Yves here. We’ve explained repeatedly that the Ukraine “raw earths” deal is based on extreme exaggeration of the mineral deposits that the Ukraine government owns (or to which it retained mineral rights) and therefore could offer to the US. Aside from the obvious problem that those “rare earth” reserves are disproportionately in Russian-controlled or Russian-claimed territory, the best of the rest is very likely to be in private hands. Think anyone is going to get very far were there attempts to seize them? Ukraine oligarchs have muscle and would sabotage any efforts (they are capable focusing minds even more by killing work crew. Equipment would have value on the black market).
This post usefully catalogues many of the obstacles to this “deal” producing meaningful returns.
That raises the question of why Trump has been so fixated on it, since his persistent efforts to get Zelensky to sign something goes beyond what would be necessary to make PR points (Ukraine owes us bigly, the Biden Administration was a patsy for providing so much support with no strings attached, I am a Big Man looking out for US economic interests). I keep falling back on the idea that this is yet another Trump dominance exercise. Having insisted Ukraine will sign a “rare earths deal,” he’s going to persist until he gets something signed.
By Andrew Topf, a journalist with over two decades of experience in newspapers, trade publications and as a mining reporter. Originally published at OilPrice
- The U.S. is eyeing Ukraine’s vast mineral wealth—including rare earths, lithium, and titanium—as a way to recoup war-related aid.
- Experts warn that Ukraine’s rare earth deposits are overstated, outdated, and largely inaccessible.
- Despite the risks and limited returns, a minerals-for-reconstruction deal appears to be moving forward.
The United States is pinning its hopes on reclaiming expenses incurred on Ukraine during its war with Russia by tapping Ukraine’s vast mineral potential including the development of rare earth element deposits.
The problem with this deal is two-fold: one, the deposits in question are mostly within Russian-occupied territory; and two, rare earths are difficult to find lumped together in economic quantities, and even harder to separate into rare earth oxides, that are used in everything from cell phones to electric vehicles to high-tech weaponry.
The Deal
First, the proposed deal. It outlines a plan to use future revenues from Ukraine’s rare earth and critical mineral reserves, as well as oil and gas.
According to Al Jazeera, a Reconstruction Investment Fund would be created, using revenues generated from Ukraine’s natural resources to reinvest in reconstruction following over three years of intense war.
Ukraine would contribute 50 percent of revenues from state-owned resources to the fund. It is unclear where the remaining half would come from and how much control the US would wield over the funds, says Al Jazeera, adding the US will support Ukraine’s efforts to secure lasting peace but offers no direct security guarantees.
How Much Aid Was Sent to Ukraine?
In that now-infamous meeting between Trump, Vice President Vance and Ukraine’s President Zelensky, Trump said the US has paid more than $350 billion in military aid/ support to Ukraine.
Zelensky disputed that figure — likely an unsubstantiated Trump guesstimate, which started at $500B — saying it was much lower.
The Kiel Institute for the World Economy, which has tracked military, financial and humanitarian aid to Ukraine since the war began, said the United States has donated $118 billion.
The US Department of Defense puts the number at $183 billion, which includes the cost of replenishing Ukraine’s defense stocks.
What Minerals Does Ukraine Have?
According to Ukraine’s Economy Ministry, the country holds deposits of 22 out of 34 minerals classified as critical by the European Union.
These critical minerals — whose reserves made up approximately 5 percent of the global supply as of 2022 — include precious and non-ferrous metals, ferroalloys and minerals such as titanium, zirconium, graphite and lithium.
Ukraine has an estimated 500,000 tonnes of lithium reserves, which are considered among Europe’s largest repositories of the battery metal.
As for the rare earths, according to The Independent, Ukraine has rare earth elements such as lanthanum and cerium, used in TVs and lighting; neodymium, used in wind turbines and EV batteries; and erbium and yttrium, whose applications range from nuclear power to lasers. EU-funded research also indicates Ukraine has reserves of high-priced scandium, but the data is classified.
These rare-earth resources are estimated to have a value of more than £12 trillion, and according to The Independent, Zelensky has been trying to develop them for years. He reportedly offered outside investors tax breaks and investment rights to help mine these minerals in 2021, but war broke out a year later.
More than 95 percent of industrially useful rare-earth metals are produced by China, creating supply chain and national security vulnerabilities in the US and elsewhere.
A recent graphic by Visual Capitalist says Ukraine claims to hold nearly $15 trillion worth of mineral resources, making it one of the most resource-rich nations in Europe. The country is home to the continent’s largest reserves of lithium, titanium, and uranium.
According to data from the Ukrainian geologic survey, Ukraine possesses 5% of the world’s mineral resources, including 23 of the 50 materials deemed critical by the U.S. government. These include:
- Titanium– Used in aerospace and military applications
- Graphite– Essential for battery production
- Lithium– A key component of lithium-ion batteries
- Beryllium– Vital for defense and telecommunications
- Rare Earth Elements– Crucial for electronics, renewable energy, and defense industries
Source: Visual Capitalist
Where are the deposits?
The Independent says:
A little over £6 trillion of Ukraine’s mineral resources, which is around 53 per cent of the country’s total, are contained in the four regions Mr Putin illegally annexed in September 2022, and of which his army occupies a considerable swathe.
That includes Luhansk, Donetsk, Zaporizhzhia and Kherson, though Kherson holds little value in terms of minerals.
The Crimean peninsula, illegally annexed and occupied by Mr Putin’s forces in 2014, also holds roughly £165bn worth of minerals.
The region of Dnipropetrovsk, which borders the largely occupied regions of Donetsk and Zaporizhzhia, and sits in the face of an advancing Russian army, contains an additional £2.8 trillion in mineral resources.
Russian difficulties with major military operations seem likely to preclude a serious attempt to take the region but mining operations in the area would be perilous with Moscow’s soldiers so close.
Before the Russian invasion, Ukraine had registered 20,000 mineral deposits, with 8,700 of them proven and encompassing 117 of the world’s 120 most used metals and minerals, according to the Center for International Relations and Sustainable Development.
Other key points made by Al Jazeera:
- The country has some of the world’s top recoverable coal, gas, iron, manganese, nickel, ore, titanium and uranium reserves.
- Most of these minerals span Luhansk, Donetsk, Zaporzhizhia, Dnipropetrovsk, Korovohrad, Poltava and Kharkiv.
- Russia, which controls approximately 20 percent of Ukraine, including large parts of Luhansk, Donetsk and Zaporzhizhia, is sitting on about 40 percent of Ukraine’s metal resources.
- Ukraine has said that a significant portion of its rare earth elements are in the Donetsk and Luhansk regions.
However, despite all the hype about rare earths in Ukraine, the country doesn’t even make the top 12 countries ranked by the US Geological Survey as having the largest rare-earth mineral reserves. These countries are, in order, China, Brazil, India, Australia, Russia, Vietnam, the US, Greenland, Tanzania, South Africa, Canada and Thailand.
Are They Mineable?
According to IEEE Spectrum, Ukraine doesn’t have any mineable rare earths. The publication quotes Erik Jonsson, senior geologist with the Geological Survey of Sweden, who says there are four areas with substantial deposits of rare earth ores, and four slightly bigger deposits: Yastrubetske, Novopoltavske, Azovske and Mazurivske.
All but one are within the zone that the Russians currently control.
The other problem is identifying the size of the deposits. While numbers are available, there is no detailed outline of how they were arrived at, and they are believed to come from the Soviet era dating as far back as the 1960s.
“The rare-earth deposits don’t look that relevant,” Jonsson concludes. “I mean, I wouldn’t go for them.” Two of the deposits are dominated by a mineral called britholite, he notes, which is not desirable because it has not been processed for rare earths, which means that almost nothing exists in the way of process chemistry and equipment.
Jack Lifton, executive chairman of the Critical Minerals Institute, is more scathing in his criticism.
“If you want critical minerals, Ukraine ain’t the place to look for them. It’s a fantasy,” he says. “There’s no point to any of this. There’s some other agenda going on here. I can’t believe that anybody in Washington actually believes that it makes sense to get rare earths in Ukraine.”
“I doubt very much that President Trump cares about rare earths,” adds Lifton. “He’s being told they’re important. He’s operating as a pure businessman.”
There is ample truth in what Lifton is saying, if one knows anything about rare earths.
Mining rare earth elements is fairly straightforward but separating and extracting a single REE takes a great deal of time, effort and expertise.
According to one expert, the ore is first ground up using crushers and rotating grinding mills, magnetic separation and flotation gives the lowest-value sellable product in the rare earth supply chain: the concentrated ore. The milling equipment — crushers, grinding mills, flotation devices, and electrostatic separators – all have to be configured in a way that suits the type of ore being mined. No two ores respond the same way.
The next step is to chemically extract the mixed rare earths from the concentrated ore (cons) by chemical processing. The cons must undergo chemical treatment to allow further separation and upgrading of the REEs. This process, called cracking, includes techniques like roasting, salt or caustic fusion, high-temperature sulfidation, and acid leaching which allow the REEs within a concentrate to be dissolved. This separates the mixed rare earths from any other metals that may be present in the ore. The result will be still-mixed-together rare earths.
The major value in REE processing lies in the production of high-purity rare earth oxides (REOs) and metals but it isn’t easy. A REE refinery uses ion exchange and/or multi-stage solvent extraction technology to separate and purify the REEs. Solvent-extraction processes involve re-immersing processed ore into different chemical solutions to separate individual elements. The elements are so close to each other in terms of atomic weight that each of these processes involve multiple stages to complete the separation process. In some cases it requires several hundred tanks of different solutions to separate one rare earth element. HREEs are the hardest, most time consuming to separate.
The composition of REOs can also vary greatly. They can and often are designed to meet the specifications laid out by the end product users — a REO that suits one manufacturer’s needs may not suit another’s.
Less technically, The Independent says investors highlight a number of barriers to investment in Ukraine, such as inefficient, complex regulatory processes, difficulty accessing geological data, and obtaining land plots. They said such projects would take years to develop and require considerable up-front investment.
It’s worth noting that the United States currently has only one operating rare earths mine, Mountain Pass in California. Rare earths are mined and made into a concentrate before being shipped to China for further processing.
Developing a mine from discovery to production in places like the United States and Canada can take upwards of 20 years.
Is the Minerals Deal Still On?
It appears to be. After the disastrous meeting in the Oval Office, Zelensky wrote a letter to Trump saying that Ukraine is ready to sign the minerals deal — even though the US hasn’t offered Ukraine any security guarantees.
The current ceasefire deal looks to be heavily skewed toward Russia’s demands. Ukraine and Russia have agreed to a moratorium on attacking each other’s ships in the Black Sea. However, the Kremlin said it would only implement the ceasefire once the US delivers sanctions relief on Russian agricultural products and fertilizers, The Guardian pointed out Wednesday, noting that observers are questioning whether Russia has given anything to secure its first offer of sanctions relief since the beginning of the war. Ukraine has opposed any sanctions rollback on Russia.
The Guardian analysis said the Trump administration appears ready to make a deal with Russia that offers two prices to halt its war with Ukraine: political and military concessions from Ukraine as well as an escape from the international isolation that began after its full-scale invasion in 2022.
