What to make of the Ukraine minerals deal

0:00NPR

0:11On Monday, Donald Trump announced a pause on military aid to Ukraine. It's a huge deal. The U.S. is spending more on military assistance than the next nine other countries combined. This freeze comes after the Oval Office blow-up last Friday, just before what was supposed to be a signing ceremony on a minerals deal between the U.S. and Ukraine. And to understand why Ukraine's minerals are so important to this very fraught negotiation, you can look inside a Tomahawk cruise missile. That is where you will find a very strong type of magnet, a type so strong that it could crush your fingers off. These magnets are part of small motors and electronics that the missile uses to help hit its target.

1:01And the magnet in question is a neodymium magnet. Neodymium is what's called a rare earth element. It's one of 17 metals on the periodic table that help our modern economy spin. Rare Earth elements are also used in batteries, TV screens, and electric vehicles, as well as throughout the military. Ultimately, there's almost no defense technology that I can produce without Rare Earths. According to experts like Gracelyn Baskarin, what makes the U.S. military nervous is that China produces 70 % of the world's supply of Rare Earths. This is The Indicator from Planet Money. I'm Kenny Malone. And I'm Darian Woods.

1:42Both the U.S. and Ukraine say the door is still open to a minerals deal. So today on the show, we decided to take a closer look. What's in the draft deal? Do Ukraine's minerals live up to the hype? And who profits? Support for this podcast and the following message come from Recorded Future. Every day, millions of cyber threats compete for attention. But only a few truly matter to your business. As a leading threat intelligence company, Recorded Future cuts through the noise with precision intelligence. That's why top banks and governments trust them. Because security leaders don't just react.

2:20They foresee spotting the signals that others miss and acting before threats become setbacks. Recorded Future. Know what matters. Act first. This message comes from NPR sponsor, U.S. Bank. With U.S. Bank Business Essentials, you get more than just a bank. you get a dedicated partner that provides you a powerful combo of checking and card payment processing with quick access to the money you've earned, proving that there is nothing as powerful as the power of us. Visit usbank.com today to learn more. Member FDIC. Copyright 2025 U.S. Bank. Graceland Baskaran is the director of the Critical Mineral Security Program at the Center for Strategic and International Studies.

3:03And Graceland says the origins of this potential minerals deal can be traced to the U.S. elections last year, as Volodymyr Zelensky tried to make his case. He knew that when President Trump came, he had to take a more transactional approach. And so in his victory plan last fall, he had included minerals on his own. You know, in this new world order that we live in, minerals are a form of negotiating power. The Ukrainian government has a whole report hyping up its mineral wealth. And this struck a chord because Graceland says the U.S. is vulnerable in its lack of access to rare earth elements, especially when compared to China.

3:43The reality is we are in a very precarious time geopolitically. We put out a report at CSIS that shows that China is outpacing us at a rate of 5 to 6x with securing the minerals and manufacturing munitions and other weapons. So in a way, you know, China is operating at wartime capacity and we're operating at peacetime capacity. In the event of a conflict with China, the Chinese government could block exports of all rare earth elements, meaning the U.S. could be restricted in its ability to build new submarines, jet engines, night vision goggles and Tomahawk missiles. Now, a story about rare earth elements would not be complete without the disclaimer that they are not, in fact, actually all that rare.

4:30They are found all over the world. It's a little bit of a misnomer. It's well branded, I will say. Very well branded. But what is scarce is the processing plants to extract these. And this is where China comes in. It holds a good chunk of the world's rare earth elements. But more importantly, it has the means and the stomach to process them. China is willing to supply the huge amounts of energy needed and tolerate the torrents of pollution from the chemicals used. Even the U.S. military buys products with rare earth elements from China, though it is trying to reduce that. Javier Blas is a Bloomberg columnist covering energy and commodities.

5:08He agrees that diversifying away from just China is a good thing. He just doesn't believe rare earth elements are that important. Let's put things into context. The U.S. imported significantly more olive oil from Spain than rare earth elements from China. What about if there was no neodymium from China coming into the United States? Well, I suppose that neodymium will stop being used in other applications and it will be reserved for only military applications. And in that case, that neodymium that is produced outside China probably will be enough. Now, Graceland adds, as much as rare earth elements get the spotlight, the draft deal with Ukraine covers all natural resources, including coal, oil and gas.

5:58They also have graphite, which is very heavily used in electric vehicles, titanium, which you need for defense. The draft deal says half of the revenue from all new mines and related infrastructure, like processing plants that are owned by the Ukrainian government, would go into a shared fund. The U.S. would contribute an unspecified amount of money. The fund would reinvest into Ukraine's economy and security. Both countries could receive distributions in the future. Now, if that sounds a little vague, it's because the draft agreement is vague. Yeah, it says that further details will be ironed out in future agreements.

6:35And that's just one question mark for the deal. Grayson also points out it's unclear how possible it would even be to mine Ukraine's rare earth elements. The former director of the Ukrainian Geological Survey has said, hey, we don't even have a modern mapping of rare earths. Like, we're relying on 30 to 60-year-old data from the Soviet Union. And so what we don't know is how many of these deposits are actually commercially viable to mine. Plus, all of that electricity needed to produce these rare earth elements. Well, that's in short supply in Ukraine right now. And the challenge we have with Ukraine is a majority of the energy infrastructure has been damaged in the war.

7:16If you look at the number of substations that have been damaged by missiles and drones, it's very significant. Then there's the time needed to set up the mines and the processing plants. From the time that we do a geological mapping, which we still need to do, it on average globally takes 18 years to develop a mine into a producing asset. So I'm really looking at a 20-year effort here. Maybe it's a rare case of politicians having a long foresight, Kenny. There's never been a case of that in the history of all time, I think. I don't know. Maybe I'm wrong about that. Who knows? Who knows? Overall, while Grayson thinks the U.S.

7:54military does need a secure supply of rare earth minerals, the deal seems like something that might bear fruit a long way away. I don't think we're going to see a lot of immediate benefits in the U.S. speaking candidly. In this whole discussion, the private sector has been a bit quiet. Like nobody's running to Ukraine where I have, you know, security risk. I have very limited infrastructure. I don't have good data to make my decisions. There's some really important barriers to investment. One barrier, according to one estimate, is that 40 percent of Ukraine's minerals are in territory currently occupied by Russia.

8:32Yes, not exactly attractive for people to come in and make a quick buck. Yeah. And yet, despite all these caveats, Grayson does think the deal is good for Ukraine. I think that it can be quite beneficial for Ukraine for a couple of reasons. I mean, anytime you talk about building a mining industry, you know you're going to have to build a lot of energy infrastructure, right? You get a geological mapping. The geological survey has not been prioritized at all in the last, you know, 10 years. Could use like a boosted capacity. So there are some key things they stand to gain in the much shorter term.

9:06Supporters say this deal helps keep the U.S. invested in the long-run protection of Ukraine because it'll have more skin in the game. Critics, on the other hand, have likened the negotiations to an extortion, a shakedown. Now, a third point of view is that there's not much to shake down, not a lot of new natural resource wealth in the first place. Either way, other countries have taken notice. What we're seeing is this could potentially be a blueprint for future minerals policy and minerals deals. Take the ongoing conflict in the Democratic Republic of the Congo. In recent months, Rwandan-backed rebels have escalated their offensive against the country.

9:47And so DR Congo's president reached out to the U.S. and Europe asking if they want to cut a minerals deal. So whether or not the Ukraine deal goes ahead in its current form, it could reshape international relations. Yeah, there's a lot at stake more than just one piece of paper. This episode was produced by Cooper Gassmikim with engineering by Jimmy Keely. It was fact-checked by Tyler Jones. Kate and Cannon edits the show and The Indicator is a production of NPR.

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