Unlock the White House Watch watch newsletter for free
Your guide on what the US elections of 2024 mean for Washington and Le Monde
Ukraine and the United States have entered into an agreement on the joint development of the country’s mineral resources thanks to a “reconstruction investment fund”.
The agreement, dated February 25 and obtained for the first time by the Financial Times, is much less expensive and sweeping than the initial proposal of Washington.
A reference prior to $ 500 billion in possible income from mineral extraction has been abandoned. There is also no explicit American guarantee of Ukrainian security that kyiv wanted in exchange to share the benefits of his precious natural resources.
While the Ukrainian negotiators were able to reduce the scope of the agreement and repel some of the most expensive terms required by the Trump administration, several crucial details have not yet been decided.
Where are the income of Ukrainian mineral extraction?
kyiv and Washington will set up a “joint investment fund” in which Ukraine will pay 50% of all income obtained from the “future monetization” of natural resources belonging to the Ukrainian government.
In theory, the fund will invest in the rebuilding and economic development of Ukraine’s post-war period, potentially in all sectors, not only natural resources.
Will the United States be owners and will they control the fund?
He will be held jointly and managed by American and Ukrainian governments, but above all, more details on property and governance will be marked at a later stage in a “fund agreement”. In its opening offer, the United States had pressure for 100% property and complete decision rights.
Instead, the agreement indicates that the “maximum percentage of property ownership of the fund” owned by the United States and “the decision-making authority” will be “to the extent allowed under American laws ». This may be due to the fact that American agencies can face limits in their participation in such a fund.
For example, if it was the US Development Finance Corporation managing American interest in this fund, under existing legislation, its equity investments would be capped at 30% of ownership of any project.
Neither the United States nor Ukraine will be able to sell any share of the fund without the consent of the other.
Will income be invested in Ukraine or paid in the United States?
This is also vague and will be decided in the fund agreement.
The agreement indicates that the fund will allow and reinvest incomes “at least per year in Ukraine to promote the security, security and prosperity of Ukraine”.
But it does not stipulate that all income will be reinvested and this adds that the subsequent fund agreement “provides for future distributions”.
What Ukrainian resources are covered by the agreement?
Ukraine has large deposits of critical minerals, including lithium, graphite, cobalt, titanium and some rare land. It also has oil, gas and coal reserves. All these elements are covered by the agreement – as long as they are detained “directly or indirectly” by the Ukrainian government – as well as associated logistics.
However, the deposits that already contribute to government chests in taxes, fees or license fees are not covered by the agreement. This would exclude the current operations of UKRNAFTA and NAFTOGAZ, the oil and public gas companies, which are perhaps the most lucrative of all the extractive industries of Ukraine.
Ukraine’s deposits have also not suffered from exploration or significant development – processes that take years, even under stable jurisdictions. There is also a lack of data on the quality of reserves, which is crucial information for investors before committing millions in new mines. A large proportion of deposits are in a territory controlled by the Russian forces.
The exploitation of critical minerals in Ukraine would require large investments. The fund could, in theory, finance some of them, but it will start from scratch unless the United States really put money in advance. Projects would also take years to generate taxable operating profits.
Has Ukraine obtained the security guarantees he asked for?
US President Donald Trump described the mineral agreement as a means of obtaining a “return on investment” for help in the previous United States in Ukraine. He has banned large program gains, from $ 350 billion to $ 500 billion. Given the difficulties of marketing these deposits, it is likely to produce only a fraction of this.
Trump’s administration argued that the simple presence of American economic interests in Ukraine would be sufficient to prevent future Russian military aggression. President Volodymyr Zelenskyy demanded clearer guarantees of future US military assistance and security guarantees in the agreement. He didn’t get them.
“It does not contain all the security guarantees that Ukraine wanted, but I wanted at least one sentence mentioning guarantees-and that’s it,” he said on Wednesday.
High Ukrainian officials involved in negotiations told the FT that they had suffered immense pressure from the Trump administration to finalize the agreement.
They hope that when Zelenskyy and Trump will sign it on Friday in the White House, it could open the door to more detailed discussions on military assistance and additional guarantees as part of the US president to end the war Russia.
Additional reports by Joseph Cotterill
