Tough Road Ahead with US-Ukraine REE Cooperation Despite the Hype
Critical Unanswered Questions Remain
The US-Ukraine critical minerals deal, signed on April 30, 2025, establishes a 50-50 joint Reconstruction Investment Fund that will finance Ukraine’s recovery and development projects, particularly in mining, energy, and infrastructure.
As described below, if the description above sounds too good to be true, well, it probably is. But depending on one’s perspective, this deal can be taken as a positive where it comes to preconditions (at least between the US and Russia) for a settlement to the Russia-Ukraine war.
But before we get to that, under the agreement, the US is granted preferential-but not exclusive-access to Ukraine’s supposed reserves of critical minerals, including rare earth elements, lithium, titanium, graphite, and uranium, all essential for advanced technologies and green energy. The fund will be managed equally by both nations, with each side appointing three board members and all decisions requiring consensus, ensuring no party has unilateral control. Fifty percent of royalties and license fees from new mineral projects will flow into the fund, which will also be credited with the value of future US military aid, such as air defense systems. For the first decade, all profits will be reinvested in Ukraine, with a focus on economic growth and rebuilding war-damaged infrastructure. Importantly, Ukraine retains full sovereignty over its subsoil, infrastructure, and resources, deciding what, where, and how extraction occurs, and state-owned enterprises remain under Ukrainian control. Two thorny and unresolved questions here: first, how much REE does Ukraine actually have, and second, how much of that (~40%?) is in Russian controlled territory?
Crucially, the agreement does not impose any debt obligations on Ukraine for previous US assistance, a significant shift from earlier US demands for repayment and a point of contention in prior negotiations. The deal applies only to new licenses and projects, leaving existing revenue streams untouched. It also incorporates language affirming Ukraine’s right to pursue EU membership, stipulating that the agreement will be renegotiated in good faith if any terms conflict with EU accession requirements. While the deal signals a long-term US economic stake in Ukraine’s stability and reconstruction, it notably omits explicit US security guarantees, which Kyiv had sought. Instead, it is being framed as a strategic economic partnership designed to anchor American involvement in Ukraine’s future, support its sovereignty, and send message to Russia about continued Western commitment to Ukraine’s independence and recovery. To many (including in Moscow) this message may not be very convincing.
Geopolitical Context
The recently signed agreement on access to natural resources, reconstruction and continued purchases of military equipment is being billed as a new chapter in strategic cooperation but the realities behind the deal are much more complicated. The big winners here are the US and Russia, with Ukraine, the EU and even China on the losing end.
Why is Ukraine on the losing end? First and foremost, Ukraine failed to secure clear security guarantees from the US. US Treasury officials have proposed that the creation of direct US economic interests in Ukraine is equivalent to commitments to Ukraine’s territorial security, but this rings a bit false. After having poured billions of dollars of defense equipment and funding into Ukraine, the US is concerned with what it can get back out (answer: rare earth minerals and some other stuff). Hypothetically, if Russia were to take over the rest of Ukraine and promise to supply the US with as much or more natural resources as it will receive under the new agreement, how would that sit with the Trump administration? Probably just fine. Note that ~40% of the resources in question are in territories currently controlled by Russian forces. Russia won’t be giving them back. So in summary, the lack of clear security commitments from the US (and the EU for that matter) is a compromise from the US to Russia at Ukraine’s expense.
In exchange, it appears that Ukraine will not be obligated to repay prior aid from the US, which is a bit cheeky, because the logic behind prior US aid was that protecting Ukraine’s territorial integrity (and preventing Russia from invading more of its neighbors) was worth paying for without requiring anything in exchange. That was the prior US administration, and the logic of support for Ukraine is now completely transactional via a deal that is essentially a lien on some of Ukraine’s future natural resource revenues.
Second, Ukraine is going to have to accept territorial losses, which also appear to have been more or less negotiated between the US and Russia. Little elaboration required here.
Why does the EU lose out? Recall that the EU signed its own Strategic Partnership on Raw Materials with Ukraine in 2021, aiming to tap into Ukraine’s deposits of lithium, titanium, graphite, and rare earths for its green transition and industrial goals. However, progress on that front was stymied by Russia’s invasion in 2022. The newer US-Ukraine deal on raw materials is clear about priority access to said materials by the US. Will the Trump administration pay any attention to the EU’s 2021 agreement with Ukraine? Don’t hold your breath.
In fact, a secondary headline this morning has been about the EU talking with Russia about new supply arrangements for rare earths and other strategic minerals. This is beyond ironic given that the EU has been struggling to diversify its energy supply away from Russia even through Russia’s latest foray into Ukraine was a reminder that it still has it’s eyes on territory that includes EU member states. Why is this necessary? Because the EU got boxed out by the US in Ukraine and is being cut off of critical mineral supplies from China at the same time.
And for China, any material progress between the US, EU and anyone else on REE cooperation is a negative. But, and this is a big but, it will take years for Ukraine (and others) to develop processing capacity, and this aspect of China’s leverage will remain intact for the time being. It may begin to erode, but regardless of whether miners are in the US, Australia or even Ukraine, they can dig up all they want but there is nowhere else to send it, at least for now.
The Deal
On April 30, 2025, Ukraine and the United States signed an agreement that redefines the contours of their wartime partnership. The deal, years in the making and finalized after months of intense negotiations, grants the United States preferential access to Ukraine’s supposed reserves of rare earth elements and critical minerals while establishing a jointly governed Reconstruction Investment Fund. For Ukraine, the agreement secures economic support without taking on debt obligations. For the United States, it opens a strategic pathway to resources vital for clean energy, defense systems, and high-tech manufacturing.
At the heart of the agreement is the creation of the US-Ukraine Reconstruction Investment Fund, an equally governed body with three board members appointed by each country. Neither side will hold a controlling interest, and all decisions must be made by consensus. The fund will be financed through a combination of royalty contributions from new mining licenses issued by Ukraine and direct financial or military support from the United States, including the transfer of air defense systems and other assistance. For the first decade, all profits from the fund will be reinvested exclusively in Ukraine, with a focus on critical infrastructure and resource development projects. Crucially, Ukraine retains full sovereign ownership of its subsoil and natural resources, with the right to determine extraction sites and conditions.
This arrangement marks a significant departure from previous versions of the agreement, which were heavily tilted in favor of Washington and proposed up to $500 billion in resource-related repayments for past US military aid. Ukrainian President Volodymyr Zelenskyy firmly rejected those earlier terms, stating that he would not accept a deal that would financially encumber future generations. The final version of the agreement eliminates any obligation for Ukraine to repay past support, a critical concession that Ukrainian officials hailed as a diplomatic victory.
While the agreement has no explicit security guarantees, it aligns closely with Ukraine’s aspirations to join the European Union. In fact, the text of the agreement stipulates that any clauses conflicting with EU law must be renegotiated, ensuring compatibility with Kyiv’s EU integration trajectory. Ukrainian officials also expect the deal to catalyze broader foreign investment, particularly from American and European companies, by providing a stable and transparent framework for joint ventures in the mining and energy sectors.
From Brussels, the response has been one of cautious support. The European Union signed its own Strategic Partnership on Raw Materials with Ukraine in 2021, aiming to tap into Ukraine’s deposits of lithium, titanium, graphite, and rare earths for its green transition and industrial goals. However, progress on that front was stymied by Russia’s invasion in 2022. European policymakers are now advocating for a trilateral minerals partnership between the EU, Ukraine, and the United States to avoid fragmentation and ensure cooperative supply chain resilience. The EU’s emphasis on sustainable extraction and circular economic models contrasts with Washington’s focus on rapid access and strategic stockpiling, but both blocs share a common goal: reducing dependency on China, which currently controls more than 75% of the global rare earths market.
Russia, for its part, has denounced the agreement as an act of economic subjugation. Former President Dmitry Medvedev characterized the deal as a forced repayment of Western military aid through the surrender of Ukraine’s national wealth. Kremlin-aligned media outlets have portrayed it as a sign of Ukraine’s desperation and framed the fund as a façade for US economic exploitation. Russian officials have also warned that the agreement could escalate the geopolitical confrontation between Moscow and the West, particularly as several of Ukraine’s most valuable lithium and titanium deposits lie within Russian-occupied territories in Donetsk and Zaporizhzhia.
Obstacles Remain
Indeed, implementation of the agreement faces several hurdles:
First, the deal must be ratified by the Ukrainian parliament, a process expected to begin in mid-May. Procedural delays are likely, and some lawmakers have expressed concern over the transparency and long-term implications of the agreement. The specifics of implementation also have to be negotiated by the US and Ukraine after the deal is formally ratified, and this may not be a smooth process.
Second, Ukraine’s mineral resource data is based largely on Soviet-era geological surveys. Many sites have not been evaluated with modern methods, creating uncertainty around commercial viability.
Third, the ongoing conflict with Russia poses serious security challenges. Roughly 40% of Ukraine’s metal resources and several key lithium and graphite reserves remain in territories currently occupied by Russian forces.
Additional obstacles include regulatory inefficiencies and investor skepticism. Ukraine’s permitting process has long been criticized for opacity and bureaucratic inertia. Land acquisition remains cumbersome, and infrastructure to support large-scale mineral extraction is underdeveloped. Nonetheless, Ukrainian officials estimate that the country’s mineral sector could attract $12–15 billion in foreign investment by 2033, provided these systemic issues are addressed.