A natural resources deal between the United States and Ukraine. Analysis

The United States and Ukraine signed a subsoil agreement on May 1. As part of the deal, a special investment fund will be created, which will direct the proceeds from the development of deposits for the restoration of Ukraine. The new version of the document turned out to be slightly more beneficial for Kiev than the original version, but it still carries risks. For more information about the details of the resource transaction and its significance, see the Izvestia article.

What was included in the deal

• In accordance with the agreement, revenues from the development of new Ukrainian deposits of rare earth materials, precious and non-ferrous metals, as well as oil and gas will flow to an investment fund established by Ukraine and the United States. Ukraine will be obliged to transfer to this fund half of all rent and royalties received by the budget. U.S. military assistance in any form will also be considered a contribution to the fund.

• At the same time, the agreement does not mention the Zaporizhia NPP, which is under Russian control. Kiev insisted that the nuclear power plant be transferred to Ukraine, and the United States considered the option of gaining control of the nuclear power plant as one of the resources under the deal. Obviously, Kiev's demands were rejected when signing the agreement.

• Since the fund is aimed at restoring and modernizing Ukraine, one of the conditions for the implementation of the agreement is to end the conflict. The document published by Ukraine states that each side must complete "its internal procedures" for the deal to enter into force.

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Ukraine's debt

• The Ukrainian side considers its main victory to be the exclusion from the text of the agreement of the requirement to reimburse Kiev for the assistance it has already received from Washington. Earlier, US President Donald Trump insisted that since the US had spent $350 billion to support Ukraine, including arms supplies, the deal should now reimburse these costs.

• The validity of the US claims against Kiev is also confirmed by the document signed by former US President Joe Biden, which expands his powers to help Ukraine. Based on the text of the law, all assistance to Kiev was provided on loan or lease terms. At the same time, Ukrainian President Vladimir Zelensky denied any debt to the United States.

• On the day the agreement was signed, the White House said the deal was designed to protect the U.S. contribution to support for Ukraine. Washington expects that as a result of the agreement it will be able not only to return the invested funds, but also to make a profit.

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Privileges for the USA

• Kiev claims that the new version of the agreement does not provide for a preferential right to develop deposits for American companies. Earlier, Ukraine opposed such a formulation, as it could complicate relations with partners from the European Union. The new version of the document implies that in order for Kiev to fulfill its obligations to the EU, the terms of the agreement can be changed after consultations with the United States.

• The text released by the Ukrainian side states that the partner country should be provided with equal conditions with other investors for the development of deposits in Ukraine. At the same time, the American press says that companies from the United States will receive "privileged access" to Ukrainian resources.

There are no guarantees of safety

• Kiev initially expected to exchange resources for membership in the North Atlantic Alliance or security guarantees from the United States, similar to the fifth article of the NATO Charter. Despite the partnership agreement with the UK, which Ukraine signed in January, so far no European state is ready to send its troops and weapons to Ukraine to repel possible attacks without the guaranteed support of the United States.

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• Trump previously stated that the idea of Ukraine's membership in NATO was the cause of the conflict, and ruled out the possibility of the country joining the alliance. The new US administration insists that Europe must ensure Ukraine's security. The latest version of the agreement between the United States and Ukraine also lacks a provision on security guarantees from Washington. Washington claims that the presence of American investors in Ukraine can already be considered a guarantee of security.

Obligations of the parties

• The investment fund will be registered in the USA, and the account will be opened in Ukraine and replenished in hryvnias. The document stipulates that the budget of Ukraine will be responsible for financial obligations under the partnership. At the same time, there are no such obligations in relation to the United States.

• Ukraine has managed to retain ownership of deposits and state-owned companies that extract and supply resources. Kiev insisted on this also because the privatization of deposits by foreign investors would require amendments to the country's constitution. The Ukrainian side emphasizes that the decision on which fields to develop also remains with Kiev.

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Incomplete set of documents

• The text of the agreements published by Ukraine does not contain details: it is assumed that the mechanism of the fund's work and the allocation of funds will be more clearly spelled out in separate documents. According to the foreign press, they were signed by Ukraine at the same time as the framework agreement. Kiev says that the signing is still pending.

• In order to comply with legal procedures, the framework document must be ratified by deputies of the Ukrainian Parliament: parliamentarians will not see more detailed agreements. Kiev has stated that their signing will take place after ratification. The United States expects that the deal will enter into force in a month, so Kiev accelerated the ratification process by rescheduling the meeting from May 15 to May 8.

Prospects of the agreement

• The agreement stipulates that during the first 10 years, all income from investments received by the fund will be directed to the reconstruction of Ukraine. After this period, the United States, as the founder, will be able to receive a portion of the fund's income. At the same time, the prospects for attracting foreign investors to Ukraine are vague, primarily due to the ongoing conflict.

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• According to the deal, the fund will receive income only from new deposits, and their development will take years. According to the Center for Strategic and International Studies, an average of 18 years pass from the discovery of a deposit to the extraction of minerals, and not all projects turn out to be economically profitable.

• The Agreement is open-ended and will take precedence over the domestic legislation of Ukraine. To implement it, Kiev will have to amend the budget code.

Why the deal is important

• The United States demanded that Ukraine conclude a deal on mineral resources as confirmation of Kiev's desire for peace, threatening otherwise to withdraw from the negotiation process. On the eve of the signing of the agreement, the White House criticized Zelensky. US suspicions about Kiev's willingness to accept the terms of the deal intensified when Ukraine demanded amendments to the agreement immediately before signing the document.

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• Resources were almost the only asset of Ukraine: in 2023, Zelensky made Ukrainian rare earths the main argument for attracting the attention of Donald Trump. Therefore, the agreement may be more symbolic in nature, and its main purpose is to demonstrate Kiev's loyalty to Trump.

• Despite the unfavorable conditions, Ukraine was forced to make a deal, because if it failed, it risked losing the support of the United States. The most serious damage to Kiev could be the termination of intelligence sharing and the blocking of Starlink satellites, which Ukraine's European allies will not be able to compensate for.

• One of Kiev's main gains was the clause allowing the United States to supply weapons to Ukraine as part of the resource deal — military supplies will be regarded as contributions to the investment fund. Kiev will have to pay an equivalent amount in hryvnias in response. This not only frees the United States from accusations of involvement in the conflict, since Ukraine will actually pay for the weapons, but it can also become a lever of pressure on Moscow.

• Despite the fact that the agreement has been signed, American military supplies to Ukraine remain in question, as the United States insists on ending the conflict. The White House has already stated that the time has come for direct negotiations between Moscow and Kiev, which means that Ukraine's gain from signing the deal may be even less than expected.

When preparing the material, Izvestia took into account the opinions of:

• Dmitry Drobnitsky, an American political scientist;
• political scientist Alexei Chesnakov.