President Donald Trump is on the cusp of finalising a deal with Ukraine, granting the U.S. preferential access to the country’s vast raw material reserves. However, the true value of these reserves is shrouded in uncertainty, as estimates are based on outdated Soviet-era surveys that failed to account for the feasibility and cost of developing these resources.
The latest draft of the agreement cited in Economic Pravda, a Ukrainian newspaper, stipulates that Ukraine will allocate 50% of its state-owned natural resource revenues to a fund dedicated to invest in Ukraine. Notably, this deal does not include any U.S. security guarantees. On paper, the U.S. appears poised to reap significant benefits from this agreement, considering Ukraine’s natural resources and environment ministry claims that the country’s bedrock contains approximately 5% of the world’s critical raw materials.
These resources, including graphite, lithium, titanium, beryllium, and uranium, are crucial for the production of batteries, radar systems, and armour, which are essential to the defense and tech industries. Securing access to these resources could help reduce America’s reliance on Chinese minerals. However, the actual extent of Ukraine’s mineral wealth remains a mystery, with only around 8,000 of the country’s 20,000 surveyed mineral deposits and sites deemed viable.
The development of these resources is further complicated by the need for significant investment, estimated at $15 billion for the 10 largest known mining prospects. This includes the construction of mines, quarries, and processing facilities. Moreover, the extraction process is expected to be costly and time-consuming, with the Ukrainian Geological Survey estimating that developing the Novopoltasvke deposit, one of the largest rare earth sites in the world, would require an investment of $300 million.
China currently dominates the rare earth supply chain, processing nearly 90% of the world’s rare earths. The U.S. and other major producers lack the necessary infrastructure and expertise to refine these minerals, forcing them to rely on Beijing. Developing this infrastructure in Ukraine would take years and likely be less efficient than shipping the minerals to China for processing.
The deal is also complicated by the fact that several promising mineral prospects are located in territories under Russian occupation. Ukrainian Deputy Prime Minister Yulia Svyrydenko estimates that Russia has occupied $350 billion worth of Ukraine’s critical mineral and gas reserves. Trump must now decide whether to increase support for Ukraine and help the country reclaim its occupied territories or pursue an alternative deal with Russia. As S&P Global notes, extracting Ukraine’s rare earth elements might not be profitable due to the technical challenges and costs involved.