U.S. Firms to Invest in Ukraine’s Rare Earth Elements in Return For Continued Aid

Executive Summary:

• Ukraine and the United States reached a landmark deal on rare earth elements (REEs), with Ukraine allocating proceeds from the future monetization of its mineral resources to fund domestic projects.
• Washington has emphasized securing REEs and critical minerals from Ukraine in exchange for U.S. aid. European media, however, has criticized the terms as exploitative, warning of long-term economic burdens for Ukraine.
•  The United States has shifted to direct negotiations with Russia, excluding Ukraine, sparking diplomatic tensions. Ukraine and European allies insist on participation, casting doubt on negotiation outcomes.

As Russia’s full-scale invasion of Ukraine enters its fourth year, a looming question has emerged regarding how the new U.S. administration’s policies will impact aid to Ukraine. The United States is now seeking reimbursement for continuing assistance. On February 25, Ukraine and the United States reached a landmark deal on critical minerals, which will reportedly establish a fund to invest in projects within Ukraine.  Proceeds from “future monetization” of Ukrainian state-owned mineral resources will contribute to 50 percent of the fund (Kyiv Independent, February 25). Details on the obligations of the United States have yet to emerge.

Discussions on Ukrainian rare earth elements (REEs) have proliferated in recent weeks. On February 3, Trump remarked, “We’re looking to do a deal with Ukraine where they’re going to secure what we’re giving them with their rare earth and other things. We’re putting in hundreds of billions of dollars. They have great rare earth. And I want security of the rare earth, and they’re willing to do it” (Voice of America, February 3). Ukrainian President Volodymyr Zelenskyy subsequently noted, however, that approximately 20 percent of Ukraine’s mineral reserves, including nearly half of its REE deposits, were located in the territories temporarily occupied by Russia, limiting their availability (Dengi.ua, February 15, 2025).

REEs are a set of 17 metallic elements with chemical similarities whose optical, magnetic, and electrical properties make them increasingly critical for high-tech applications. REEs are difficult to find in the high concentrations needed for profitable mining. The People’s Republic of China (PRC) now has a global monopoly on the production (~70 percent) and processing (~90 percent) of REEs. In contrast, the United States produced 43,000 metric tons of REEs in 2022, about one-fifth of the PRC’s output, entirely from a single mine in Mountain Pass, California (Rodney C. Ewing, Sulgiye Park, Cameron L. Tracy, “Reimagining US rare earth production: Domestic failures and the decline of US rare earth production dominance – Lessons learned and recommendations,” Resources Policy, Vol 85, Part A (August 2023)).

Zelenskyy first proposed the REEs swap arrangement to Trump while he was running for a second presidential term during a meeting in Trump Tower on September 27, 2024. This was the first face-to-face meeting between Trump and Zelenskyy in over four years. During the meeting, Trump said it would be “fair” to give U.S. companies access to the minerals as U.S. aid had assisted Ukraine in withstanding Russia’s invasion. (Forbes, September 27, 2024).

During his first term, Trump had previously expressed interest in REEs and their importance to the U.S. economy. In 2017, he issued Executive Order 13817, “A Federal Strategy To Ensure Secure and Reliable Supplies of Critical Minerals” (Federalregister.gov, December 26, 2017). The goal of the executive order was to “reduce the Nation’s vulnerability to disruptions in the supply of critical minerals” because of its “strategic” nature for “the security and prosperity of the United States.”

According to the U.S. Geological Survey, Ukraine has no promising REE deposits (Bloomberg, February 10). Commenting upon this discrepancy, European Business Association Subsoil Use Committee head Dmitry Kashchuk observed that Trump, most likely, by “rare earth elements” meant “critical” materials, natural resources with strategic economic and national security importance (Deutsche Welle, February 13). This case is more likely because, of the 50 items on the U.S. list of critical minerals, Ukraine has reserves of 22 of them (U.S. Geological Survey, February 22, 2022).

The exact dollar amount of Ukraine’s REEs that Trump is seeking is unclear. On February 8, The New York Post reported that Trump said he wanted a $500 million deal with Zelenskyy to access Ukrainian REEs and gas in exchange for security guarantees in any potential peace settlement (The New York Post, February 8). Two days later, however, Trump told Fox News anchor Bret Baier during a half-hour interview, “We are going to have all this money in there, and I say: I want it back. And I told them that I want the equivalent, like $500 billion worth of rare earth. And they have essentially agreed to do that” (Fox News, February 10). The $500 billion, now used as a benchmark by the media, represents a 1,000 percent increase from Trump’s earlier proposed “deal” cost. According to the announcement on February 25, the United States dropped the demand for a $500 billion claim (Kyiv Independent, February 25).

The United States’ decision to agree on direct U.S.-Russia negotiations to end Russia’s war against Ukraine breaks with the policy of former U.S. President Joe Biden, who insisted that any peace talks must involve the Ukrainian leadership. Ukraine is being treated as an observer rather than a U.S. partner, with Trump having excluded Ukraine from proposed negotiations, which were announced after his 90-minute telephone conversation with Russian President Vladimir Putin on February 12 (Kremlin.ru, February 12, 2025). On February 13, Zelenskyy stated that the fact that Trump had a phone conversation with Putin before calling him was deeply upsetting. Zelenskyy added that Ukraine would never accept any U.S.-Russian bilateral agreements on its fate without direct participation in the discussions (Ukrainska Pravda, February 17). The pro-Kremlin Russian tabloid Komsomol’skaia Pravda gloated, “Trump signed Volodymyr Zelensky’s death sentence” (Komsomol’skaya Pravda, February 13).

On February 16, BBC News broke the story that Ukrainian officials would not attend the Russia-U.S. talks that were held in Saudi Arabia on February 18, as Ukraine had not been invited and accordingly did not send a delegation (BBC, February 16; see EDM, February 18). The previous day, the U.S. special envoy to Ukraine, Keith Kellogg, said that while the United States, Russia, and Ukraine would be involved in talks, Europe was not invited, as previous negotiations had failed because too many parties had been involved (BBC, February 15). Zelenskyy has repeatedly warned that Ukraine will not accept any deal struck without his country’s input (President of Ukraine, January 25). European media has been harshly critical of the U.S. proposition on Ukrainian REEs. On February 7, The Daily Telegraph, reviewing a draft of the pre-decisional contract marked “Privileged & Confidential,” observed, “The terms of the contract … amount to the U.S. economic colonization of Ukraine, in legal perpetuity. It implies a burden of reparations that cannot possibly be achieved” (The Daily Telegraph, February 17).

In the past three years of Russia’s full-scale invasion, Ukraine has, against all odds, managed to defend 80 percent of its territory (see Strategic Snapshot, February 24). According to the U.S. negotiating team in Riyadh, Ukraine’s occupied territories are fungible, as is future aid. The potential outcomes of any second-round discussion—the next of which is scheduled for February 27 in Istanbul—are murky at best, as Ukraine and its European allies insist they must be part of the negotiations (Kyiv Independent, February 22; The Moscow Times, February 25; TASS, February 26). U.S.-Russian obduracy in including Ukraine and Europe in peace talks raises the real possibility that Zelenskyy might simply refuse the terms Trump and Putin offer. Accordingly, the prospects of the “art of the deal” in the desert succeeding at present appear somewhat illusory.