U.S. and Ukraine could still secure minerals deal that is ‘positive’ for both sides, officials say

U.S. President Donald Trump’s hopes of securing access to Ukraine’s rare earth minerals hit a wall Saturday after President Volodymyr Zelenskyy rejected the bid on the grounds that it was too focused on U.S. interests.

Prospects of an economic pact in exchange for Washington’s support for the war-torn country have gained traction over recent days amid talk of a wider deal to end the war, but Zelenskyy said the offer tabled thus far did not provide any specific security guarantees for his country.

“I didn’t let the ministers sign a relevant agreement because in my view it is not ready to protect us, our interest,” Zelenskyy told The Associated Press on Saturday in Munich. The U.S. had proposed taking ownership of 50% of Ukraine’s critical minerals, Reuters reported, citing three people familiar with the matter.

Still, officials at Munich Security Conference have said there is scope to negotiate a deal that is palatable to both sides.

U.S. Republican Senator Lindsey Graham on Saturday said such a deal could be a “game changer” in resolving the conflict and a “nightmare” for Russian President Vladimir Putin.

“This minerals agreement between the United States and Ukraine is a game changer, because President Trump can go to the American people and say Ukraine is not a burden, it’s a benefit,” Graham said Saturday.

“If this minerals agreement happens it’s a nightmare for Putin, because we have something to defend that we didn’t have before,” he added.

Ukraine is home to vast deposits of precious minerals critical for manufacturing high-tech products. The Kyiv School of Economics estimates that the country hosts deposits of 20 out of the 50 critical raw materials, including titanium, lithium and zirconium.

President Trump has said he wants $500 billion worth of such minerals from Ukraine to help reduce U.S. dependence on China, but Zelenskyy said any exploitation would need to be tied to security guarantees for Ukraine.

Democratic Senator Chris Coons told CNBC Saturday that the deal could be a “positive” for both sides, provided it made security assurances for Kyiv.

“If this is an investment opportunity where American companies and other companies from Europe would be involved in mining and processing, so that we can be independent of Chinese sources of these strategic minerals — and if his helps deepen and strengthen our partnership to help ensure the security of Ukraine going forward … that would be a positive thing,” Coons said.

He added, however, that there were some descriptions of the deal that are “quite different from that.”

The existing U.S. proposal centers on the use of Ukraine’s rare earth minerals “as compensation” for funding already provided by the Biden administration, as well as payment for future support, the Associated Press reported current and former senior Ukrainian officials as saying Saturday.

“The U.S. has made it very clear, their foreign policy is going to be transactional, nothing else,” Binaifer Nowrojee, president of the Open Society Foundation, told CNBC Sunday. Nevertheless, she said, Ukraine remains in a “good place to negotiate.”

Ukraine has long been looking to develop its critical mineral industry and an agreement with the U.S. could provide the support needed for the capital intensive work of mineral extraction and processing.

Nataliia Shapoval, head of KSE Institute, a think-tank within the Kyiv School of Economics, which compiled a database of Ukraine’s critical minerals, agreed that a deal could be mutually beneficial for both countries if negotiations were done “in good faith.”

“Ukraine wants to believe that Trump wants an economics-based, serious basis for discussions with Putin. If there would be more U.S. investors in Ukraine, there would be more basis to protect Ukraine,” Shapoval told CNBC Thursday via video call.

Still, she emphasized that any agreement must contain more than reparations and would need to go hand in hand with a wider deal with Russia to end the fighting.

“If Trump is not planning to use critical raw materials as part of the framework for negotiations with Russia, and is just thinking we want reparations for its help, it’s a waste of time for everyone involved,” she added.