In a significant move to bolster its critical minerals supply chain, the United States has proposed a rare earth mineral deal with Ukraine. This strategic partnership aims to reduce America’s reliance on China, the current dominant player in the global rare earth minerals market. As tensions between the US and China continue to escalate, securing alternative sources of these critical minerals has become a pressing national security concern.
This led to a contentious proposal by the Trump administration that Ukraine gives the U.S control of the mining of its rare earth minerals including $500 billion worth of profits from the proceeds of their sales as compensation for its war time assistance to Kyiz based on the claim that the U.S has spent over $350 billion to help Ukraine defend itself against the Russian aggressors.
The initial response of the Ukrainian government was to decline the U.S draft proposal on the exploitation of their country’s valuable minerals, such as lithium used in the renewable energy, aerospace, defence, and nuclear industries, because it did not contain security guarantees that came with the $500 billion price tag. However, the U.S government’s position is that with a heavy American presence in the Ukrainian mining sector, no country would dare attack them to avoid a confrontation with the U.S.
The US has long been dependent on China for its rare earth minerals supply, which has created significant vulnerabilities in its supply chain. This is especially true considering the implications of the trade war the Trump administration initiated against China and the expected backlash from China. By partnering with Ukraine, America can diversify its sources, reduce its reliance on China, and enhance its energy security.
The proposed rare earth minerals deal with Ukraine offers several strategic benefits for America, including diversifying the supply chain as Ukraine’s rare earth mineral deposits will provide a new, reliable source of these critical materials and thus reduce America’s dependence on China for these minerals. It will also enhance the U.S’s energy security by securing access to rare earth minerals. This will then enable the U.S to accelerate its transition to renewable energy sources and reduce its reliance on fossil fuels.
The deal is also expected to create new job opportunities in the mining, processing, and manufacturing sectors, contributing to economic growth and development. Also, by reducing its reliance on China for rare earth minerals, the US can mitigate the risks associated with supply chain disruptions as a result of its trade war with China and enhance its national security. The deal is also expected to strengthen the US- Ukraine strategic partnership and promote cooperation in areas such as energy, trade, and security.
Against the backdrop of this proposed deal, the Ukrainian President Volodymyr Zelensky said that he considered the U.S support for Ukraine in the war as an aid and not a loan to be repaid. The Ukrainian leader was quoted to have said, considering aid as a debt to be repaid would be a “Pandora’s box” that would set the precedence requiring Kyiv to reimburse all its backers.
Further complicating the deal is the perception that the Trump administration is a biased umpire in their mediation to bring peace between the two warring factions and the Ukrainian government might not be willing to commit the country’s long-term interest to an ally that cannot be trusted. However, if the U.S government can provide the long-term security guarantees that Ukraine needs, they might just be able to pull off the deal.
The proposed rare earth minerals deal between the US and Ukraine is a strategic move that will enhance America’s energy security, economic growth, and national security. By diversifying its supply chain and reducing its reliance on China, the US can unlock new opportunities for cooperation and growth with Ukraine. As the global rare earth minerals market continues to evolve, this partnership will play a critical role in shaping America’s long-term strategic interests and promote its economic and national security objectives.
Oshobi, a management consultant, development economist, and author, writes from Lagos, Nigeria