The End of Normalization with Russia
The Ukraine Mineral deal gives Trump the appearance of a success amidst an ocean of failure. On the same day as this absurdity, there is further evidence that even the strongest US “ally,” Japan, is now becoming angry. As Reuters recently reported that Japan is:
"Deeply concerned" about global economic fallout from U.S. President Donald Trump's trade tariffs, Finance Minister Katsunobu Kato said on Thursday in the government's strongest warning yet as the two nations began trade talks.”
As Dougles Macgregor says today, Trump has subjected the entire globe to a “crisis of inconsistency.” And this will not end well. Least of all for the US.
Note that the US does not need any of what Ukraine has to offer, not least rare earths that under more normal circumstances would be more readily available from Russia and China. This is even more the case with respect to oil, gas and aluminum which Macgregor says is what the deal mainly appears to be about.
The most valuable resources, Smith argues below, such as shale gas reserves and lithium deposits, sit disproportionately in parts of Ukraine currently or predictably soon to be under Russian control.
There is even some concern that the British have already signed some form of mineral deal with Ukraine and that Ukraine is selling the same stuff to more than one party.
All this presumes that the most attractive materials are actually accessible to available technology, which some sources doubt. Not to mention the low status of the Ukrainian negotiator who has signed the deal with US Treasury Secretary Bessant and the issue as to whether her signature or indeed the signature of any other member of what is now the unelected cabal of a regime that came to power as a result of a US-backed coup d’etat in 2014, would be regarded by Zelenskiy’s successors as remotely legitimate.
Although the deal does not include explicit US security guarantees to Ukraine, the AP reports that the Trump administration:
“Lifted its suspension of military aid and intelligence sharing for Ukraine, and Kyiv signaled that it was open to a 30-day ceasefire in the war with Russia, pending Moscow’s agreement, American and Ukrainian officials said Tuesday following talks in Saudi Arabia.”
So in the wake of the predictable failure of the Trump “peace proposal” carried to Putin by Witkoff last Friday, which has now been roundly rebuffed by the Kremlin as falling well short of Russian conditions for a permanent ceasefire as set out by President Putin in June 2024, Trump has now apparently resorted back to the war by restoring US weapons (apparently including air defense) and intelligence to Ukraine (although this is still a continuation of the last Biden tranche; it is questionable if a new tranche would be approved by Congress).
Yves Smith of Naked Capitalism has published one of the most extensive treatments available at the time of writing, and I will summarize the main points below. For the original article, see:
“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 agreement is now much more favorable to Ukraine: it provides for equal control by the US and Ukraine, applies only to new developments, and lasts only for 10 years
“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.”
As Smith argues, the deal provides Trump with a pretext to continue funding the war. Having an economic interest in Ukraine’s survival would give the Administration a reason to keep Ukraine fighting.
A Ukraine source posted a purported summary of key terms:
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);
Smith cites Moscow correspondent John Helmer:
“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. “
On the question of “equal” control, Smith argues that the amount invested by each party does not have to equate to their level of control. In any case, a true 50/50 deal is the kiss of death. One party has to be in charge from a governance perspective.
As for the war:
“There will be no negotiated settlement of the war between Russia and Ukraine. That means Russia continues to prosecute the war and take more territory until it sees fit to stop. For the sake of this thought experiment, assume Russia prostrates Ukraine, takes control of a big swathe of Ukraine in the south and east that includes Odessa, Mykolaiv, Dnipropetrovsk, Sumy, and Kharkiv oblasts, and installs a puppet government in western Ukraine with a neutral status and a limited degree of autonomy once denazification has been completed…
“One could see the Trump administration seeking compensation, and using the failure of Russia to oblige as a justification to seize the $67 billion in dollar-denominated Russian frozen assets as liquidated damages….To put it another way, the minerals pact was certain to be a source of conflict with Russia were it ever to get done. “
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