Ukrainian and US teams reportedly reached agreement on a critical minerals agreement, and President Volodymyr Zelenskyy is expected in Washington on February 28 to formalize the deal.
The idea has not gone down well in Ukraine and Zelenskyy faces serious political risks if he is seen as bowing to US demands without explaining how the deal benefits Ukrainians. Some have referred to it as the “Budapest Memorandum 2.0”, a reference to the failed US-UK-Russia commitment to keep Ukraine safe and independent.
The details are limited at the moment, but Ukraine has successfully resisted the administration’s attempts to secure $500bn in critical mineral deposits.
Political pressure and coercion
President Trump’s open threats that Ukraine will have problems if President Zelenskyy doesn’t sign the agreement not only contradicts the spirit of the strategic partnership but also undermines an already weakened international law.
The Vienna Convention on the Law of Treaties stipulates that treaties procured by the coercion, threat, or use of force shall be without any legal effect (Article 51-52).
The US also has commitments under the 1994 Budapest Memorandum, in which the US among others, committed to “refrain from economic coercion, designed to subordinate to their own interest the exercise by Ukraine of the rights inherent in its sovereignty and thus to secure advantages of any kind” (Article 3).
Turning grants into loans
President Trump’s demand that profits from the agreement be used to reimburse US aid to Ukraine over the past three years is ungrounded.
Following the same logic, Ukraine might ask its partners to compensate it for the huge quantities of weapons disposed of under the 1992 Treaty on Conventional Armed Forces in Europe (5,300 tanks, 2,400 armored combat vehicles, and 477 combat aircraft), or the 2005 Ukraine-NATO agreement (15,000 tons of munitions, 400,000 small arms, and 1,000 man-portable air-defense missiles).
The demand might also contradict US law. Aid to Ukraine in the form of irrevocable grants is stipulated in five funding bills passed by bipartisan votes of Congress from 2022-2024.
Only the last Ukraine Appropriation Act in April 2024, provides for potentially forgivable loans ($9.4 bn of economic and budgetary support). The first half of this loan ($4.7bn) was forgiven by President Biden in November, so President Trump has power over the other half of these funds.
Moreover, the extraction of Ukrainian minerals by private companies will not return taxpayers’ money to the US budget. And Ukraine-US deal could set a dangerous precedent of converting grants into loans post factum, even though the EU stated on February 24 that it will not demand any of Ukraine’s natural resources in exchange for aid provided. It has though suggested its own, notably generous critical minerals agreement to Ukraine.
Value of the deal — disproportionate figures
President Trump is demanding the repayment of a much higher amount ($500 bn) than the amount of aid actually provided ($175 bn).
Importantly, only part of this money has been spent and delivered to Ukraine; mainly humanitarian and economic aid amounting to about $43bn. Military aid funds ($66bn) remain in the US and are invested in US military production.
Half of this sum goes to US companies to replenish weapons sent to Ukraine from existing stocks under the PDA program (about $34 bn). The other half goes to US companies to produce weapons for Ukraine under the USAI program (about $33bn). Because of bureaucratic hurdles and long lead times, Ukraine has so far received only a small portion of the weapons under this program.
Finally, a big share of “Ukraine funds” (about $60bn) is not earmarked for Ukraine, but for strengthening US military capabilities and US military presence in Europe, aid to Europe and Asia, and other items.
Statements that Europe has allocated much less aid than the US are inaccurate. In 2022-2024, the EU has allocated $174bn in military ($52bn) and financial, humanitarian and refugee aid making up the rest.
The deal
The approach to the deal differs in Kyiv and Washington, with the first seeking security guarantees in exchange for critical minerals and the second perceiving an agreement from a purely economic perspective.
Under the deal, Ukraine would give 50% of the profits from the extraction of natural resources to an investment fund in which the US would have significant, but not 100%, control.
The first two versions of the agreement (as of February 7 and February 21) were openly described by some as “economic colonization of Ukraine”. But the final agreement is said to address some of Ukraine's concerns: it appears not to commit Ukraine to providing a set amount of revenue to the investment fund; does not appear to relate to past aid to Ukraine. It also remains unclear whether Ukraine will still be obliged to repay a certain amount to the US if profits from critical mineral extraction are below expectations.
Dividing Ukrainians
There is an understanding in Ukraine that Zelenskyy has few choices when facing immense US pressure, but by signing the bad agreement Ukrainian president risks losing part of the public support that has returned in recent weeks following President Trump's criticisms.
Economic cooperation with the US in general and investments in particular are seen by experts and decision-makers as positive for Ukraine. However, the main concern remains political and moral — that war-torn Ukraine might not receive security guarantees and will become an economic colony under the unfair deal.
This would cause frustration and division in Ukrainian society.
Under the Ukrainian constitution though, critical minerals belong to Ukrainian people, so the additional detailed deal on establishing an investment fund in Ukraine will have to be ratified by the Ukrainian parliament. This could put the issue of security guarantees back on the table.
The deal to be signed in Washington will be just a first step - a “framework agreement” meaning Ukraine and the US will have more time to settle potential disagreements when discussing.
In the end, US companies will be the first to ask President Trump about protecting their investments from Russian aggression. Ukraine has been arguing this for years – only strong bilateral security guarantees or NATO membership could be a reliable ground for Ukraine’s reconstruction, as they will secure European and American investments from future Russian aggression.
Marianna Fakhurdinova is a Non-resident Fellow at the Center for European Policy Analysis (CEPA) and Associate Fellow at the New Europe Center (Kyiv).
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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