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‘First, we need peace:' US-Ukraine minerals deal only one step on long road to investment

As Kyiv and Washington celebrate agreeing to jointly develop Ukraine’s natural resources after weeks of tense negotiations, the deal still has a long way to go before the money starts flowing.

Officials, experts, and those close to the deal say the current version of the agreement is an improvement to earlier drafts. But they caution this is just the first step to more negotiations rather than a concrete deal. And with no signatures yet on paper, things could change in the coming days.

“It’s definitely much better compared to what we saw before. I don’t see any traps, but we need to reach a final conclusion,” Oleksandr Merezhko, an MP, told the Kyiv Independent.

After weeks of back and forth, Kyiv and Washington agreed on a deal on Feb. 25. A final draft of the agreement dropped Ukraine’s major objections, including a demand for Kyiv to fill a $500 billion reconstruction fund and a 2:1 investment clause for Kyiv to double the aid given by the U.S.

The agreement would create a reconstruction fund to be jointly managed by Kyiv and Washington. Ukrainian state-owned enterprises involved in mineral deposits, oil, gas, and hydrocarbons, as well as infrastructure like liquified natural gas terminals and ports, would contribute 50% of their future revenue to the fund.

The contributions would then be invested in Ukraine at least annually with the goal of encouraging foreign investment into the country’s natural resources. Just the publicity around the fund will bring Ukraine to the attention of average U.S. investors, said Serhii Fursa, deputy managing director at investment firm Dragon Capital.

The current draft of the agreement reads more like a memorandum of understanding than an international treaty, said Merezhko, meaning it is neither politically binding nor requires ratification by Ukraine’s parliament. A second “Fund Agreement” mentioned in the draft deal that is set to be negotiated next will require parliamentary approval.

At this point, the agreement is “mainly symbolic” to show that Kyiv and Washington remain committed to “achieving common goals,” said Edward Chow, a non-resident senior associate at the Center for Strategic and International Studies.

But without the most basic elements and clarity on how the fund will work, there is a risk that “it sets up expectations that may be dashed,” he added.

President Volodymyr Zelensky and U.S. President Donald Trump could sign the agreement in Washington on Feb. 28.

While the deal doesn’t contain the security guarantees Kyiv was hoping for, the very presence of American assets in Ukraine is seen as a way to potentially encourage the U.S. to invest in Ukraine’s defense.

“Americans tend to defend more those countries where they have investments, where they have economic interests,” said Merezhko. “The more American and European companies we have in Ukraine, the better for our economy and our security.”

American involvement in state-owned enterprises, of which there are over 3,000 in Ukraine, could lead to better governance, said Andy Hunder, head of the American Chamber of Commerce in Ukraine.

A terrikon rises near a coal mine in Donetsk Oblast, Ukraine, on Feb. 22, 2025.

“If you have the right management, you could see many of these state-owned enterprises showing good results,” he told the Kyiv Independent.

The current agreement says that the revenues will not come from state enterprises that are “already part of the general budget revenues,” meaning big taxpayers like oil and gas giant Naftogaz are excluded.

The agreement also notes that the U.S. and Ukraine want to ensure that adversarial countries “do not benefit from the reconstruction” process after a peace agreement. With the White House not wanting Ukraine to fall into the orbit of its economic rival, Beijing, Merezhko believes the clause could be a “hint at China.”

The U.S. is trying to peel Russia away from China’s grip, with State Secretary Marco Rubio saying Moscow can’t become Beiijing’s “junior partner,” in an interview with media outlet Breitbart.

"We want this to generate cash to fill the American and Ukrainian state coffers."

During a press briefing on Jan. 26, Zelensky stressed the importance of the fund being Ukrainian-American rather than not simply controlled by the U.S., as in the previous proposal.

He added that the absence of debt and the removal of the 2:1 investment clause were “particularly important.” The Ukrainian government will no longer have to pay two dollars for every dollar given by the White House under the current agreement.

“The most risky factors are off the table,” Fursa told the Kyiv Independent. In his opinion, the current deal is on “much more acceptable terms” as it removes the demand Ukraine pay back U.S. aid provided to Kyiv.

What’s next for the minerals deal in Ukraine?

If the reconstruction fund is done right, it could help funnel much-needed capital into Ukraine and open the country up to U.S. investors.

The issue now is what exactly will be agreed upon once the two sides get into the weeds of it. The current agreement does not explain how the fund will be managed as this will be established in the subsequent fund agreement.

“We all pretty much have an understanding of what we want the fund to do. We want this to generate cash to fill the American and Ukrainian state coffers,” Hunder said.

Yet questions remain about under what jurisdiction the fund will be registered, its size, and its timeframe as there’s no set end date. Moreover, Ukraine’s tax laws need to be changed to redirect the cash flow from the state budget to the fund.

The fund itself may not actually come to fruition, said Fursa. He doesn’t see enough revenue from Ukraine to make it work while the U.S. government hasn’t agreed to invest into it either.

Bucket-wheel excavators mine rare earth materials in Zhytomyr Oblast, Ukraine, on Feb. 25, 2025.

Trump likely imagines private American companies will come into Ukraine and get first pick on investment projects.

Ukraine initially offered up its critical mineral deposits to Trump, promising to have trillions of dollars worth of raw materials buried in its subsoil. Ukraine’s underinvested mining sector was hopeful that a deal could bring American capital, technology, and innovation.

With the current agreement encompassing all natural resources, including the more lucrative oil and gas sectors, critical minerals have become less relevant. The agreement’s lack of secure investment guarantees into mineral mining concerns George Popov, a research analyst at the National Association of Extractive Industry of Ukraine.

“As an extractive industries association, we would like to see real guarantees of development in the mineral sector in Ukraine. Like exporting resources, developing infrastructure, or even geological investigations here made by the United States,” he said.

Focusing on new deposits rather than the current mines would be a positive step, as would privatizing some of the mining companies, said Volodymyr Landa, a senior economist at the Kyiv-based Center for Economic Strategy.

“A lot of resources that are economically feasible to mine are already mined. There are probably some cases in which we are mining some unfeasible resources,” he said. But for any investment there needs to be a “long and lasting peace,” he said.