Mr. Zelensky goes to Washington

As President Zelensky travels to Washington to sign a U.S.-Ukraine minerals framework agreement at the White House on Friday, important elements of Trump 2.0 geopolitics are falling into place.

While Kyiv seeks to keep Trump engaged in its security as all parties consider bringing the conflict to an end, the new U.S. administration is putting an end to the post-Cold War order and ushering in a new “spheres of influence” era.

The Framework Agreement

The minerals deal is a Framework Agreement, in Zelensky’s words, and serves as a prelude to more detailed Bilateral and Fund Agreements to be hammered out subsequently. Language in the Agreement is revealing, and includes:

• A joint Reconstruction Investment Fund, to collect and reinvest revenues, income from future monetization of Ukraine’s natural resource assets.

• Ukraine’s government to contribute 50 percent of revenues from relevant government-owned natural resources to the Fund.

• These are minerals, hydrocarbons, oil, natural gas, and relevant infrastructure. Current budget revenues are excluded.

• The U.S. will maintain a “long-term financial commitment to the development of a stable and economically prosperous Ukraine.”

• The U.S. supports “Ukraine’s efforts to obtain security guarantees needed to establish a lasting peace”, with both parties committing to identify “necessary steps to protect mutual investments.”

• The subsequent Bilateral and Fund Agreements will be “integral” to establishing a “lasting peace” and to strengthening “economic security resilience.”

• Particular attention to sanctions violation or circumvention.

• Avoiding conflict with Ukraine’s EU accession ambitions.

• Of note for debt investors: avoiding conflict with “obligations under arrangements with international financial institutions and other official creditors.”

Ukraine’s minerals

Ukraine’s State Geological Service estimates lithium reserves to be 500,000 metric tons, among the largest in Europe but only 1-2% of the ~30 million metric tons in economically viable global reserves.

For graphite that figure is as high as 6%, while for uranium it is 2-4%, and for titanium 1%.

Ukraine also has rare earths used in nuclear power, lasers, electric vehicle batteries, wind turbines, lighting, and TVs.

Western investors see highly-attractive opportunities in Ukraine’s post-war reconstruction.

This is particularly true in energy and minerals, which speaks to the agreement, but also in the infrastructure, agriculture, IT and defense tech sectors.

Mercenaries in Washington

The glaring omission from Ukraine’s perspective is the absence of any explicit U.S. security guarantees, though the wording links stability and peace to prosperity and investment protection.

This suggests that the U.S. isn’t entirely off the hook for Ukraine’s security, and tying in mutual investments may be enough to keep Trump interested.

Tellimer’s Hasnain Malik has called the deal “bizarre” and that there must be “more than meets the eye”.

The optics could be a way to enable Trump to continue supporting Ukraine financially while sticking to his America-first dealmaking narrative.

It also allows Zelensky to appear to have resisted some US demands.

My own view is the one that Occam’s Razor would suggest, that the simplest explanation is most likely.

Trump sees Ukraine as real estate and will only continue to support Kyiv in exchange for an economic benefit in return, all while wanting to disengage from Europe more broadly.

Dunces in Brussels

Mentioning the EU is a poignant reminder of who is going to be left holding the bag for Ukraine’s security.

In a new world where hard power matters more than ever, the days of European foot-dragging at taking the continent’s defense seriously and putting it into their own hands are now resolutely behind us.

Germany’s new Chancellor-elect Friedrich Merz has essentially said as much.

With NATO membership off the table for now and amid waning U.S. engagement, European security guarantees and EU membership have become more important to Kyiv.

Yet, from an EU member state perspective, accepting Ukraine as a member would be a challenge for the bloc, even if Kyiv were to meet Brussels’ accession conditionalities.

Thieves in Moscow

The deal’s wording about preventing sanctions violation is a thinly-veiled reference to the fact that much of Ukraine’s mineral resources are now located in Russian-held areas.

It is estimated that the Donetsk, Luhansk, and Dnipropetrovsk regions are home to 70 percent of Ukraine’s $14.8 trillion in critical minerals, though Russia controls much of Donetsk and Luhansk.

Other analysis suggests that around $12.4 trillion of mineral, metal, and energy deposits are located in Russia-controlled Ukraine, though this appears to measure a broader range of resources.

The Ukrainian organizations National Institute of Strategic Studies and We Build Ukraine think that 40% of Ukraine’s metal deposits are in territory under Russian control.

EU and U.S. sanctions prohibit trade of any goods originating from Russian-occupied areas, including minerals, coal, and other raw materials.

Even if the U.S. were to walk back relevant sanctions in order to pursue some sort of economic rapprochement with Moscow, it is unlikely the EU would do so as well.

Thus any resources extracted from Russian-controlled territory in Ukraine will continue to be nearly impossible to export onto global markets for the foreseeable future without laundering or black market trade.

Moreover, foreign companies have been burnt in Russia in so many instances that few would be willing to risk investing anywhere in Russia proper.