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Ukraine and the United States have signed a contract for the joint development of the country's mineral resources through a “reconstruction investment fund.”
The February 25th deal was originally obtained by the Financial Times and is much more troubling and cleaned than Washington's original proposal.
Previous mentions on the potential for $500 million in revenue from mineral extraction have been removed. There is also no express guarantee of Ukraine's safety, which Kyiv wanted to share profits from valuable natural resources.
Ukrainian negotiators have been able to narrow the scope of the deal and push back some of the more troubling terms requested by the Trump administration, but some key details have yet to be decided.
Where do the revenue from mineral extraction in Ukraine go?
Kyiv and Washington will establish a “co-investment fund” in which Ukraine pays 50% of all revenues from “future monetization” of natural resources owned by the Ukrainian government.
In theory, the fund will invest in Ukraine's postwar reconstruction and economic development.
Does the US own and manage the fund?
It will be jointly owned and managed by the US and Ukrainian governments, but importantly, further details of ownership and governance will be presented at the later stages of the “fund agreement.” With the opening bid, the US was promoting 100% ownership and full decision-making rights.
Instead, the transaction states that the “maximum percentage of the ownership of the fund's capital” and “decision-making authority” held by the US “to the extent permitted under US law.” This may be because US institutions may face restrictions on participation in such funds.
For example, if you are a US development financing company that controls US interests in the fund, its equity investments will be restricted to 30% ownership of any project under existing law.
Neither the US nor Ukraine can sell shares in the fund without other consents.
Will the proceeds be invested in Ukraine or will they be paid to the US?
This is also vague and will be determined in the fund agreement.
The transaction states that the fund will reinvest in Ukraine, “promoting Ukraine's safety, security and prosperity, at least each year and year.”
However, it does not provide for all revenue to be reinvested, adding that subsequent fund agreements “providing future distributions.”
Which Ukrainian resources are covered by the contract?
Ukraine has a large amount of important minerals deposited in large quantities, such as lithium, graphite, cobalt, titanium and several rare earths. It also has oil, gas and coal reserves. All of these are subject to the contract as long as they are owned “directly or indirectly” by the Ukrainian government.
However, deposits that have already contributed to the government's financial resources for tax, royalty and licensing fees are not subject to the transaction. This excludes the current operations of Ukranafta and Naphthogaz, perhaps the most advantageous state-owned oil and gas companies of all Ukrainian extraction industries.
The Ukrainian deposits have also undergone no significant research or development. It is a process that takes years even under stable jurisdiction. Additionally, there is a lack of data on the quality of reserves. This is important information for investors before committing to millions of mines to new mines. Most of the deposits are in territory controlled by Russian troops.
Utilizing Ukraine's important minerals requires enormous investment. In theory, funds can fund some of them, but unless the US actually spends money in advance, it starts from scratch. It also takes years for a project to produce taxable operating profits.
Has Ukraine obtained the security guarantee it sought?
US President Donald Trump describes the mineral trade as a way to obtain “recovery” of previous US aid to Ukraine. He wrapped up enormous revenue from the scheme, ranging from $350 billion to $500 million. Given the challenges of commercializing these deposits, it is possible that only a small portion of them will be obtained.
Trump's administration argued that the mere presence of US economic interests on Ukraine was sufficient to prevent future Russian military attacks. President Volodymyr Zelenskyy called for clearer assurances of future US military support in the deal and security guarantees. He didn't get them.
“It doesn't include all the security guarantees Ukraine wanted, but I wanted at least one sentence, mentioning the warranty. That's there,” he said Wednesday.
A senior Ukrainian official involved in the negotiations told the FT that they are under heavy pressure from the Trump administration to finalize the agreement.
They hope that Zelensky and Trump sign in at the White House on Friday will open the door to more detailed discussions on military aid as part of the US president's push to end the Russian war. Masu.
Additional Reports by Joseph Cotteryll
