U.S. and Ukraine Sign Mineral Rights Deal After Months of Negotiations

What Happened?

The deal creates the ‘United States – Ukraine Reconstruction Investment Fund’ and includes some significant language towards Russia. Specifically, the new agreement stipulates that ‘no state or person who financed or supplied the Russian war machine will be allowed to benefit from the reconstruction of Ukraine.’

The new agreement includes provisions about Ukraine’s mineral wealth in addition to oil and gas, though according to the terms, Ukraine will retain ownership while the U.S. will be provided with ‘joint access.’ The text of the agreement also refers to the Russian invasion of Ukraine as the starting point for the current conflict.

Why it Matters

The Trump administration claims in the long run the United States will earn back more than the total amount of aid that has been supplied to Ukraine in the past three years. The deal does grant the United States preferential treatment with respect to the mining and development of Ukrainian natural resources, in return for the creation of the Ukraine Reconstruction Investment Fund.

U.S. Treasury Secretary said, ‘This agreement signals clearly to Russia that the Trump Administration is committed to a peace process centered on a free, sovereign, and prosperous Ukraine over the long term.’ Significantly, the deal's text also says that the United States acknowledges Ukraine's intention to join the European Union and the need for this agreement not to conflict with that.

Ukraine’s First Deputy Prime Minister said their expectation is that for the first decade of the reconstruction investment fund, profits will be ‘fully reinvested in Ukraine's economy’, either in new projects or reconstruction. That specific language does not appear in the text of the deal, though it could be added later. 

Overall, the deal is long on aspirations and goals but short on guarantees. For example, it is difficult to envision how any type of reconstruction work could begin, or be carried out in Ukraine, as long as the war continues. Without an agreement to end the war, it is unlikely any of the terms of the mineral deal could be carried out or enforced anytime soon. 

The deal is also predicated on the continued existence of an independent Ukraine. It’s not difficult to imagine Russian President Putin declaring the deal to be null and void, if Ukraine’s current government collapsed or was overthrown in the future. Still the agreement is a win for the Trump Administration, since President Trump has sought to get a minerals deal for several months. 

How it Affects You

The Trump Administration claims the new deal will provide financial compensation to the United States for the supplies and support it sent to Ukraine. It should be remembered however, that much of the money earmarked for Ukrainian weapons or supplies during the past three years was spent in the United States to pay defense contractors and other vendors. Since taxpayers still footed the bill, if the agreement does generate revenue for the U.S. government then the Trump Administration’s claims will be valid.