Agreement on Reconstruction Fund: The US and Ukraine signed an agreement to establish a Reconstruction Fund aimed at attracting global investments in Ukraine’s economy.
Investment Contributions and Returns: The fund will be financed by US contributions and potential Ukrainian revenues from new resource licenses, with profits intended for future investments in reconstruction.
Political Implications: The agreement enhances Ukraine’s strategic partnership with the US, despite lacking explicit security guarantees, marking a politically advantageous outcome for both nations.
The benefits of a minerals deal with the US can include:
Increased Investment: Enhanced foreign investment in local mining sectors, leading to economic growth.
Job Creation: Development in the minerals sector can lead to new job opportunities for local populations.
Technological Advancements: Access to advanced technologies and expertise from US companies can improve mining efficiency and safety.
Trade Relationships: Strengthening diplomatic and trade ties between countries can lead to further economic cooperation.
Resource Security: Provides a stable supply of critical minerals necessary for industries such as technology and renewable energy.
Market Access: Facilitating access to US markets for exported minerals, potentially improving revenue.
Sustainability Initiatives: Collaboration on sustainable mining practices can lead to environmentally friendly operations.
Geopolitical Leverage: Strengthening a country’s position in global geopolitics through strategic partnerships.
There were various potential names for the rare earths, minerals, natural resources and economic agreement that the US and Ukraine had hoped to conclude immediately after the inauguration of US President Donald Trump in January.
In the end, after a number of attempts and amendments, an agreement to establish a United States-Ukraine Reconstruction Fund was signed between Washington and Kyiv on April 30.
It consists of just 10 pages, with a two-page appendix. “Together with the United States, we are creating the Fund that will attract global investment into our country,” Ukrainian First Deputy Prime Minister Yulia Svyrydenko posted on Facebook. The agreement does not mention any Ukrainian debt obligations to the US, nor does it change Kyiv’s course towards European integration.
What is the fund supposed to do?
Svyrydenko said that the US would make contributions to the fund. In addition to direct funds, she said, it could include air defense systems for Ukraine. For its part, Kyiv will contribute 50% of revenues from new licenses for extracting raw materials to the fund and can also make additional contributions.
“We expect that the first 10 years of profits and income of the fund will not be distributed, but can only be invested in Ukraine, in new projects or reconstruction. These conditions will be discussed further,” the minister posted on Facebook.
The US-Ukrainian minerals deal still needs to be ratified by the Ukrainian parliament. But the opposition European Solidarity faction is unhappy that lawmakers were not included in the negotiations and has demanded that Ukrainian President Volodymyr Zelenskyy hold talks with representatives of the parliamentary groups and factions.
When will the first investments come?
“An agreement with the US is essential for Ukraine today,” Ilya Neskhodovskyi, head of the analytical department of the Ukrainian think tank National Interests Advocacy Network, or ANTS, told USA News.
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“We pay and give up part of our revenues, but in return we receive military and financial support as well as American investment,” he said. “As the Americans will control the way the investments are made, it is assumed that they will then be more willing to invest in the Ukrainian economy.”
However, the money will not start flowing immediately. Experts believe that investment can only be expected after the end of the “hot phase” of Russia’s war against Ukraine, a freeze in the conflict, or the signing of a peace agreement.
“New projects are out of the question now during the war. I don’t think they will be possible before the middle of next year,” said Anatoliy Amelin from the Ukrainian Institute for the Future. “Companies that plan to invest in Ukraine, be it in raw materials, mining or processing, must take this into account in their budgets for next year,” he added, speculating that, at best, US investment would come to Ukraine from 2027 and 2028. “The US is still motivated to help us, but the next aid will accumulate as debt obligations in the fund.”
Trump has been clear he wants Ukrainian resources in exchange for aid, he’s not doing this for free.
Will US military aid be resumed?
At the same time, experts also pointed out that the agreement is politically advantageous for Ukraine, as it continues cooperation with the US, including in terms of intensifying military aid. “This is a huge political and diplomatic victory for Ukraine!,” wrote Tymofiy Mylovanov, the head of the Kyiv School of Economics and former Ukrainian economy minister on Facebook. It “gives Trump an internal political victory, and because of this a more positive attitude to Ukraine.”
He continued: “Ukraine was able to protect its interests in this agreement! All the draconian wishes of the other side, despite the insane pressure that is hard to imagine, have been canceled. And the deal seems fair.”
According to media reports, immediately after the agreement was signed, Trump agreed to sell at least $50 million (€44m) worth of weapons to Ukraine for the first time during his second term of office.
Did Zelenskyy get security guarantees?
Critics have pointed out that the agreement lacks any US security guarantees for Ukraine. And yet this was Zelenskyy’s original goal when he initiated the signing of an agreement with the US.
“This is an agreement for the future. The agreement is more of a political nature, it is an attempt to restore relations with the US. But it contains no security guarantees, and that is a real problem for Ukraine,” Yevhen Mahda, executive director of the Ukrainian think tank Institute of World Policy EU News.
He said that Ukraine had already signed more than three dozen security agreements with international partners. “These are more useful in terms of security policy issues than the agreement with the US on the establishment of an investment reconstruction fund.”
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