Trump and his Treasury Secretary, Scott Bessent, can say they want $US500 billion of revenue from Ukraine’s resources, ports and infrastructure, but that begs the question of whether there is $US500 billion to be had.
If Ukraine’s resources are so plentiful and attractive, why has there been so little commercial development of them? If they have been known about for decades, surely there would have been an attempt to exploit them in the decades ahead of Russia’s invasion.
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It’s not enough for resources to exist if they are to have value. It has to be commercially viable to extract them. It takes a lot of capital – hundreds of millions of dollars, if not billions, and time, a decade or more – to develop a large-scale mine.
Then there need to be processing facilities to turn the resources into marketable commodities, which is again expensive and, for rare earths, environmentally challenging. Iluka Resources’ refinery in Western Australia, for instance, is expected to cost between $1.7 billion and $1.8 billion.
The suspicion is that Ukraine’s resource base has been relatively untouched because the deposits aren’t large enough or rich enough in metals or minerals to attract the capital needed to develop them.
Complicating matters is that an estimated 40 per cent of the country’s resources lie within areas either controlled by Russia or within areas of active fighting.
Trump’s fixation on forcing Ukraine into a deal that he thinks will deliver America $US500 billion as repayment for the $US174 billion of military equipment and aid the US has provided it (not the $US300 billion Trump claims) seems to have stemmed from Zelensky’s efforts after last year’s election to improve his country’s relationship with the incoming administration.
In a visit to the US last year, he talked up the potential of Ukraine’s resources and the potential for American participation in developing them.
Trump being Trump, he has seized on the apparent opportunity to show that, unlike his predecessor, Joe Biden, he will force Ukraine to pay for the aid it has been given so far, any aid it might receive in the future and something on top of that to demonstrate his mastery of the art of the deal.
He’s making Zelensky “an offer he can’t refuse” to borrow from The Godfather, albeit that the US isn’t offering anything in exchange other than an assertion that if Washington has an economic interest in Ukraine, it will deter any future Russian aggression.
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As Zelensky has pointed out, American companies’ very substantial operations and investments in Russia and Ukraine didn’t, obviously, stop Russia from invading or seizing American interests in the past.
The US plan, as described by Bessent (who says it doesn’t involve any coercive pressure), would be to create a reconstruction fund for Ukraine in which the United States held a 100 per cent financial interest and had governance rights. The fund would receive revenue from Ukraine’s “natural resources, infrastructure and other assets”.
Ukraine would contribute half the fund’s revenues until its contribution reached $US500 billion, with the US having first rights to that initial $US500 billion.
Bessent presented the plan as a commitment to Ukraine and its reconstruction, which is not how Trump has talked about it. He has described it as payment for the aid provided.
Zelensky has said the agreement provides that for any future aid, Ukraine would be required to repay America $US2 for every $US1 it was lent. The agreement doesn’t include any security guarantees or further military support.
Given that Trump has made it clear he’s going to do a deal with Russia – which may have an economic dimension and may even include the Ukrainian resources within the regions Russia now controls – regardless of what Ukraine does or doesn’t agree to, Zelensky ultimately will have to negotiate some sort of deal that at least gives Ukraine something, even if it is only to avoid an even more adversarial relationship with the Trump administration.
While Zelensky said he wouldn’t sign something that might take 10 generations of Ukrainians to repay, he also said that if forced, Ukraine should probably “go for it” and sign the agreement.
Trump said at the weekend that he thought the two sides were close to a deal and that “we better be close to a deal.”
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“We’re asking for rare earth and oil – anything we can get,” he told a conference of conservatives on Saturday.
There may or may not be economically viable resources within Ukraine. It would take a lot of exploration and feasibility studies to determine whether there are.
Still, America’s attempted shakedown of a vulnerable Ukraine and Trump’s push to coerce it into handing over half its income from its resources in perpetuity – income that will be desperately needed if there is to be a post-war reconstruction of a state devastated by Russian bombing – is distasteful, at best.
It would be more than a little ironic if, after Trump undermines America’s reputation as a defender of democracies in his unprincipled pursuit of economic gain, the treasure trove of resources he believes lies within Ukraine turned out to be an illusion created, at least in part, by “a moderately successful comedian”.
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