Donald Trump's mysterious obsession with Ukraine's shale gas reserves

Yahoo

17-04-2025

Donald Trump has softened his plan to seize the commodity resources of Ukraine very slightly. The draft remains a coercive document, a pseudo-contractual expropriation of a victim nation with its back to the wall.
Ukraine's leaders finally seem resigned to accepting an ultimatum that has no peacetime precedent in modern state relations, putting the best face on the lesser of two evils. 'The basic legal stuff is almost ready. If everything moves constructively, the agreement will bring economic gains to both our countries,' said Volodymyr Zelensky.
He can reasonably hope that the political weather will have changed in Washington long before the offending clauses start to bite, or at least that the American people will remember their noble tradition of generosity and fair play.
The White House has at last understood that Ukraine's critical minerals are an enormous red herring. The $24 trillion (£18 trillion) figure floated by fantasists is for comic books. 'This whole story is insanity. There are no rare deposits of any commercial value in Ukraine,' said Jack Lifton, head of the Critical Minerals Institute.
'The claims are based on Soviet information that we can't trust. The country has never mined rare earths or developed the processing industry, and without that the rock is worthless. The same goes for Greenland, where there is no power, no water, no skills, and it is so expensive that the Chinese gave up trying,' he said.
'America already has the world's richest deposits at Mountain Pass, and we have Canada next door loaded with rare earths. What the US needs for national security is to develop its own downstream industry and to stop sending our output to China for processing,' he said.
The real resource prize in Ukraine is natural gas. Andríy Kóbolyev, ex-head of Ukraine's energy giant Naftogaz, told me that exploitable shale reserves in the Dnipro-Donetsk basin may be much larger than generally thought. 'We could replace half the lost Russian gas exports to Europe,' he said.
'The conventional plays are depleted but we are sitting on the best shale table in the world. It is even better than the [American] Permian Basin in thickness and porosity,' he said.
He added: 'The potential is huge if the right companies come in to explore and drill with new technology. You can do 30 to 50 fracks per well these days. We're still just doing one or two.'
Kóbolyev said Ukrainian Energy conducted a detailed study of the Yuzivska basin in north-east Ukraine and concluded that gas could be extracted at one third of the cost of liquefied natural gas (LNG) imported from Qatar or the US. 'All the pipeline infrastructure is already there from Soviet days so it is a very attractive play,' he said.
The organic carbon content of the best Ukrainian field is 7.6pc and the porosity is 9pc. Both are well above levels in the prolific Marcellus basin in the US. The layers are 100 metres thick.
'Whoever is advising the Americans knows this country very well. My impression is that they are probably Russian: they know exactly what they are doing, and where to apply political pressure,' he said.
The mystery is what Trump hopes to gain from a shale boom in Ukraine. The gas would undercut and knock out expensive American exports of LNG to Europe, which Trump is also pushing hard.
It sits oddly with parallel US-Russian talks to revive the Baltic Nord Stream pipelines and restore Siberian gas flows to Europe, with Trump-friendly companies taking a big slice of the business.
The story makes sense only if there is fast-growing demand for gas in Europe and the world. But the EU's energy agency says Europe's gas use has peaked and will go into mechanical decline as the region adds 70 gigawatts of renewable power each year.
China is moving at breakneck speed to end reliance on seaborne hydrocarbons as a national security imperative. It is instead marrying coal with wind, solar and nuclear, aiming to achieve total energy independence as an electro-state.
The International Energy Agency predicts a global gas glut by the late 2020s. It says LNG will never be competitive at scale for power plants in India or much of the global south. In my view, data centres will not change the equation once superconducting technology hits the market.
It is one thing for Zelensky to swallow the bitter pill and let the Trump administration play its dirty commercial game, whatever that may be. It is another to persuade feisty Ukrainian lawmakers to ratify what looks to many like a double injury: a colonial land grab and a strategic sell-out wrapped in one.
Trump's special envoy Steve Witkoff has business ties to Russian oligarchs. He has already endorsed the sham referenda of the four annexed oblasts of Donetsk, Luhansk, Zaporizhia, and Kherson, and has rhetorically ceded large swaths of territory that Putin is not close to conquering.
'It is going to be a very hard sell,' said Tim Ash, from Chatham House. 'I can't see the Rada [Ukraine's parliament] voting for a deal that is nothing more than extortion, and gives Ukraine nothing in terms of its security.'
The document says the US-Ukraine investment fund will control all infrastructure in Ukraine linked to natural resources, including roads, rail, pipelines, ports, terminals, refineries, LNG facilities, etc.
It will control 'critical minerals, oil, natural gas, fuels or other hydrocarbons and other extractable materials'.
The US will have three of the five board members and the first right of refusal on all projects. It has authority to examine the books of any Ukrainian agency whenever it wants. It can veto sales of Ukraine's resources to Europe. The US puts up no money. It offers no security guarantee.
It is still unclear whether the final draft splits the royalties 50:50 between the US and Ukraine from the outset, or whether the Americans will receive all the revenue until Ukraine has paid off a putative 'war debt' of $100bn to the US, with 4pc interest added.
This war debt clause in the earlier drafts was self-evidently absurd. No company will invest billions upfront if the entire profit for years to come goes to the US government.
The sorry saga is a strategic debacle. Russia is in scarcely better shape than it was in early 1917. The US defence intelligence agency says Vladimir Putin's motley forces are facing operational disintegration and cannot keep going for more than a few months.
The Kremlin's rainy day fund has run out of money. Oil is in a structural bear market. Analysts are pencilling in $50 a barrel. Russia's deformed Keynesian war economy coming apart at the seams. Sir Richard Dearlove, ex-head of MI6, says the West just has to wait a little, tighten the screws at the right moment, and Putin will be forced to the table on our terms.
Instead Trump has offered him a real estate joint venture.
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