The wider benefits of a US-Ukraine “rare minerals” deal

President Trump’s approach to foreign policy is one of give and take; a zero-sum game of winners and losers. In his mind, the United States has been on the losing end of unbalanced deals, with foes and allies alike bracing for the prospect of retaliatory actions.

In light of this mentality, the most important question is where does this leave Ukraine? Trump is yet to make good on his promise to end the war in 24 hours. However, there have been indications that the US may in fact increase its military support in a bid to bring Russia to the negotiating table and bring the conflict to an end – once and for all.

But this continued US support will come at a price, with Trump recently floating the idea that additional aid will be based on the US’s ability to access “rare earth” minerals – such as lithium, gallium, and neodymium - which are key components in the manufacture of everyday electronics such as computers, smart phones, electric cars, and even advanced defence systems.  

Ukraine’s willingness to accept a deal whereby US mining firms receive preferential access seems a relatively small concession for continued military support. However, it is not the first time the idea has been suggested, with the possibility of such access explored in 2021.

Dymtro Sennychenko, the former Head of the State Property Fund of Ukraine between 2019 and 2021, had been responsible for pursuing such initiatives in Ukraine. As part of his role, Sennychenko was looking to sell many state-owned assets, preferably to US companies, that had previously been managed by the Ukrainian public sector. One of the companies (United mining and chemical company) has 4% of the world reserves of titanium ore. For him, a former management consultant, foreign investors would bring both the necessary funding, technical expertise, and would be less likely to engage in bribery or other corrupt measures.

Although often positioned as a bastion of liberal democracy, Ukraine still contains some severe hangovers from the Soviet era. Prior to the election of President Zelensky, and the onset of the conflict, much of the country was dominated by oligarchs who maintained control of the country’s major industries, including mining and manufacturing.

Corruption was part and parcel of everyday business life, and the country suffered as a result. If Ukraine is to rebuild back stronger, with a more robust economy, and align itself more closely with western countries, it will need to introduce far reaching reforms that improve the manner in which business is conducted in Ukraine.

Reformers, such as Sennychenko are now being prosecuted by Ukrainian authorities - believed to be politically motivated, and the deaths of two former Heads of the State Property Fund who died in suspicious circumstances are now treated as murders. All of this suggests that the oligarchy continues to maintain a grip on Ukraine, using similar tactics to those often seen in Russia.

The sale of mineral deposits to US mining firms and potential refinement in the country brings multiple benefits to both sides. For Ukraine, an injection of capital into a ravaged economy will be very much needed post conflict. US technical skills and expertise will allow a new industry to grow, particularly as many of its former industrial factories are now in Russian hands. In addition, the presence of a US firm, with potential US government backing, will make Russia think twice about any further aggression into Ukraine, lest they kill or injure US citizens.

For the US, there is the obvious economic benefits for the chosen mining companies, who can expect to see continued future demand for rare earth minerals. An agreement could be worth trillions of dollars according to current prices for the minerals.

The deal would also please Trump’s base, who would welcome further jobs being created in the United States, particularly if manufacturing companies decide to onshore their production facilities in the US, most notably benefitting the automobile and technology industries. The Trump administration can hold this up as a major political success, allaying fears at home of US funding for Ukraine, including many within his own party such as Vice President JD Vance.

For now, military aid and direct budgetary assistance to Ukraine is so far exempt from the pause on US foreign aid programme, but this is not the case for USAid, the US Government’s development agency, who has so far disbursed more than $7.6bn to Ukraine since the start of the conflict.

The US-Ukraine rare earth deal suggests that there is hope for continued US military support for Ukraine. This will also bring greatly needed reform to Ukraine’s economy, improve how business is conducted, and provide a level of security for the population as the nation rebuilds. For US firms will bring a strong ethical code for conducting business without corruption, based on maximising efficiency and revenue.