Ukraine minerals deal could help US reduce reliance on China amid trade tensions: Observers

As Ukraine scrambles for United States support to fend off Russia on the battlefield, Kyiv officials signalled a major minerals agreement could be signed with Washington on Friday (Feb 28). 

Observers said US President Donald Trump has been eyeing this deal as it could help the US to depend less on China, which controls about 70 per cent of the world’s critical rare earth minerals.

Beijing’s rare earth sector has grown in significance to America and the rest of the world due to rising demand for tech products.

Rare earths comprise 17 minerals whose production China dominates, accounting for 90 per cent of global refined output. They are also vital for a host of industries like defence, aerospace and artificial intelligence.

While rare earth minerals are not uncommon, economically viable deposits are difficult to find. Washington reportedly imported 70 per cent of its rare earth metals from Beijing between 2020 and 2023.

Trump has demanded that Ukraine give the US access to its rare earth minerals to compensate for the billions of dollars of wartime aid it received under former US President Joe Biden.

“Potentially, (gaining an upper hand on Beijing) is what the US administration is trying to do – play the Ukrainian natural resources against what China may have offered to the US economy,” said Leonid Petrov, senior lecturer and dean of business and management at the International College of Management, Sydney.

“We understand that Trump, who started the trade war with China, is now facing the interruption of supplies of rare earth metals from China,” he added.

Late last year, amid escalating trade tensions, Beijing banned exports of certain critical minerals that have widespread military applications to the US.

In 2023, China banned the export of technology to make rare earth magnets, adding it to an existing ban on technology to extract and separate the critical materials.

NO UPDATED UNDERGROUND MAPPING

Mining economist Gracelin Baskaran noted that minerals “are the shaping force in our foreign policy right now” and has been “part of the conversation on US-Canada foreign policy”.

However, she pointed out there is still a lack of information on exactly how much Ukraine’s vast mineral reserves hold. 

Much of its reserves remain untapped due to difficulties in access, old and undeveloped infrastructure, and a lack of investment. Some mineral deposits are also located in Russian-occupied Ukrainian land.

Kyiv has said it holds about 5 per cent of the world’s “critical raw materials”. These include 19 million tonnes of graphite ore, as well as one of Europe’s largest confirmed reserves of lithium, which is crucial to making batteries, ceramics and glass.

In 2022, prior to Russia’s invasion, Ukraine said its global share of titanium production was 7 per cent. 

The US imported more than 95 per cent of its titanium – used to build aeroplanes, electronic devices and medical equipment – as of 2023. 

“Ultimately, we don’t know what’s underground with much detail in Ukraine. The majority of Ukraine was mapped 30 to 60 years ago by the Soviet Union, and there's not a lot of updated data mapping,” said Baskaran, who is director of the Critical Minerals Security Program at US-based think tank Center for Strategic and International Studies.

“What we have now essentially is an agreement without actually understanding what is economically viable to mine. Just because you have a resource doesn't make it competitive to mine,” she told CNA’s Asia First programme.

NOT A SHORT-TERM PROJECT

Baskaran also stressed that the benefits of the deal will not materialise under the Trump administration.

It takes 18 years on average globally to build a mine, which lasts between 40 and 80 years – potentially longer with brownfield investment, she said.

“This is not a short-term (project) that, by the end of Trump's term, we're going to see minerals coming this way. But again, remember that all minerals policy is long-term,” she added.

“We started building rare earth separation processing facilities (in the US) a few years ago to reduce our reliance on China, which processes 90 per cent of the world's rare earths, but they're not finished yet. These are multi-year projects.”

Petrov told CNA’s Asia Now the deal has seemed “very strange” and “very hurried”, adding that Ukrainian President Volodymyr Zelenskyy was “desperate to save his country”.

Under Trump, the US has sought to thaw relations with Russia. This shift in policy has sparked fears that it could spell the end of US support for Kyiv and the rest of Europe.

Petrov noted that the minerals deal does not seem to provide a commitment from the US to give security guarantees to Ukraine in the wake of any ceasefire deal with Russia – one of Kyiv’s prior demands for an agreement.

Nevertheless, reports stated that Washington has cut clauses deemed unfavourable to Ukraine, such as a demand that it provide US$500 billion worth of resources. Kyiv previously said this was far above the official figure of US$65.9 billion in US military aid to Ukraine since the invasion.

“We are looking at very unclear, very shadowy dealings, and there are many questions about this deal particularly in the state of war,” said Petrov.

“Those signatures (on the deal), in the current situation of an ongoing war of aggression, perhaps won’t be very long-living."