Does the US need Ukraine's rare earths to move away from China?

US President Donald Trump wants access to Ukraine's mineral deposits in exchange for future military aid. That's not entirely surprising to analysts. The world's largest economy and other Western countries have long had their eyes on Kiev's rich mineral resources.

Most of Ukraine's rare earth deposits are scattered in central regions but remain untapped. (Source: Alamy)

On February 3, US President Donald Trump told reporters: "We are looking to make a deal with Ukraine whereby they will secure the aid they are receiving from us by providing rare earths and other things.

“I want guarantees on rare earths. We are investing billions of dollars in this area. Ukraine has abundant rare earths and they are ready to make a deal.”

President Volodymyr Zelensky quickly "nodded" to Mr. Trump's offer. Mr. Zelensky called on Washington companies to invest in Kiev's rare earths, calling it an "important economic spearhead" in a "winning plan" to end the conflict with Russia.

Benefits for both

Mr Trump has previously suggested that any future assistance would be provided in the form of loans and would be conditional on Kiev negotiating with Moscow.

Under former President Joe Biden, the world's largest economy has provided $65.9 billion in military aid to Ukraine since Russia launched its special military operation in February 2022.

Mr. Biden argues that aid is necessary. However, the new President of the United States has made it clear that he does not believe that the country should continue to provide aid without receiving anything in return.

According to CNN , an agreement outlining deeper cooperation between the US and Ukraine on minerals has been in the works for months, before Mr. Trump took office earlier this year.

A memorandum of understanding signed under the Biden administration last year stated that the US would promote investment opportunities in Ukrainian mining projects in exchange for Kiev providing economic incentives and conducting business.

Kiev has a similar agreement with the European Union (EU), signed in 2021.

While the goal of the US-Ukraine deal — securing supplies of key minerals from Ukraine — remains unchanged, Mr Trump’s approach appears to be more transactional, said Adam Mycyk, a partner in the Kyiv office of global law firm Dentons.

"It is not yet known what form such an agreement will take, but it would be in Ukraine's best interests for its recovery from the military campaign and its long-term economic prospects. By concluding an agreement with the United States, Ukraine could maximize the processing and value creation of the country's rich mineral resources," Mycyk said.

Meanwhile, Nataliya Katser-Buchkovska, co-founder of the Ukrainian Sustainable Investment Fund, sees an agreement to bring US investment into Ukraine's mining sector as beneficial to both sides.

Revealing Ukraine's huge assets

Ukraine has huge mineral resources. In particular, the country possesses valuable assets, which are some of the most important raw materials that are essential for industries such as defense, high-tech equipment, aerospace and green energy.

Specifically, the Eastern European country owns rare earth elements such as lanthanum and cerium, used to make lighting; neodymium, used in wind turbines and electric car batteries; and erbium and yttrium, used in the fields of nuclear energy and lasers.

The World Economic Forum (WEF) 2024 report also estimates that Ukraine holds about 5% of the world’s total rare earth reserves. The country also has significant deposits of other minerals such as lithium, titanium, zirconium and is rich in other common resources such as copper, iron ore, oil and gas.

According to information from the Kyiv School of Economics (KSE), most of Ukraine's rare earth deposits are scattered in central regions but remain unexploited.

In total, Ukraine is estimated to have 305 million tons of resources, including 46 titanium deposits, 34 polymetallic deposits, 11 graphite deposits and 2 lithium deposits.

Workers survey the Yeristovo and Poltava iron ore mines in Poltava region, Ukraine. (Source: Getty)

America wants to move away from China?

According to analysts, President Trump's interest in Ukraine's rare earth resources is motivated by concerns that China owns large quantities of these resources.

The world's largest economy relies heavily on imports of essential minerals, many of which come from China. Of the 50 minerals classified as critical, the United States is completely dependent on imports for 12, according to the United States Geological Survey (USGS).

Ukraine's large mineral resources provide supply diversification for the US, helping the country move away from major producers like China.

The world's second-largest economy has long dominated global production of rare earth minerals and other critical materials.

Beijing is responsible for nearly 90% of the world's rare earth mineral processing, according to the Center for Strategic and International Studies (CSIS). It is also the world's largest producer of graphite and titanium and a major processor of lithium.

The latest trade war between the world's two largest economies makes finding alternative suppliers even more important for the US.

China's latest economic measures announced in retaliation for Trump's new tariffs include new export controls on more than two dozen metal products and related technologies.

While they do not include the most critical materials Washington needs, the moves show Beijing is ready to use its mineral resources as leverage in trade disputes.

In the future, demand for rare earths and critical minerals is expected to surge due to the global transition to electric vehicles and renewable energy development, said Mr. Mycyk.

“Therefore, Ukraine's large mineral resources provide diversification of supply to the US, allowing the country to move away from large producers like China,” he asserted.

However, there are still bottlenecks that hinder the US on its journey to cooperate with Ukraine and move away from China.

More than half of Ukraine's mineral resources, worth more than $7.5 trillion, are located in four territories that President Vladimir Putin announced he would annex in September 2022, and the Russian military currently controls most of these areas, The Independent reported.

Of course, Moscow does not support Washington's plan. Kremlin spokesman Dmitry Peskov said that Mr. Trump's idea was essentially a proposal for Ukraine to buy aid, to provide aid on a commercial basis, not unconditional support or for any other reason.

Therefore, although the benefits are clear, accessing Ukraine's huge assets remains a major challenge for the US.

Source: https://baoquocte.vn/my-can-dat-hiem-cua-ukraine-de-roi-xa-trung-quoc-303454.html