The US and Ukraine have agreed to an outline of terms for their so-called minerals deal. We don’t know if the parties have included the usual caveat in US letters of intent, that the agreement is not binding or whether any durable commitment, whether now or in a definitive agreement, requires the approval of Ukraine’s parliament, the Rada, which would give Ukraine the ability to walk away from the scheme or force an improvement in its provisions. The fact that the main provisions are now much more Ukraine favorable than at the outset means the Rada may well bless the agreement, particularly since the press has reported that the US will continue to provide military support for Ukraine, in the form of air defenses.
As we’ll explain below, our prediction that this deal would be a spoiler as far as normalization of US-Russia relations look every bit as operative as we predicted from the get-go.
We had warned from the outset that the so-called Ukraine “raw earths” deal conflicted with the US agreeing to a settlement of the Ukraine conflict by creating an economic incentive for the US to support Ukraine in retaining as much territory as possible.
Even with the development opportunities not all that juicy, neocon pot-stirrers eager to add to the list of purported Russian dirty deeds will argue otherwise. The fact that the most valuable resources, such as shale gas reserves and lithium deposits, sit disproportionately in parts of Ukraine currently or predictably soon to be under Russian control would become another bloody flag. The fact that the most attractive assets are already being exploited (and as we’ll see below, are excluded from the current scheme) would not be mentioned in polite company.
And even those on the Trump team who are more Russia-favorable will have their view of what this “deal” is worth tainted by the cognitive bias called the endowment effect.1 Humans have an odd tendency to value things they have as worth more than the same item not in their possession.
And the “not Russia hostile” camp is also running into the headwinds of US public opinion. As John Helmer pointed out:
… follow the seven charts. Take note of the last one – this shows that despite growing disapproval by US voters of the President’s performance in office, most Americans think Trump’s policy towards Russia is “too friendly”. This sentiment is holding strong at all education levels, for blacks and Hispanics, and across all age groups, except for the middle-aged (50-64). The most anti-Russian Americans recorded in this new poll appear to be Harris voters and black protestants.
Another factor that will tend to poison Trump’s relationship with Russia is his failure to deliver on his loud and much-repeated pledge to settle the Ukraine conflict in 24 hours. Trump’s bluster and bullying were no match for the non-negotiable Putin or even the conniver Zelensky. The minerals deal is thus a timely distraction from this embarrassment. It may serve to bolster the barmy claim that somehow Trump won.
From our February post, Trump Will End His Option of Walking Away from Project Ukraine with His Minerals Deal:
WE TOLD YOU SO. From a February 15 post:
Most commentators took the Trump talk of owning or getting rights to Ukraine’s minerals to be bluster. Yours truly remarked otherwise, that this looked like a way for Trump to justify and get funding for a continued US participation, even if at a lower level than under Biden, by presenting it as a loan. This would make it the bastard cousin of the Ursuala von der Leyen plan to issue bonds against Russian frozen assets to which it does not have good title.
Admittedly, the sketchy-seeming minerals agreement between the US and Ukraine, widely reported in Western media, has yet to be consummated (more on that soon). But as its contours emerge, other commentators are reaching the same conclusion that we did from the get-go: that it would not just provide Trump with a pretext to continue funding the war, but having an economic interest in Ukraine’s survival would give the Administration a reason to keep Ukraine fighting. Crudely speaking, the more territory the Ukraine state can hold, the more the US can loot develop…
In keeping, notice the title on the Financial Times map below. As we’ll see, the related article makes clear the pact does not include a formal military commitment, but Trump’s patter and the change in US incentives, make it hard to think that the US will stop supplying Ukraine with arms and funds.
Regardless, we were not alone in noticing Boris Johnson’s unseemly enthusiasm for this agreement:
Boris Johnson endorses the Trump/Ukraine minerals deal, comparing it to lend-lease for Britain in WWII. He says it will ensure long-term US funding of Ukraine, and contains provisions Putin will never accept. Why do the most hardcore Ukraine war supporters love this deal so much? pic.twitter.com/xXcEywqfe6
— Michael Tracey (@mtracey) February 25, 2025
Before you think our take that a “raw earths” deal would give the US reason to protect its interest, even if it was more PR/vaporware than real, consider this section from the initial (and deemed to be outrageously one-sided) outline of terms:
The Government of the United States of America supports Ukraine’s efforts to obtain security guarantees needed to establish lasting peace. Participants will seek to identify any necessary steps to protect mutual investments, as defined in the Fund Agreement.
As we pointed out in February:
Now in fairness, this document is so loosey-goosey that Trump could later make all sorts of excuses why he walked away, not that Trump has ever been big on consistency. But he made so much noise about what a great deal this agreement was that he is pretty certain to show commitment to it for at least a while….which means more arms and money, which mean the Ukraine war has now become Trump’s war.
Fast forward to the current state of play. A Ukraine source posted a purported summary of key terms. The text of Radu Hossu’s tweet:
The agreement on rare minerals between Ukraine and the USA has been signed. It is an agreement of net benefit to Ukraine compared to all previous iterations:
– Ukraine will have full ownership of the resources;
– The agreement only covers future exploration, exploitation and refining projects, not existing ones already in Ukraine’s operation;
– Ukraine will decide what these will be;
– A fund (called the Ukrainian Reconstruction Investment Fund for Reconstruction of Ukraine) will be set up in which Ukraine and the US have 50-50 participation without US veto power from the initial agreement projects;
– All Ukrainian companies that are responsible for energy resources remain 100% Ukrainian state-owned (Ukrnafta or Energoatom);
– It was agreed that Ukraine owes no financial debt for wartime economic aid to the US;
– The agreement is within the limits of Ukrainian law and in no way infringes on Ukraine’s economic sovereignty, indeed Bessent stated that the US strongly supports Ukraine’s accession to the European Union;
– It was agreed that the US will provide not only technological transfer for the development of the new projects, but also financial support on the basis of 50% of their value, but (ATTENTION!!!) also their protection, through anti-aircraft defense systems;
– Ukraine will also invest 50% from the state budget;
– ALL funds will be in the first years invested only in the reconstruction of Ukraine (over a period of 10 years);
—-
I was skeptical that this would happen, but an extremely professional and incredibly well-sourced and connected lady told me two months ago thus: “Radu, trust me when I tell you, it will be good for Ukraine”. It was hard for me to believe her. Madam, thank you for giving me hope.Officially, if this agreement will be implemented, which I expect it will, it turns Ukraine into a strategic partner of the US. I can’t help but think in these moments as I read this extraordinary news of that meeting between Zelenskyy and Trump in St. Peter’s Basilica.
Pope Francis, wherever you are, thank you.
The Financial Times account validates the notion (albeit in a much more hedged manner) that the Ukraine side sees the agreement as including air defense support:
Both sides cheered the deal. Scott Bessent, the US Treasury secretary, said in a statement that the US was “committed to helping facilitate the end of this cruel and senseless war”.
He added the deal “signals clearly to Russia that the Trump Administration is committed to a peace process centred on a free, sovereign, and prosperous Ukraine over the long term”.
Ukraine’s first deputy prime minister, Yulia Svyrydenko, celebrated the deal in a post on X, saying: “On behalf of the Government of Ukraine, I signed the Agreement on the Establishment of a United States-Ukraine Reconstruction Investment Fund…
Svyrydenko said the US, in addition to making financial contributions to the fund, might offer further support, including air defence systems…
After concerns in Kyiv over whether the deal would violate Ukraine’s sovereignty and disrupt its path towards EU membership, Svyrydenko said her negotiators ensured the language complied with her country’s constitution “and maintains Ukraine’s European integration course”.
John Helmer, in the aforementioned interview with Nima of Dialogue Works, confirmed our concerned, based on an earlier edition of the Financial Times story cited above. Starting at 17:45:
And in the last couple of hours, we’ve seen a new propaganda line from the Ukrainians. They’ve said, they’ve told the FT, the Financial Times in London, the Japanese-owned propaganda outlet, very hostile to Russia, the Ukrainians have said they are sending their deputy prime minister to Washington to sign the so-called minerals agreement but it may not be signed because they’ve hit a significant difference. The US wants the Ukraine to repay, Trump’s words, Trump’s concept, the $100 billion to $300 billion number that counts to being the value of US assistance to the war so far. The Ukrainians have said we are taking that out, and that the US capital investment in mining rare earths and other minerals and energy in Ukraine, this capital contribution should be counted forward, to the future, for US military aid. Which means that the Ukrainians have gotten an undertaking that there will be ongoing US military assistance to the Ukraine. That’s really important. It’s not noticed by the FT, but the Ukrainians have been led to believe by Trump that he will go on supporting the Ukraine with military aid. But the Ukrainians say we’ll count that future against what we will concede to be the US right to dig minerals and mining energy out of the Ukraine.
Now that’s not just a little disagreement between the Ukrainians and the Americans. It’s a big one because of what it reveals. The US has promised to continue military aid, intelligence sharing, all the elements of the war against Russia. But they can’t agree on how it will be offset by the payback mechanism Trump is using.
Mind you, the US is fabulously agreement incapable and Trump has managed to be even more so. The Trump side may have made this commitment, or insinuation, in bad faith. Or it may intend to take its chances with getting Congressional approval for what it will present as a limited arms package to protect its investment in Ukraine. Or it could resort to gimmickry, like guaranteeing a bond issue. If the Administration can’t get the spending authorized, it can tell Ukraine it tried.
The pink paper in the story we quoted also said:
Under the agreement, the Ukrainian state determines what natural resources are extracted, with Svyrydenko saying it outlined an “equal partnership”, with the fund “structured on a 50/50 basis”.
Now anyone who has worked on investments knows that the amount invested by each party does not have to equate to their level of control. Private equity and hedge fund limited partnerships are classic examples, with institutional investors providing nearly all the money yet legally relegated to a passive status, save for limited veto rights.2
However, based on having repeatedly advised financial institutions and investors on joint ventures, a true 50/50 deal is the kiss of death. One party has to be in charge from a governance perspective.
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1 From Investopedia:
In behavioral finance, the endowment effect, or divestiture aversion as it is sometimes called, describes a circumstance in which an individual places a higher value on an object that they already own than the value they would place on that same object if they did not own it.
This type of behavior is typically triggered with items that have an emotional or symbolic significance to the individual. However, it can also occur merely because the individual possesses the object in question.
Let’s look at an example. An individual obtained a case of wine that was relatively modest in terms of price. If an offer were made at a later date to acquire that wine for its current market value, which is marginally higher than the price that the individual paid for it, the endowment effect might compel the owner to refuse this offer, despite the monetary gains that would be realized by accepting the offer.
So, rather than take payment for the wine, the owner may choose to wait for an offer that meets their expectation or drink it themselves. The actual ownership has resulted in the individual overvaluing the wine. Similar reactions, driven by the endowment effect, can influence the owners of collectible items, or even companies, who perceive their possession to be more important than any market valuation.
2 And those are virtually entirely for show. The right to trigger them is in the hands of an advisory committee….which the general partner stacks so that investors friendly to them hold a majority of votes.
