What to make of the Ukraine minerals deal

Summary

Summary of "What to Make of the Ukraine Minerals Deal"

Podcast: The Indicator from Planet Money
Host: Darian Woods
Release Date: March 6, 2025

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Introduction

In the March 6, 2025 episode of The Indicator from Planet Money, host Darian Woods explores the complexities surrounding the recently announced minerals deal between the United States and Ukraine. This deal comes amid significant geopolitical tensions and shifts in global supply chains, particularly concerning rare earth elements essential to both civilian and military technologies.

Background of the Ukraine Minerals Deal

The episode begins with a pivotal development: former President Donald Trump’s announcement on pausing military aid to Ukraine. Darian Woods explains the gravity of this move, noting, "The US is spending more on military assistance than the next nine other countries combined" (00:11). This pause follows last Friday’s disruption in the Oval Office just before a scheduled signing ceremony for the minerals deal between the US and Ukraine.

Significance of Rare Earth Elements

Kenny Malone delves into the heart of the matter by highlighting the critical role of rare earth elements. He uses the analogy of a Tomahawk cruise missile to illustrate their importance: “Inside a Tomahawk cruise missile, you will find a very strong type of magnet... a neodymium magnet” (00:35). Neodymium, a rare earth element, is crucial not only for military applications but also for everyday technologies such as batteries, TV screens, and electric vehicles.

Gracelyn Baskerin, Director of the Critical Minerals Security Program at the Center for Strategic and International Studies (CSIS), underscores the indispensability of these elements: “Ultimately, there's almost no defense technology that I can produce without rare earths” (01:22).

US Dependence on China

A major concern discussed is the US’s heavy reliance on China for rare earth elements. Gracelyn Baskerin points out, “China produces 70% of the world's supply of rare earths” (01:26). This dependency raises national security concerns, as highlighted by the potential for China to restrict exports in a conflict scenario. Woods elaborates, “In the event of a conflict with China, the Chinese government could block exports of all rare earth elements” (04:22), severely limiting the US’s ability to produce essential military hardware.

Details of the Draft Deal

The proposed minerals deal with Ukraine is multifaceted, encompassing not only rare earth elements but also other natural resources like coal, oil, gas, graphite, and titanium. According to the draft agreement, “half of the revenue from all new mines and related infrastructure... would go into a shared fund” (06:20). This fund, supported by an unspecified US contribution, aims to reinvest in Ukraine’s economy and security, with both nations potentially receiving distributions in the future.

Challenges to the Deal

Despite its ambitious scope, the deal faces several significant obstacles:

1. Data and Infrastructure: Gracelyn Baskerin highlights a crucial issue: “We don't even have a modern mapping of rare earths” in Ukraine, relying instead on outdated Soviet-era data (07:01). Additionally, much of Ukraine’s energy infrastructure has been damaged due to ongoing conflicts, making the establishment of processing plants and mines a formidable challenge.

2. Occupied Territories: Approximately 40% of Ukraine’s mineral resources lie in regions currently occupied by Russia, deterring potential investors and complicating extraction efforts (08:40).

3. Long-Term Development: Establishing a viable mining industry is a lengthy process. As Baskerin notes, “globally it takes 18 years to develop a mine into a producing asset” (07:43), suggesting that the benefits of the deal may not materialize for two decades.

Geopolitical Implications

The minerals deal is not just a bilateral agreement but could set a precedent for future international resource negotiations. Kenny Malone references the situation in the Democratic Republic of the Congo, where mineral-rich regions are seeking similar deals amid regional conflicts: “Whether or not the Ukraine deal goes ahead in its current form, it could reshape international relations” (09:53).

Gracelyn Baskerin adds, “This could potentially be a blueprint for future minerals policy and minerals deals” (09:47), indicating the broader impact this negotiation could have on global resource politics.

Conclusion

While the US recognizes the strategic importance of securing a stable supply of rare earth elements, the Ukraine minerals deal presents numerous challenges that may delay its benefits. Gracelyn Baskerin remains cautiously optimistic about the deal’s potential for Ukraine: “Anytime you talk about building a mining industry, you know you're going to have to build a lot of energy infrastructure” (08:58). However, the immediate advantages for the US appear limited, with significant barriers to overcoming the current logistical and geopolitical hurdles.

Ultimately, the episode underscores the intricate interplay between natural resources, international politics, and national security, highlighting the far-reaching implications of the Ukraine minerals deal.

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Notable Quotes:

• “Essentially, minerals are a form of negotiating power.” — Gracelyn Baskerin (03:29)
• “China is outpacing us at a rate of 5 to 6x with securing the minerals and manufacturing munitions and other weapons.” — Gracelyn Baskerin (03:59)
• “We're operating at peacetime capacity.” — Gracelyn Baskerin (03:59)

All timestamps correspond to the original podcast transcript.

Transcript

[NPR Host]

NPR.

[Darian Woods]

On Monday, Donald Trump announced a pause on military aid to Ukraine. It's a huge deal. The US 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 ceremony on a minerals deal between the US And Ukraine.

[Kenny Malone]

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. And the magnet in question is a neodymium magnet.

[Darian Woods]

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.

[Gracelyn Baskerin]

Ultimately, there's almost no defense technology that I can produce without rare earths.

[Kenny Malone]

According to experts like Gracelyn Baskerin, what makes the US 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.

[Darian Woods]

And I'm Darian Woods. Both the US 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?

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[Darian Woods]

Is the director of the Critical Minerals Security Program at the center for Strategic and International Studies. And Graceland says the origins of this potential minerals deal can be traced to the US Elections last year. As Volodymyr Zelenskyy tried to make his.

[Gracelyn Baskerin]

Case, he knew that when President Trump came, like 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.

[Kenny Malone]

The Ukrainian government has a whole report hyping up its mineral wealth. And this struck a chord because Graceland says the US Is vulnerable in its lack of access to rare earth elements, especially when compared to China.

[Gracelyn Baskerin]

The 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's operating at wartime capacity and we're operating at peacetime capacity.

[Darian Woods]

In the event of a conflict with China, the Chinese government could block exports of all rare earth elements, meaning the US could be restricted in its ability to build new submarines, jet engines, night vision goggles, and Tomahawk missiles.

[Kenny Malone]

Now, a story about rare earth elements would not be complete without the disclaimer that they are not, in fact, actually all that rare. They are found all over the world.

[Darian Woods]

It's a little bit of a misnomer.

[Kenny Malone]

Well, 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 US Military buys products with rare earth elements from China, though it is trying to reduce that.

[Darian Woods]

Javier Blas is a Bloomberg columnist covering energy and commodities. He agrees that diversifying away from just China is a good thing. He just doesn't believe rare earth elements are that important.

[NPR Host]

Let's put things into context. The US 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 be a 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.

[Darian Woods]

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.

[Gracelyn Baskerin]

They also have graphite, which is very heavily used in electric vehicles, titanium, which you need for defense.

[Kenny Malone]

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 US 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.

[Darian Woods]

Now that sounds a little vague. It's because the draft agreement is vague. Yeah, it's, it's. Yeah. It says that further details will be ironed out in future agreements. And that's just one question mark for the deal. Graceland also points out it's unclear how possible it would even be to mine Ukraine's rare earth elements.

[Gracelyn Baskerin]

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.

[Kenny Malone]

Plus all of that electricity needed to produce these rare earth elements. Well, that's in short supply in Ukraine right now.

[Gracelyn Baskerin]

And the challenge we have with Ukraine is a majority of the energy infrastructure has been damaged in the war. If you look at the number of substations that have been damaged by missiles and drones, it's very significant.

[Darian Woods]

Then there's the time needed to set up the mines and the processing plants.

[Gracelyn Baskerin]

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.

[Darian Woods]

Maybe it's a rare case of politicians having a long foresight guinea.

[Kenny Malone]

There's never been a case of that in the history of all time. I think. I don't know. I am wrong about that.

[Darian Woods]

Who knows? Who knows? Overall, while Grayson thinks the US military does need a secure supply of rare earth minerals, the deal seems like something that might bear fruit a long way away.

[Gracelyn Baskerin]

I don't think we're going to see a lot of immediate benefits in the US Speaking candidly and this whole discussion, the private sector has been a bit quiet, like nobody's running to Ukraine, where I have 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.

[Kenny Malone]

One barrier, according to one estimate, is that 40% of Ukraine's minerals are in territory currently occupied by Russia.

[Darian Woods]

Yes. Not exactly attractive for people to come in and make a quick buck.

[Kenny Malone]

Yeah.

[Darian Woods]

And yet despite all these caveats, Grayson does think the deal is good for Ukraine.

[Gracelyn Baskerin]

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.

[Kenny Malone]

Supporters say this deal helps keep the US 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 shakedown.

[Darian Woods]

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.

[Gracelyn Baskerin]

What we're seeing is this could potentially be a blueprint for future minerals policy and minerals deals.

[Kenny Malone]

Take the ongoing conflict in the Democratic Republic of the Congo. In recent months, Rwandan backed rebels have escalated their offensive against the country. And so Dr. Congo's president reached out to the US and Europe asking if they want to cut a mineral steel. So whether or not the Ukraine deal goes ahead in its current form, it could reshape international relations.

[Darian Woods]

Yeah, there's a lot at stake, more than just one piece of paper. This episode was produced by Cooper Katz McKim with engineering by Jimmy Keely. It was fact checked by Tyler Jones Cake and Cannon edits the show and the indicator is a production of npr.

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