U.S. and Ukraine Partner to Secure Critical Minerals

In a significant move to secure critical mineral supplies, the United States and Ukraine have signed a mineral agreement. On May 1, local time, Ukraine's First Deputy Prime Minister and Minister of Economy, Yulia Svyrydenko, announced the signing of the "U.S.-Ukraine Reconstruction Investment Fund Agreement," commonly referred to as the "mineral agreement." The U.S. Department of the Treasury also confirmed the establishment of the U.S.-Ukraine Reconstruction Investment Fund on April 30, local time.

The fund, jointly managed by the U.S. and Ukraine on a 50:50 basis, ensures that neither party has dominant control. The fund will be financed entirely by revenues from new permits, covering 50% of the funds from new permits in critical materials and oil and gas projects. These funds will be incorporated into the budget upon the fund's establishment. Existing project revenues or budget revenues are not included in the fund. Ukraine stated that the fund will subsequently invest in mining, oil and gas projects, and related infrastructure or processing projects. The specific investment projects will be jointly determined by Ukraine and the U.S.

Analysts suggest that in the era of "Trump 2.0," resource diplomacy has become a key tool in U.S. foreign policy, aimed at ensuring the supply of critical resources for the U.S. This focus on resource leverage is driven by the political goal of enhancing domestic manufacturing competitiveness and driving industrial return. For instance, rare earth elements are crucial in high-tech products and defense industries. Europium is used to produce vibrant colors on smartphone screens, yttrium is essential for superconductors in the aerospace industry, and neodymium is used in the production of electric vehicle motors.

Ukraine plays a pivotal role in the global mineral supply chain. As of 2022, Ukraine has identified over 8,000 mineral deposits, possessing 22 out of the 50 critical minerals listed by the U.S. These include iron, manganese, titanium, and uranium, among others, with significant global reserves.

In contrast, the U.S. has long relied heavily on imports for its critical mineral resources. In 2023, the U.S. Department of Energy listed 50 critical minerals, including lithium, nickel, cobalt, manganese, vanadium, and graphite for batteries, chromium, tungsten, tin, and titanium for alloys, and germanium, gallium, indium for high-tech applications, as well as 15 rare earth elements including yttrium, scandium, and neodymium. According to the U.S. Geological Survey, in 2022, the U.S. was entirely dependent on imports for 12 of these 50 critical minerals, and more than half of its supply for 28 others came from imports.

In an effort to address this dependency, Donald Trump ordered a trade investigation into critical minerals and their derivatives on April 15. The investigation aims to assess the impact of these imports on national security and resilience. If the U.S. Secretary of Commerce determines that the import of critical minerals poses a threat to national security, and President Trump decides to impose tariffs, the tariff rates under Section 232 of the Trade Expansion Act of 1962 will replace the current reciprocal tariff rates. This investigation will cover critical minerals, including rare earth elements, as well as processed critical minerals and derivatives, which are considered essential for the U.S. defense industrial base.