The Minerals Deal with the US: A Boon or a Bane For Ukraine?

On February 28th, 2025, US President Trump and his Ukrainian counterpart Volodymyr Zelensky met at the Oval Office, scheduled to sign the minerals deal that could have been the first step towards a ceasefire. Yet, the meeting soon spiralled into a fiery exchange as the two leaders shared divergent views on the pathway towards peace, and the signing of the minerals deal was subsequently cancelled. While there have been intense discussions on who is responsible for this diplomatic disaster, this passage aims to step outside moral judgment and analyse, from a realist and historical lens, whether the mineral deal could serve Ukraine's interests.

To begin with, the minerals deal could bind American interests to Ukrainian soil, strengthening the country's future involvement in European peace. Recent research reflects that a considerable proportion of the American population perceives that the former Government's support of Ukraine has no impact on or even undermines the national security and interest of the country. This indifferent attitude is likely due to the lack of American business presence in Ukraine, as data shows a mere 530 million USD in foreign direct investment from the US in 2021. Yet, with the proposed terms, American and Ukrainian enterprises will form a partnership in mining rare earth minerals, and the two countries will establish a Reconstruction Investment Fund to manage the profits. The investment could bundle American interest with Ukraine's socio-political circumstances. This will prompt American enterprises, media, and the public to exert more pressure on the authorities to maintain peace in Ukraine, thereby protecting their economic interests. The increased American involvement could, therefore, be more likely to deter future Russian aggression.

It is understandable that from Ukraine's perspective, the direct military involvement of the US may be a more concrete security commitment. However, history reminds us that in the eyes of small nations, building close economic ties with strong powers is sometimes more effective than forming military alliances in maintaining peace. Before the outbreak of WWII, Poland formed military alliances with France and the UK. The country was guaranteed that in case of a Nazi invasion, Poland would immediately receive military assistance from these two powers. Yet, following Germany's invasion on September 1st 1939, France and the UK were reluctant to provide timely and wholehearted support as they did not want to draw themselves into an unprepared war. The Western betrayal suggested that military commitment may not be the best option for small nations to achieve lasting peace, as protecting and maximising its interest are the code of survival for every country in the jungle-like international community.

On the other hand, Switzerland, a small central European state without a powerful military force, managed to avoid the war due to its strong economic ties with the Allies and the Axis powers. During the war, the Swiss National Bank continued to perform gold transactions for the belligerent states. The country also exported strategic raw materials and dairy products to the Allies and Axis powers. The close economic relations made these warring countries reluctant to attack Switzerland, which would undoubtedly hamper their interests. Indubitably, contemporary Ukraine can hardly fully imitate the Swiss model as the two countries share distinct economic systems and topography. Nevertheless, Ukraine could take the minerals deal as an opportunity to introduce American, European, and, if necessary, Russian capital into its market. Together with the EU's commitment to send peacekeeping forces after the ceasefire, Russia may incur more costs in future attacks against Ukraine.

The minerals deal will also allow Ukraine to undergo a faster post-war recovery than Russia. Under the agreement, Ukraine will contribute half of its revenues gained in the project to the Reconstruction Investment Fund, which will be used for rebuilding its infrastructure. It is also likely that the war-torn country will continue to receive loans and subsidies from the EU, under the Ukraine Facility, for its reconstruction and rearmament. On the contrary, Western economic sanctions will likely remain even with a peaceful settlement in Ukraine, according to the estimation of a high-ranking Russian official. Other studies also suggested that the Russian military may need at least a decade to recover to its pre-war level. These suggest that the possible ceasefire brought by the minerals deal could put Ukraine in an advantageous position regarding post-war recovery.

There are, nevertheless, valid concerns over the possible American economic colonisation in Ukraine. Partnering with the US might indicate a loss of Ukrainian control over its critical resources. However, it should be noted that more than 40% of Ukraine's rare earth elements are located in the Russian-occupied zones. Furthermore, the lack of capital and skills may make it difficult, if not impossible, for the country to access these strategic raw materials by its sole effort. Hence, introducing foreign investment and partnership may be one of the few remaining options for the nation to raise capital for post-war reconstruction.

The Trump-Zelensky meeting on February 28 was unquestionably a diplomatic disaster. President Trump may well demand more from the Ukrainian side in future mineral deals as compensation for being, according to his rhetoric, “insulted.” Ukraine might have missed the best time to achieve peace with an advantageous position. Nevertheless, this lesson reminds us that international politics is never a fairyland. Instead, it resembles more of a cruel jungle, where beasts strive to survive and maximise their interests at all costs.

Image: Wikimedia Commons/The White House

Licence: public domain.

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