Ukrainian socialist: Five main problems with the US-Ukraine mineral deal

First published in Ukrainian at Соціальний рух. Slightly updated by author and translated for LINKS International Journal of Socialist Renewal.

The minerals deal signed between Ukraine and the United States reflects US capital’s desire to gain unhindered access to Ukraine’s mineral resources. It also gives the US new leverage over Ukraine’s economic and political situation. In contrast, there are no obvious benefits for Ukraine, despite it ceding sovereignty.

Ukraine’s Verkhovna Rada (parliament) voted on May 8 to ratify the so-called Mineral Deal. The Agreement between the Government of Ukraine and the Government of the United States of America on the establishment of the American-Ukrainian Investment Fund for Reconstruction (hereinafter referred to as the Agreement or the Subsoil Agreement) was signed on April 30. 

US imperialism used Ukraine’s vulnerable position to impose a number of disadvantageous conditions. Despite the removal of some of the more oppressive conditions (such as “billing” Ukraine for military assistance already provided), it gives the US new leverage over the economic and political situation in Ukraine. 

At present, even its public defenders will not dare say that it promises prosperity or stability for Ukraine. The very question of representatives of a foreign country being able to exclusively determine the terms of exploitation of our subsoil (which is property of the Ukrainian people) is indignant. The beneficiaries of the agreement are US capital and, perhaps, a section of the Ukrainian oligarchy, but not Ukrainian working people.

However, it would be wrong to describe this agreement as an irreversible national catastrophe. Ukraine may yet free itself from the colonial yoke and renounce the Agreement in the future, if it rids itself of oligarchic capitalism and reasserts its sovereignty.

Regarding the Agreement, here are five main problems that should be considered:

1) The deal is based on inequality between parties. The parties agree to create an US-Ukrainian Reconstruction Investment Fund in the form of a limited partnership (hereinafter referred to as the Partnership). In terms of its content, the contract provides significantly more advantages for the US side than for the Ukrainian side. 

Article II of the Agreement, which effectively overrides Ukrainian legislation, is indicative: the norm limits the possibility of adopting laws that could negatively affect the Agreement’s implementation. Article III, regarding the need for institutional transformations consistent with “market principles,” can be viewed as veiled pressure to deepen neoliberal reforms. 

Profits arising from the deal will be exempt from taxes (Article IV) and companies will be able to send them overseas. Potential compensation for losses (indemnity) is only mentioned in the context of Ukraine’s obligations (Article V). Any investment projects in subsoil use or operation of significant infrastructure facilities can be implemented by notifying the Partnership (Article VII). If Ukraine needs to meet certain additional obligations to the EU, the parties to the Agreement must conduct “good faith consultations and negotiations” on taking them into account (Articles VII, VIII).

2) The proposed model will lead to the further primarization of the economy. The essence of the Agreement in economic terms is, among other things, that Ukraine and the US will jointly seek, explore and extract natural resources, while also attempting to attract investment in critically important sectors of the economy. The main focus in the eyes of US investors is simply extracting Ukraine’s natural minerals. 

This will push into the background the possibilities for mutually beneficial cooperation in rebuilding infrastructure or developing high-tech technologies. Social issues (working conditions in the extractive sector, sustainable development) were left out of the Agreement. After all, trade unions or environmental organizations did not participate in its discussion at all. 

Reconciling the interests of the development of the extractive industry with social priorities could have positive long-term consequences.

3) Secret diplomacy undermines the legitimacy of the Agreement. The final terms of the Agreement were kept secret until the last moment, which made public discussion on this issue impossible. Negotiations and preparations were done in secret, and the position of the Ukrainian government was kept unknown. The voting process to ratify the Agreement also took place in an atmosphere of non-transparency and in the shortest possible time. 

The Ukrainian public still lacks full information about the annexes to the Agreement (the so-called Limited Partnership Agreement). The Main Scientific and Expert Directorate did not express its assessment of the draft Law on Ratification (No. 0309), as not all related documents were attached to the Agreement.

4) The Agreement does not strengthen security, but limits sovereignty. During the war, Ukraine will not receive everything it needs from the US. This is clear from Donald Trump’s statements. But signing the Agreement confirms the idea that Ukraine will not be able to use its existing wealth as before. 

The signing of the Agreement is motivated by security considerations, but in reality it will not bring anything useful in this area. The promised military support is illusory (Article VI refers to the possibility of transferring weapons with the subsequent inclusion of their cost as  capital contribution by the US). 

One cannot help but notice how cautious the wording is regarding the Russian-Ukrainian war: recognition of Ukraine’s contribution to maintaining international peace by countering Russian aggression is not even mentioned.

5) The Agreement is a consequence of the inability of neoliberal authorities to mobilize resources. Ukraine is forced to resort to risky ways to attract investment precisely because of the fear of nationalizing strategic industries, introducing a progressive tax scale, and combating the shadow economy. 

The signing of an unequal agreement on future cooperation has been forced upon Ukraine due to its need to protect itself from Putin’s invasion. This Agreement is, after all, a logical result of the fact Ukrainian authorities proposed ​​developing subsoil resources to obtain foreign funds at the end of 2024. The blackmail by the US administration during negotiations over the Agreement shows how difficult it will be to push this process in the direction Ukraine requires.

The most important lessons we should draw from the current situation are the following: the context surrounding the Agreement will objectively contribute to dispelling illusions about the nature of US imperialism, and the idea that Ukrainian people should rely only on themselves will become even more entrenched. 

Ukraine’s minerals can benefit the people, but for this to occur authorities must implement a socialist economic model, in which the state controls the economy and redistributes wealth among the different social strata. 

In terms of international cooperation, there are opportunities to build equal relationships with the countries of Europe, which themselves are interested in seeing Ukraine strong and protected.

Vitaliy Dudin is a member of Соціальний рух (Social Movement).