian Public-Private Partnership Agency (the “PPP Agency”) and the US International Development Finance Corporation (the DFC).

It is the supplementary agreements that regulate key issues such as fund management, contributions by the parties, and revenue and profit sharing. But unlike the framework agreement, they are not subject to ratification by parliament and are not yet available to the public.

Ukraine will contribute to the fund 50% of the revenue from rent and license payments received from both new licenses and “dormant licenses.” The latter category includes deposits that have not been exploited for the past ten years or in which no more than 1% of the reserves has been mined.

Put simply, when Ukraine issues new extraction licenses, companies pay a one-time fee. The exact amount depends on the type of resource, the site location, and the bidding terms. Rent is a regular tax companies pay for the actual extraction of minerals. The rates depend on the type of resource and the amount of extraction. Before the full-scale Russian invasion, an average of 104 licenses were issued per year. In 2021, the state and the local communities budgets received UAH 82 billion in rent payments ($3 billion at the average exchange rate for 2021).

Now half of the money from the new licenses will go to the fund. According to Kachka’s estimates, Ukraine’s tentative contributions to the fund will amount to “about 1-2 billion hryvnias per year” ( $25-50 million at the current exchange rate).

The agreement covers a wide range of critical resources, including rare earth minerals (e.g., neodymium, lanthanum), strategic metals (such as lithium, titanium, cobalt), and hydrocarbons, including oil and natural gas. The full list includes 57 minerals and can be expanded by mutual agreement. The deal does not cover production and revenues from other minerals such as coal, sand, crushed stone, and granite. It also does not apply to revenues from Ukrainian infrastructure, state-owned enterprises, and nuclear power plants, as Washington initially insisted.

The United States will initially contribute about $25 million to launch the fund. But most importantly, the United States will be able to convert the value of any future military assistance into fund shares. It is assumed that these shares will give the United States priority in profit distribution. Thus, the more military aid Washington provides to Ukraine, the greater will be its share of the dividends received from the fund’s activities. Kachka calls it “an additional incentivizing tool” to motivate the United States to support Ukraine militarily.

Right of first refusal

As agreed, the fund is granted priority rights when considering new licenses for the extraction of natural resources covered by the agreement. This means that all state agencies issuing licenses will have to include an obligation to inform the fund of potential projects and investment opportunities in their terms and conditions.

If the fund is interested in a proposal, the licensee would be required to enter into negotiations with the fund, following the procedures described in the supplemental limited partnership agreement. The text of this document has not yet been made public. If the fund is not interested, the licensee will not be able to conclude a deal with a third party on terms more favorable than those that could be offered to the fund.

In other words, the fund receives an exclusive advantage to participate in investments in the development of Ukraine's mineral resources and access to the most attractive terms and conditions. Moreover, all future licenses to extract the resources specified in the agreement will have a special provision: DFC or its designated entity will be the first to buy back the extracted resources during the entire term of the license.

The buyback shall be done at market prices on a commercial basis. If DFC refuses to buy, the licensee agrees not to sell the resources to other buyers on more favorable terms for a certain period of time (presumably six months).

Just before the deal was ratified, Ukrainian prime minister Denys Shmyhal assured that Ukraine was able to assert parity in the fund’s management (there were to be three Ukrainian and three US managers) and would not be subject to US law in case of disputes.  

Leaks in the Ukrainian press tell a different story: additional “technical” agreements give the American side an advantage in the fund’s key management structures, while Ukraine could possibly lose its voting rights if the deal’s terms are violated. Thus, Ukraine transfers control over future revenues and access to its mineral resources in perpetuity through an opaque mechanism. In return, it receives potential investments into resource extraction and a mechanism to convert future military aid into profits for the United States.

Potential gains

The fund can attract capital to develop its natural resources. This is of critical importance, but given that the agreement covers new and idle deposits, the actual launch of production and revenue generation is a matter of decades.

The agreement ties US economic interests to Ukraine and creates a formal mechanism linking future military aid to an increase in the US stake in the fund. But this is only an incentive, not a guarantee that such assistance will be provided.

On the positive side, since only new and dormant licenses are affected, Ukraine’s current budget is not directly affected. The losses relate to potential revenues from future projects.

Potential risks

The key problem with the mineral deal is that Ukraine has effectively lost sovereignty over future strategic resources. The indefinite transfer of control over the most promising future licenses through “right of first refusal” and exclusive rights to buy back raw materials means that Ukraine is limiting its sovereignty in managing critical national assets and selecting investors for decades to come.

Fifty percent of revenues from new projects will go to the fund rather than to the state budget. In the long term, this is a direct financial loss from the most valuable future extractions. The fund’s revenues will not be taxed, as the institution will receive the standard tax benefits for international financial institutions under Ukrainian law.

The inaccessibility of key managing documents makes the fund a “black box.” This creates risks of malpractice and decisions made to the US advantage. The mechanism of converting military aid into fund shares means that the more aid that is received, the greater the US share in the future mineral revenues.

Transferring control over the extraction and primary sale of raw materials to foreign capital increases the risk that Ukraine will remain a supplier of raw materials without developing its own high-tech processing and production based on these resources. This is what economists call the “raw materials curse.”

The inability to unilaterally withdraw from the agreement or to do anything that might worsen the US investment position limits Ukraine’s potential to adapt to the changing global environment or its domestic needs in the future.

Disputes on the corporate side will be resolved through arbitration rather than in national courts, which also reduces transparency and control on the part of Ukrainian society and the state. 

The agreement formally covers the entire territory of Ukraine, including the occupied territories, but the fund’s operational activities will depend on the actual situation, adding an element of uncertainty regarding assets in the disputed territories.

Ukrainian officials predict that the payoff from the fund’s operations will not be realized until at least ten years from now. This means that the current urgent need for funding and investment will not be satisfied by the revenues from this deal in the foreseeable future.

Security guaranties? None

The mineral deal, Trump argued, is itself a guarantee for Ukraine. According to him, no one would attack Ukraine as long as America is present there. 

To understand whether this is true, it is enough to mention that US companies were operating in Ukraine both in 2014, when Russia annexed the Crimean peninsula and destabilized Donbass, and in 2022, when the full-scale invasion began. Fourteen companies with American owners were already involved in Ukrainian mineral extraction, but their presence did not prevent the Russian army from advancing on Ukrainian territory.

The ratified agreement contains no provisions on mutual defense, military assistance (other than an indirect mechanism for converting its value into shares in the fund), or collective security. Attempts to present this economic agreement as a security guarantee are nothing more than political rhetoric unsupported by the text of the document. 

Real security guarantees for Ukraine would be permanent arms supplies, training, sanctions against the aggressor, strong political alliances, and possibly future integration into collective security systems. They are not gained by transferring control over future mineral revenues to an opaque fund whose real profitability and benefits for Ukraine are set in the very distant future.

Choice without an alternative

In 2021, Zelensky proposed to allocate revenues from mineral extraction to the individual accounts of Ukrainian children. These funds were supposed to be used upon reaching adulthood to pay for education, housing, or medical treatment. The first payments were supposed to start in 2036. Now this idea has been forgotten, and the authorities are unlikely to return to it as long as the resource agreement with the United States is in force.

Amid a war of attrition, Ukraine had to agree to the deal under tremendous pressure, with tight negotiating deadlines. Resistance to Russian aggression requires huge sacrifices and constant external assistance. The mineral deal, although it poses a long-term risk of economic dependence, is the tough price the country is paying to save itself from military defeat and occupation.

The open-ended nature of the agreement, its lack of transparency in key details (hidden in supplementary agreements), the transfer of control over the most promising future assets for potential benefits deferred for decades, and the mechanism of linking military aid to future extraction profits are serious compromises. They risk perpetuating Ukraine’s role as a resource periphery, where profits from national wealth go into the pockets of foreign capital, even if that capital comes under the guise of “investment in reconstruction” and “ incentives” for life-saving aid.

This is the war’s tragic paradox: fighting for freedom and sovereignty on the battlefield, a country is forced to make concessions that may limit this sovereignty in the economic sphere for years to come, handing over the keys to its underground riches.

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