Policy Backgrounders

Analyzing the US-Ukraine Minerals Deal

May 08, 2025

After several months of negotiations, the US and Ukraine signed an agreement to assist with the development of some of Ukraine’s mineral resources. Overall, the agreement is far more favorable to Ukraine’s interests (and somewhat more limited) than an earlier reported draft, but the timing of the development of resources remains unclear.

• Formally, the agreement establishes a US-Ukraine Reconstruction Investment Fund; US and Ukrainian agencies will now negotiate a Limited Partner Agreement to begin the actual development of resources.
• Notably, the draft assumes Ukraine will continue with the process of EU accession and does not consider past US military assistance as “debt” to be repaid.
• The agreement contemplates rare earth elements as well as oil, natural gas, and uranium.
• Timing of the actual joint development of resources, however, remains unclear and may have to await a peace agreement.

Backdrop to the Agreement

In a meeting last year, Ukrainian President Zelensky suggested that the US and Ukraine should partner to develop Ukraine’s mineral resources. President Trump liked the idea, and in February, a few weeks before the President was to meet with President Zelensky at the White House, Ukraine was reportedly presented with a deal containing onerous terms, essentially providing that “for all future licenses, the US will have a right of first refusal for the purchase of exportable minerals,” and the deal was characterized as a way to pay back the US for military assistance to Ukraine. Ukraine rejected the deal, which in any event would almost certainly not have been ratified by the Verkhovna Rada, Ukraine’s parliament.

Negotiations continued, however, and intensified in recent weeks as progress slowed on a general ceasefire in the war with the parties coming closer on terms. While neither side issued a formal readout following the brief meeting between the President and President Zelensky in Rome at the funeral of Pope Francis, it could have been discussed then. On May 1, the two sides signed the agreement, with Treasury Secretary Scott Bessent signing for the US.

Terms of the Agreement

The agreement has an overriding goal to “further the long-term reconstruction and modernization of Ukraine” through US participation in Ukraine’s reconstruction. It covers rare earth elements (REE) (defined in the Appendix), uranium, oil, and natural gas including liquefied natural gas (LNG). Ukraine has an estimated 5% of total global REE supply as well as supplies of graphite, titanium, lithium, and copper, among other minerals and metals.

Under the agreement, the US Development Finance Corporation will serve as the US partner, alongside a Ukrainian organization supporting public-private partnerships. They will now conclude a Limited Partner Agreement to guide future work and contain further details. Ukraine will have the sole discretion to identify potential projects in Ukraine for the partnership to consider; if they are approved, once development begins, 50% of royalties, license fees, and similar payments will be considered “Ukraine Agreed Revenue,” held in a “special fund” of the Ukrainian budget, to be remitted to the Partnership (and essentially paid to the US partner). In addition, if the parties are  interested in a venture, then “Ukraine must refrain from granting to any third party materially more favorable financial or economic terms for a substantially similar investment opportunity” – a strong preference in favor of the US but less than a formal first right of refusal.

Further, because the Partnership provides for US “market-based offtake rights” to own 50% of the proceeds of the development of covered resources, the US gave an “expectation” that these products exported to the US would not face tariffs under either the International Economic Emergency Powers Act (the basis for the 10% “reciprocal” tariffs on goods) or Section 232 of the Trade Expansion Act of 1962 (the basis for the current investigation on national security grounds of imports of critical minerals which could lead to tariffs on these products).

Economic and Security-Related Terms

Overall, the terms of the agreement are more favorable to Ukraine’s interests than the reported earlier draft. Ukraine emphasized the goal of reinvesting in economic reconstruction through new projects. The agreement does not refer to past US military assistance as “debt” to be repaid through royalties on projects, although it notes that if the US provides additional military aid to Ukraine, the capital contribution of the US partner to the Partnership will be deemed to have been increased by that amount (essentially treating future US military aid as a type of loan). Further, it preserves Ukraine’s ability to join the EU as the agreement will be interpreted “in accordance with” Ukraine’s obligations under its agreements that began the accession process in 2014, which contemplate Ukraine eventually joining the EU’s common market which must grant other European countries rights to invest in Ukraine on a non-discriminatory basis.

The agreement also contains language that is related to security issues. While the agreement contains no explicit prohibition against Ukraine joining NATO, the US has already made clear its opposition to this and would presumably veto any decision by NATO to admit Ukraine. It does refer to US support for a “free, sovereign, and secure Ukraine”. It also references Ukraine’s having given up the world’s third-largest arsenal of nuclear weapons (the predicate for the Budapest Memorandum of 1994 in which the US and the UK recognized an interest in Ukraine’s security and support for independence without providing explicit security guarantees at the time that Ukraine joined the Treaty on the Non-Proliferation of Nuclear Weapons) – at least an acknowledgment of Ukraine’s security situation.

Further, the agreement states that it is part of a “broader, long-term strategic alignment between [the US and Ukrainian] peoples and governments and a tangible demonstration” of US support for Ukraine’s security and “integration into global economic frameworks” (the precise reference here is unclear but presumably means the EU, as Ukraine is already a member of the International Monetary Fund, World Bank, and World Trade Organization). It aims to benefit not only the US but the EU and “other States” supporting “Ukraine’s defense against Russia’s full-scale invasion” and to ensure that “those who have acted adversely to Ukraine in the conflict do not benefit from the reconstruction of Ukraine following a lasting peace [.]” While the language is hortatory, from the Ukrainian perspective, it is important. The signal of possible future US military aid, even if only in the form of a loan to be paid back through royalties on Partnership projects, is significant.

Conclusion – Next Steps

Ukraine’s parliament ratified the agreement unanimously on May 8. Beyond the negotiation of the Limited Partner Agreement, the work now begins of identifying deposits that could form the basis of Partnership projects. Little in the Agreement actually binds the US, though the potential for significant revenues from projects is real. Given the US push to permit additional mines in the US for rare earths and other critical minerals, and potential difficulties in starting new projects in Ukraine, it is possible that oil and natural gas – items added to the agreement between its earlier drafts and the signed version – could be a natural place to start. With the US also seeking to expand nuclear power quickly, Ukrainian supplies of uranium could be important for that effort.