US President Donald Trump said that the US wants to receive rare-earth elements from Ukraine in exchange for further US support for Ukraine’s war against Russia. Photo / Getty Images
Kyiv holds US$15 trillion ($26 trillion) in natural resources which would help break the United States’ dependence on China.
Donald Trump made no effort to disguise the potential threat to Ukraine if Volodymyr Zelensky, the country’s president, refused to cough up for American protection.
“They may make a deal. They may not make a deal,” the US president told Fox News. “They may be Russian someday, or they may not be Russian someday.”
As far as he is concerned, the US has provided “close to $300 billion [£237b]” in aid for Kyiv and it is payback time.
His price? As The Telegraph revealed this week, it is an incredibly steep one. The US has demanded what amounts to an economic colonisation of Ukraine, with significant rights over its mineral resources, oil and gas resources, ports and other infrastructure.
The demands have caused panic in Kyiv and amount to far more than what officials are willing to agree to. However, one bargaining chip Zelensky himself has proffered is access to $500b of Ukraine’s national resources, including what Trump has called are “tremendously valuable” minerals scattered throughout the country’s sprawling but partially occupied territories.
These minerals offer a tantalising promise: the ability for the US to break its dependence on Chinese supplies of critical minerals that go into everything from wind turbines to iPhones and stealth fighter jets.
With Washington in a “great power” competition with Beijing, Ukraine’s resources – worth an estimated $15 trillion – may theoretically come in handy.
The strategic significance of Ukraine’s mineral resources “cannot be overstated”, according to publicly-available Nato briefings.
Its vast reserves span more than 100 metals across some 20,000 deposits, including several that have been identified as critically important by both the US and Europe.
They include graphite, lithium, beryllium and uranium, as well as rare earth elements such as lanthanum, cerium and neodymium.
Many are crucial for modern defence, green energy and aerospace technologies – but global supplies are dominated by China.
Against this backdrop, the European Union published an action plan to diversify the sources of its critical minerals in 2020 and struck a partnership to co-operate with Ukraine to develop resources the following year.
Trump’s attempt to crash the party could throw a spanner in the works, however.
According to a copy of the US demands revealed by The Telegraph on Monday, Washington is demanding that it gets first refusal on all deposits within the country.
Trump’s shake-down has been rejected so far by Zelensky and analysts predict America’s aggressive play will face opposition in European capitals, which have themselves sought greater co-operation with Kyiv on minerals already.
“I think this is going to go down pretty badly in Europe,” says Ian Bond, a former British diplomat who is deputy director of the London-based Centre for European Reform.
“Trump basically appears to be acting as though the Americans have the right to seize Ukraine’s national assets, in return for the assistance that they have given so far.
“The fact is, if you look at the amount of aid that has been provided to Ukraine since the war began, although the US has provided more military assistance, the EU has provided much more financial and humanitarian assistance – something Trump essentially treats as non-existent.
“He is making a petty criminal’s play, like coming into a shop and saying: Nice little business you’ve got here, it would be a shame if something happened to it.
“It is an administration which is behaving like an organised crime syndicate.”
The US and EU face a looming conflict over Ukraine’s resources because of their strategic significance. Both are engaged in “ex-China supply diversification”, says Bryan Bille, of Benchmark Mineral Intelligence, referring to the superpowers’ desire to find other sources of minerals to end their over-reliance on Chinese imports.
“As with the European Union, the United States and other geopolitical actors are looking for ex-China supply of critical minerals and are looking to secure deals with partners that could, in the future, supply them.
“It’s about finding new resources to break China’s dominance, which is going to be very challenging.”
This is what makes Ukraine’s resources potentially valuable, even though they are not the best on offer internationally.
For instance, both graphite and lithium are needed in huge quantities globally to make lithium ion batteries that go into smartphones, laptops and electric vehicles, among other things.
Elsewhere, reserves of rare earth elements could have important defence applications. Each one of America’s F-35 stealth jets, for example, contains around 400kg of components that are made using rare earth elements, according to the US Congressional Research Service.
Those present in Ukraine include neodymium, erbium, lanthanum and yttrium, according to the country’s institute of geology. It also possesses other critical minerals such as nickel, beryllium, manganese, gallium, zirconium and scandium.
An EU document published in 2020 highlighted scandium and gallium as “critical raw materials”, pointing to the former’s use in semiconductors and solar panels and the latter’s use in solid oxide fuel cells and lightweight alloys.
Neodymium, meanwhile, is not just critical to F-35 jets. It is used to make the magnets found in wind turbines and electric car motors as well.
Still, there is debate around whether Ukraine’s mineral resources are all they are cracked up to be.
“In a global context, they are not that significant,” says Bille.
Ukraine’s lithium reserves are thought to amount to 500,000 tonnes of lithium carbonate equivalent. That is miniscule compared to Chile’s 9, and still quite lacklustre next to what is available in the US, which has an estimated 1.8m tonnes.
But Ukraine’s lithium hoard is far more significant in a European context, accounting for roughly one-third of the continent’s proven deposits.
This means they could still meet a significant share of Europe’s lithium demand if developed commercially. The EU is expected to need around 665,000 tonnes of lithium carbonate equivalent per year by 2030, according to Benchmark forecasts.
Supplies of certain minerals are also set to be tight this decade, Bille points out, so even marginal new supplies will be able to command a decent price.
That is expected to be the case for graphite in particular, partly because China – which refines 90% of global supplies – has restricted exports in a bid to hurt American industries such as carmaking.
Ukraine is among the world’s top five countries when it comes to reserves of the metal, which can be used to make tough steel alloys, battery anodes, nuclear reactor components and vehicle brake linings.
“I do think Ukraine’s graphite can be important,” Bille says, adding that there are some operational mines in the country already. “It’s such an important mineral and everyone is trying to secure ex-China supplies at the moment.”
Ukraine is also a top 10 country when it comes to titanium, with an estimated 7% of the world’s total, although exactly how much of the super-metal it possesses is currently kept secret.
Unfortunately, however, swathes of the country’s valuable mineral resources are currently locked up within territory occupied by Russia in the southeast.
It underlines why an end to the conflict, whether it is brokered by Trump or someone else, is likely to be an important prerequisite to Kyiv’s ambitions to monetise the country’s buried treasure.
“You need to have security guarantees,” says Bille. “That’s a very important starting point.
“The business case is quite difficult currently, because we don’t really know where the country is going and where this conflict is going.”
Though his demands may be steep, Trump will no doubt argue that his offer to Ukraine will offer exactly this kind of certainty – even if it is a grim kind.
“The Ukrainians will certainly be open to negotiation with the Americans,” says Bond. “There will be deals to be done which allow American companies into the market, no question about that, and I think that can co-exist [with Europe’s ambitions].
“But it’s a question of the terms on which it’s done and what America offers in return. And what Trump has offered so far is very little – except for threats.”
Written by: Matt Oliver
Handley has been an entrepreneur since he moved to New Zealand at the age of 14.