Unclear whether Ukraine-US rare earth saga is a masterstroke or colonial appropriation

Sky News

18-02-2025

Deep under the ground in the east of Ukraine sits a veritable mineral motherlode: rich reserves of coal, dense concentrations of iron ore and, further west in Nikopol, some of the world's biggest resources of manganese - as well as other, more exotic minerals.
The geological riches of the Donbas and its neighbouring regions have long been looked at with envy by the country's friends, enemies and neighbours as a prize. In the 19th century, Tsar Alexander II pinpointed the basin of the Donets River as the ideal spot for iron and steelworks - in large part because of the dense deposits of coal and iron. In the Second World War, Adolf Hitler coveted Ukraine 's natural resources and eventually ended up invading the region for them - though Ukrainians spent most of the occupation refusing to mine and smelt them.
Now Donald Trump is the latest world leader with his eye on Ukrainian minerals, in this case as a form of reparations for the billions of dollars America has spent supporting the country following the Russian invasion. Leaked drafts of an agreement proposed by the Americans, championed by senator Lindsey Graham, show America is pushing for 50% of the revenues from mineral resources in future.
The idea follows a meeting at Trump Tower last September between Mr Trump and Volodymyr Zelenskyy - in which the Ukrainian president reportedly proposed giving the US a direct stake in the country's rare earth elements and critical minerals in exchange for continued weapon deliveries.
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Yet the eventual proposal is, according to Ambrose Evans-Pritchard of the Daily Telegraph who has seen the full document, even more economically wrenching than the Versailles Treaty, which imposed years of crippling reparations on Germany after the First World War. Though this depends on whether it indeed extracts as much money as the documents suggest it could. However, a closer look at the geology of the country, and the nature of the mining industry, begs some serious questions about whether it will.
Nor is this the only slightly odd feature of this story. On the one hand, everyone knows Mr Trump is a dealmaker - keen to extract as much as possible from every negotiation - and so it's quite plausible that he would be attracted to a deal promising monetary reward to America. But by the same token, the main thrust of American economic policy since he came to the White House has been about imposing economic barriers on other countries. Becoming even more reliant on a foreign power for one's mineral resources seems to fly in the face of that philosophy.
The other significant factor is that many of these deposits - both of conventional minerals like coal and of more exotic minerals like titanium, lithium and rare earth metals - sit in or around the areas currently under Russian occupation. That raises another question: to what extent is this a ploy from Ukraine to draw American companies and capital into an area under threat of Russian destruction?
But the final curious issue - perhaps the most important of all - is that save for the long-established coal and iron deposits, it's not altogether clear that any of the critical mineral deposits in Ukraine are of world-changing significance. It's certainly true that Ukraine has large proven resources of lithium - around 500,000 tonnes, more than any other country in Europe. However, this is small beer in comparison with the 1.8 million tonnes of lithium reserves in the US. Indeed, look at the other prospective lithium resources that sit underneath America and they come to a whopping 19 million tonnes, more than the country will ever need for its electric vehicle fleet.
When it comes to graphite, Ukraine has a decent amount but there's much more in Norway, Korea and Brazil. Ukraine has quite a lot of titanium ores, but, again less than you find in far less unstable regions of the world like Australia and Canada. And anyway, with titanium, the main challenge is not so much finding deposits in the ground but the expertise in how to refine it into a metal.
Something similar goes for rare earth elements - a very specific corner of the periodic table where you find neodymium and lanthanum and other obscure substances. These elements are crucial for the production of high-power magnets and special steel alloys used by the military. But contrary to much of the coverage you'll have read about this, it's not altogether clear that Ukraine is especially rich in these elements. Of the 109 deposits of critical minerals identified by the Kyiv School of Economics across the country, only three actually specialise in rare earth elements. Anyway, the main reason China dominates global rare earth production has less to do with the preponderance of ores in the ground there than the fact that it is more willing to undertake the dirty, energy-intensive refining process than most other countries.
None of the above is to dispute that there are plenty of minerals in Ukraine. There are certainly large deposits of coal and iron, lots of manganese, lots of titanium and also plenty of gas stored in shale formations. Most of the more plentiful deposits have been exploited for some time. And they could be an important part of Ukraine's economy in future.
But by the same token, a) in most cases these are not earth-changing amounts, b) in most cases, the US actually has equivalent or superior deposits available on its territories or in near neighbours and c) the real challenge with minerals like these is not identifying them in the ground but getting them out of the ground cheaply and safely. When it comes to critical minerals, Ukraine is still a long way from that point.
In short: it's not altogether clear whether this whole rare earth/critical minerals saga is a masterstroke by the Ukrainians, in selling the Americans something which may end up far less valuable than it looks from the outside, or a tale of colonial-style mineral appropriation from the US. What it certainly is is decidedly odd.
Then again, there is a long history of curious stories such as these cropping up at moments such as these. In the final days of the Afghanistan occupation, there were occasional stories about the "vast mineral riches" which would soon change it into a veritable Saudi Arabia of the 21st century. What came of it in the end? Not all that much.
And that's mostly the case. Every so often a mineral discovery can be truly world-changing - enough to trigger wars and to help one nation overwhelm another. But much more often, when it comes to metals and minerals, the tall tales tend to outnumber the real ones.