Ukrainian rare earths and relations with America

According to expert Aleksey Ižak of the Institute for Strategic Research, the 50% split of royalties provided for in the agreement reached after the meeting between Putin and Zelensky seems fairly equitable for Ukraine's needs, even if the funds accumulated in the operations are unlikely to be sufficient to cover the full cost of rebuilding the country.

Kiev (AsiaNews) - As widely reported by the international press, Ukraine and the United States, after the spectacular meeting between Trump and Zelenskyj in St. Peter's Basilica at the funeral of Pope Francis, signed a historic agreement on 1 May, which provides for the formation of a joint investment fund for the reconstruction of the country devastated by the Russian war. This step opens a new page in the economic and political life of both countries, and Ukrainians hope that it will also provide a guarantee of security against the aggressor's claims.

The 12-article agreement, which lists the critical materials involved and sets out the financial aspects, has the legal status of an intergovernmental agreement and will only enter into force after ratification by the Verkhovna Rada in Kiev, as explained by Ukrainian Economy Minister Julia Sviridenko, which is expected within a month to a month and a half of discussions. The Agency for State and Private Partnership Support, in agreement with the ministry, will then manage the implementation of the programme. The Fund will take the form of a limited liability partnership on the American side, managed by the US Agency for International Development.

Fifty per cent of royalties and earnings from the use of Ukrainian subsoil products will be allocated to the Kiev state budget through a mechanism known as ‘profit agreed with Ukraine’. American companies have not been granted ‘first refusal’ rights on extraction, but they are guaranteed participation in negotiations and auctions on equal terms, with the possibility of conducting manoeuvres to purchase production at market conditions, without receiving compensation lower than that of other investors.

The management of materials will be exempt from any taxation, and in the event of a conflict of interest, priority will be given in accordance with Ukrainian legislation. Ukraine undertakes to defend American investors from any losses in the event of delays or restrictions on currency transfers. According to expert Aleksey Izhak of the Institute for Strategic Research, the 50/50 scheme seems fairly equitable for Ukraine's needs, although the funds accumulated in the operations are unlikely to be sufficient to cover the full cost of rebuilding the country. Minister Sviridenko added that more specific initiatives related to reconstruction will be implemented.

In fact, joint administration of the Fund is planned, with equal rights in decisions on investment projects, while maintaining control over resources, mineral extraction sites, the entire subsoil and infrastructure. Reconstruction projects will be entirely financed by the Fund, with no other debt obligations for Ukraine towards the US. The negotiations on this issue have been very long and laborious, and Ukraine has been resolute in defending its interests, compared to the initial proposals that provided for almost total US control over Ukrainian resources, while seeking to adhere to the criteria of equality and reciprocity that were adopted in relations with Joe Biden's administration.

The agreement therefore does not mention any restrictions on Ukraine's accession to the European Union, which, if implemented, would lead to a revision of the agreement with the US, as explicitly stated in the agreed text. Ižak also believes that ‘the agreement appears entirely reasonable, unlike at first, when it provoked very negative reactions in Ukraine and among its allies’. Ukraine will now be able to open up its market to other foreign investors for the extraction and processing of rare and useful metals such as lithium, graphite, titanium and manganese, as well as gas and oil, promising significant development of the country's industrial potential and a considerable increase in its global role.

However, concerns remain about security guarantees, one of the conditions on which Ukraine has insisted most in its negotiations with the Americans. No commitment has been made by the US on military support and other crucial areas, as Washington wanted to keep military and economic issues separate. There is only a mention that military support ‘may be included in economic support’, especially if the actions of the aggressor country affect American interests.