After a painful negotiation, Ukraine is set to approve a deal with America to jointly exploit the beleaguered country’s minerals. Donald Trump and Volodymyr Zelensky, Ukraine’s president, are due to sign a document—and pull back from a damaging war of words—when they meet in Washington on February 28th. Mr Trump is sure to declare it a victory for America. What it means for Ukraine is fuzzier.
The agreement is only the first step. Much of the detail is yet to be sorted out. But Ukraine appears to have softened Mr Trump’s first brazenly extractive demand into something closer to a joint investment venture. This looks far short of the $500bn “payback” Mr Trump had demanded for past military and financial aid from America, which independent analysts put at around $120bn.
The draft text removes the most contentious American demands. At one point the Ukrainians were apparently told they had “an hour to sign”; at another juncture, just six minutes. The latest text outlines a joint investment fund for Ukraine, which is to contribute half of the pot. This will be sourced through state-owned projects in minerals, oil, gas, LNG terminals and ports. Crucially this will not include current operations, such as the oil and gas that already contribute hugely to Ukraine’s budget.
Mr Trump’s $500bn figure is unmentioned. And America’s demand for 100% ownership of the investment fund has been dropped. Instead, ownership will be “proportional” to the sums invested by each side, raising the prospect of continuing American support. A clause that required the Ukrainians to pay twice the amount of any future aid into the fund has gone, too; Mr Zelensky had likened it to a debt on “ten generations of Ukrainians”.
A lot is still hazy, including the extent to which America will control the fund and how it will be managed. This is where contradictions may arise. One clause says America will control “the maximum amount” allowable under its own laws. Yet that might clash with the clause indicating proportionality.
This may be clarified in subsequent negotiations, along with Mr Zelensky’s initial demand, in September, for an American security guarantee as his quid pro quo for offering up his country’s resources. So far the framework mentions only a vague promise to “protect mutual investments”. But a preamble refers to a broader “architecture” of agreements and support for efforts to “obtain security guarantees”. A well-informed government source says Mr Zelensky does not intend to sign an overall agreement without broader assurances on security. The initial framework document will not require ratification by parliament, but a future full agreement will.
Though the framework deal is sketchy, Ukraine may feel it has avoided a bare-knuckle fight. Besides, the true extent of its wealth in natural resources is unknown. Modern technology has not yet been used to assess its mineral deposits. Many of them are deep down, or in concentrations that are too low to be profitable. And perhaps 40% of the metal resources are in Russian-occupied territory. Nor does the framework offer details on processing and refining, which will add much of the value.
Yet by agreeing to something, Ukraine has given Mr Trump a result—and has bought time. In the country’s battered condition, that counts for a lot. ¦
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