The Ukraine Mineral Deal Might Help The U.S. Break China’s Monopoly

The United States and Ukraine signed a long-awaited deal on April 30^th to give the U.S. priority access to Ukrainian critical minerals and other natural resources. After months of acrimonious disputes and negotiations over a ceasefire/peace between Russia and Ukraine, U.S. Treasury Secretary Scott Bessent is now touting the agreement as a signal to Russia that “the Trump Administration is committed to a peace process centered on a free, sovereign, and prosperous Ukraine,” NBC reported. If that is the case, the signed agreement may be a step in the right direction. But consistent American military and diplomatic aid, in coordination with European allies, will be necessary to clinch a sustainable solution to the 11-year-old war.

Signing the agreement may incentivize Ukraine and Russia to negotiate peace and give credence to President Donald J. Trump’s call to recoup the value (in minerals) of past American assistance to Kyiv. However, all of this still isn’t a panacea capable of solving Ukraine’s security problems. Nor is it an instant solution to America’s need to develop a supply stream for critical minerals independent of Beijing, as China currently has a near monopoly on the global trade of critical minerals. And yet, if the right peace agreement can be negotiated, it could help with both.

The Importance of Critical Minerals

The United States relies on critical minerals for several important industries, including defense, clean energy, and health technology. The vast majority of these materials, however, are under China’s control, giving Beijing undue influence over key sectors in the American economy. China supplies the world market with 80% of natural graphite and 60% of mined magnet rare earth elements, a key subset of critical minerals, according to the International Energy Agency. Beijing’s dominant position is even more evident when considering refining capacity for these minerals—China is responsible for about two-thirds of processing globally.

In response to President Trump’s “Liberation Day” tariffs and subsequent increase of tariff rates on China, Beijing imposed export restrictions on rare earths, leaving the U.S. with few options to procure these minerals. For the U.S., this new Ukraine deal is a near-term effort to grow its supply base of critical minerals and reduce China’s ability to apply economic pressure to some of America’s most sensitive industries.

What Is In The Agreement With Ukraine?

The agreement establishes the United States-Ukraine Reconstruction Investment Fund, giving the U.S. priority for subsoil exploration and extraction projects involving 55 minerals and metals (with the possibility to add more) as well as natural gas and oil.

Ukrainian officials recognize the signed agreement as much more equitable than previous versions. It acknowledges Kyiv as an equal partner in the fund rather than a junior partner and does not reference any debt obligations for Ukraine, despite Trump’s announcements. It does stipulate that any future U.S. military assistance shall be counted as U.S. contributions under the deal. The agreement makes it clear that Russian invasion was the cause of the war. It also allows for Ukraine to make extraction decisions, maintain rights to its subsoil, and remain firm in its commitments in pursuit of joining the European Union.

The agreement provides significant benefits to the United States as well, establishing a priority for America to participate in developing projects to develop Ukraine’s mineral wealth, including 7% of Europe’s titanium, used in aircraft construction, a third of European lithium deposits, which is critical for manufacturing, several sources of rare earths, and more. This will provide opportunities not only for U.S. mining companies but also for suppliers of infrastructure and technology to enter the Ukrainian market. It also provides an incentive for the U.S. to maintain its commitments to Ukraine, an essential element as talks continue with Russia to define the terms of peace in the conflict.

The Future of Ukrainian Security

The impact of the agreement will depend on the success of American efforts to ensure Ukraine’s security as peace talks with Russia continue. While Ukraine’s mineral deposits are estimated to be valued from $4 billion to $12.5 billion, the location of these mineral deposits, as well as their extent, remains unclear—further geological surveys and exploration will be needed. However, France24 reported that We Build Ukraine, a Kyiv-based think tank, estimated that up to 40% of the mineral deposits in the country are located in regions currently occupied by Russia. The more territorial concessions given to Moscow, the more the value of the agreement can decline.

Based on the terms of the agreement, Ukraine’s long-term security is now intrinsically linked to U.S. mineral interests. The agreement only applies to projects started after its signing, meaning that extraction from any of these projects will take several years, especially given that current geological surveys in the country are outdated. As such, disruptions caused by further Russian aggression could put a stop to these projects before they can even begin extracting, as well as damaging key infrastructure all over again.

In the meantime, Kyiv has entered talks with European allies to assemble a credible international peacekeeping force to ensure Ukrainian security. A peace deal must allow for such an action, as well as more comprehensive measures, like enforceable international guarantees.

The U.S.’s agreement with Ukraine is an attempt to kill two birds with one stone: it is intended as a landmark step toward peace in the region and securing critical minerals to build a supply chain outside China’s control. Going forward, U.S. efforts to negotiate a peace will need to maintain a firm line protecting Ukrainian sovereignty and territorial integrity and successfully deterring future Russian hostilities.