The U.S. and Ukraine strike a minerals deal

Summary

Marketplace Morning Report: The U.S. and Ukraine Strike a Minerals Deal

Release Date: May 1, 2025 | Host: Liana Byrne | Source: Marketplace Morning Report via BBC World Service

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1. U.S.-Ukraine Minerals Agreement: A Shift Toward Economic Partnership

In a significant development, the United States and Ukraine have formalized a mineral and energy reserves deal aimed at fostering an economic partnership. This agreement transitions focus from solely military aid to include collaborative economic interests, intending to motivate continued U.S. investment in Ukraine’s defense and reconstruction efforts.

Key Highlights:

• Profit Sharing: The U.S. will share profits from the future sale of Ukraine's mineral and energy reserves.
• Non-Exclusive Rights: Ukrainian lawmaker Lisa Yaskov emphasized that Ukraine retains full ownership of its mineral resources, stating, “We don’t grant anyone like exclusive rights to Ukrainian minerals” ([00:34]).
• Tax and Debt Implications: Yaskov highlighted that revenues from the deal “will not be taxed in Ukraine or United States” and clarified that the arrangement does not constitute a debt obligation to the U.S. ([00:34]).

2. U.S. Congressional Skepticism: Concerns Over Taxpayer Benefits

Not all U.S. stakeholders view the deal positively. Democratic Congressman Brad Sherman expressed reservations about the tangible benefits for American taxpayers:

“This deal only applies to deposits of minerals that neither the communists nor the capitalists thought were worth exploiting” ([01:28]).

Sherman draws a parallel with historical mineral exploitation in Ukraine, suggesting that the deal may not generate significant value.

3. Implementation Challenges Amid Ongoing Conflict

Gracelyn Baskerin from the Center for Strategic and International Studies provided an expert perspective on the practicalities of executing the minerals deal amidst Ukraine's ongoing conflict:

“There are so many stages of development that we have first right, we’ve got to do a mapping, we’ve got early stage project development. That all takes time” ([02:01]).

Baskerin outlined several hurdles:

• Infrastructure Damage: Half of Ukraine’s power stations are damaged, complicating the energy-intensive mining sector.
• Development Timeline: Establishing new mines typically takes around 18 years globally, indicating that substantial progress will extend beyond current U.S. presidential administrations ([02:01]).

4. Global Economic Updates

a. Bank of Japan's Economic Outlook

• The Bank of Japan maintained steady interest rates but significantly reduced its growth projections, attributing uncertainty to U.S. tariffs. Despite this, inflation is expected to remain on target.

b. IMF's Middle East and North Africa Forecast

• The International Monetary Fund downgraded its growth forecast for the Middle East and North Africa, warning that escalating trade tensions could impede economic progress more than previously anticipated for the coming year.

c. Meta Faces EU Regulatory Challenges

• Meta, formerly known as Facebook, is confronting stringent regulations from the European Commission. The company's "consent or pay" model, which forces users to choose between a paid subscription or data consent, has been deemed a violation of the EU’s Digital Markets Act.

“On Wednesday, Meta told investors and analysts that it expects that this decision by the European Commission will likely prompt it to make changes that could make the user experience for European users worse and could also have a materially adverse impact on its own business” ([03:23]).

Analysts believe Meta is attempting to sway public opinion to counteract the regulatory measures.

5. Manufacturing Downturn in China Amid U.S. Trade Tensions

Amid an intensified trade war with the United States, China’s manufacturing sector has experienced a sharper decline than economists had predicted. The impact is particularly evident in the world's largest wholesale market located in Yiwu, where businesses are adapting to decreased reliance on U.S. buyers.

Insights from Yiwu Market:

• Diversified Clientele: With U.S. dependence dropping from 20% to 14% of Chinese exports, traders are now catering more to the Middle East, Russia, and South America.

  “We used to have buyers from the U.S. now we don't care. We have rich buyers from elsewhere. Doing business with them is good” — Trader Hu Qianqiang ([05:40]).

• Perception of U.S. Market: Some Chinese traders believe the trade war will adversely affect American consumers more than the Chinese economy.

  “I hear there are lots of protests in the U.S. most of their products came from here. Do you think they need us? Of course they do” — Seller Lin Xiupang ([06:28]).

• Future Prospects: Despite ongoing tensions and lack of direct negotiations, Yiwu remains resilient, with traders optimistic about long-term growth in China over a diminishing U.S. market presence.

  “I believe this kind of tit for tat would just last for a while, maybe one or two months” — Trader Hu Qianqiang ([07:05]).

Laura Bicker’s on-the-ground reporting from Yiwu illustrates the marketplace’s strategic pivot to diversify its customer base amidst geopolitical uncertainties.

Conclusion

The Marketplace Morning Report delves into the evolving geopolitical and economic landscapes shaping today's global markets. From the U.S.-Ukraine minerals deal and its implications to the resilience of Chinese manufacturing amid trade wars, the episode provides a comprehensive overview of pivotal developments poised to influence international relations and economic trajectories in the near future.

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For more in-depth financial insights and updates, tune into Marketplace’s Financially Inclined podcast, hosted by Jannelli Espinal.

Transcript

[Liana Byrne]

The US and Ukraine have finally struck a minerals deal. Live in the uk this is the Marketplace Morning report from the BBC World Service. I'm Liana Byrne. Good morning. The US has signed a deal with Kyiv to share profits from the future sale of Ukraine's mineral and energy reserves. After months of fraught negotiations, the agreement marks a shift from military aid towards an economic partnership which aims to incentivize the US to continue to invest in Ukraine's defense and reconstruction. Here's how Ukrainian lawmaker Lisa Yaskov, the ruling Servant of the People party, responded.

[Lisa Yaskov]

So there are good parts in it which includes that we are not giving up anything from Ukraine. We don't grant anyone like exclusive rights to Ukrainian minerals. But that's a fair deal where United States are actually investing in a reconstruction fund and they will have 50, 50 access to the mineral deals. There are more interesting parts in it as for instance this revenues will not be taxed in Ukraine or United States. And what is important for us is that this deal is not actually a debt obligation to United States as it was discussed before.

[Liana Byrne]

But not everyone in Washington is convinced. Democratic Congressman Brad Sherman says it's unlikely to deliver much for US taxpayers.

[Brad Sherman]

Let's look at it this way. For well over 50 years, the Communists looked all over Ukraine and determined what minerals were worthy of exploiting. Now for the last 35 years, capitalists have done the same thing. So this deal only applies to deposits of minerals that neither the communists nor the capitalists thought were worth exploiting.

[Liana Byrne]

And with the country still at war, how will any of this actually happen? Gracelyn Baskerin of the center for Strategic and International Studies says progress, progress will take time.

[Gracelyn Baskerin]

It will not be easy to even to do the work. There's so many stages of development that we have first right, we've got to do a mapping, we've got early stage project development. That all takes time. A lot of energy infrastructure has been damaged in the war, so half of the country's power stations have been damaged. And mining is an incredibly energy intensive sector. So there's a lot of elements of development that have to happen here before it would yield actual minerals coming out of the ground. Just for context, generally globally, it's 18 years to develop a new mine into production. That's four and a half presidential administrations in the United States. It's a long term effort.

[Liana Byrne]

Gracelyn Basker in there now. Let's do the numbers. The bank of Japan held interest rates steady, but cut its growth outlook sharply, citing uncertainty from U.S. tariffs. Still, it says inflation should stay on track. The IMF has downgraded its forecast for the Middle east and North Africa, warning trade tensions will slow growth more than expected next year. Now Facebook's parent company Matter says its user users could face in a materially worse experience after a major regulatory blow from the European Commission. EU authorities find matter $230 million, saying its consent or pay model breached a new law. The BBC's Lilly Jamali has more.

[Lily Jamali]

The consent or pay model leaves users to choose between paying for a monthly subscription or consenting to being trained tracked using their data. Last week, the European Commission ruled that this approach that was suggested by Metta violates the Digital Markets act, which aims to promote competition by regulating the big tech gatekeepers, which includes Meta now. On Wednesday, Metta told investors and analysts that it expects that this decision by the European Commission will likely prompt it to make changes that could make the user experience for European users worse and could also have a materially adverse impact on its own business. One analyst I've been speaking to today said he thinks that Metta is trying to turn the tide of public opinion so that they push back against the regulatory approach.

[Liana Byrne]

Lily Jamali there now. Manufacturing in China is down, no great surprise, but it's fallen more sharply than economists predicted amid a trade war with the US so how are businesses there faring? The BBC's Laura Bicker has been to the world's largest wholesale market in the Chinese city of Yiwu.

[Laura Bicker]

This is the sound of Chinese traders trying to stay ahead of their local competition in the cavernous lobby of the world's largest shopping mall. Even before the shutters are opened, they are reciting key phrases they can use with their customers. Ten years ago, they mostly traded in English. These days they need Spanish, Arabic, and a little French. We are in IWU wholesale market. This is the biggest wholesale market in the world, and it has hundreds of stalls selling various toys. Oh, I'm just being showered by bubbles. Things have changed here since Donald Trump was last in power. The US President's first trade war taught Yi Wu a lesson. There are buyers elsewhere, as trader Hu Qianqiang explains. What do you think of Trump?

[Hu Qianqiang]

He's a joke. We used to have buyers from the U.S. now we don't care. We have rich buyers from elsewhere. Doing business with them is good.

[Laura Bicker]

The 75,000 stallholders in Yiwu are no longer as reliant on the U.S. as they once were. Eight years ago, 20% of Chinese exports were sold to the U.S. that figure is now 14%. Instead, the halls are filled with buyers from the Middle East, Russia and South America. Oscar is from Colombia.

[Oscar]

China is a big country, a big people, a big food is the most important country of the world. USA is go down. China is up.

[Laura Bicker]

Around 80% of all US toys come from China. And seller Lin Xiupang believes this trade war will hurt Americans more than the Chinese.

[Lin Xiupang]

I hear there are lots of protests in the U.S. most of their products came from here. Do you think they need us? Of course they do.

[Laura Bicker]

Talks between the two sides are still not underway. According to China's Foreign Ministry. Despite Donald Trump's assertion that he has spoken to President Xi Zhou Bo, a retired senior colonel from the People's Liberation army, says Beijing will not blink.

[Hu Qianqiang]

First in China, we say we have to let the bullet fly for a moment. That means right now, in the fog of war, we do not know what would come next. And I believe this kind of tit for tat would just last for a while, maybe one or two months.

[Laura Bicker]

While the US President waits for his Chinese counterpart to pick up the phone, the city of IWU is looking for new customers. Even as darkness falls, and even though it's peak monsoon season, the rain is pelting down. Trade is in full flow. Everyone's haggling after the best price. The belief here is that even though there will be short term pain in the long term, China, not America, will grow stronger in China. I'm the BBC's Laura Bicker for Marketplace.

[Liana Byrne]

And that's it from the Marketplace Morning Report. From the BBC World Service, I'm Lianna Byrne. Have a great day and thanks so much for listening.

[Jannelli Espinal]

If there's one thing we know about social media, it's that misinformation is everywhere, especially when it comes to personal finance. Financially Inclined from Marketplace is a podcast you can trust to help you get serious about your money so you can build a life you've always dreamed of. I'm the host Jannelli Espinal, and each week I ask experts important money questions, like how to negotiate job offers, how to choose a college that you can afford, and how to talk about money with friends and family. Listen to Financially Inclined wherever you get your podcasts.