The U.S.- Ukraine Minerals Deal: How Rare Earths Are Reshaping Geopolitics

BIANNA GOLODRYGA, ANCHOR: Well, as we discussed earlier, a potential minerals deal between the U.S. and Ukraine is still on the table. In her New York Times opinion piece, our next guest says, Trump is taking a page out of China’s foreign policy playbook as we enter, quote, “a new era,” minerals diplomacy. Gracelin Baskaran the director of the Critical Mineral Security Program at the Center for Strategic and International Studies. She joins Hari Sreenivasan to discuss why leaders are going after these precious resources.

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HARI SREENIVASAN, CORRESPONDENT: Bianna, thanks. Gracelin Baskaran, thanks so much for joining us. In the last week, we saw a potential deal between the president of the United States and the president of Ukraine fall apart about mineral rights. And I think, you know, people were kind of caught up in the viral moment that happened in the Oval Office and all the information and news about this entire mineral conversation got buried. So, let’s kind of back up a little bit and set the table a little bit for our audience here. What was the mineral rights deal that was supposed to take place?

GRACELIN BASKARAN, DIRECTOR, CRITICAL MINERALS SECURITY PROGRAM, CSIS: The original deal actually called for Ukraine to pay $500 billion back to the United States for military aid that had already been provided. In exchange, President Zelenskyy wanted security guarantees. However, the U.S. never actually spent $500 billion on aid in Ukraine. We know the figure to be closer to about $138 billion. So, eventually the deal got negotiated down and down and down and ultimately, where we landed is that there would be a fund that would be set up and all future mineral, oil, and gas projects would take 50 percent of their revenue and put it into this fund. And this fund amongst other things could also invest in Ukraine. However, the security guarantee never came back, which was the point of ultimate contention.

SREENIVASAN: So, I guess that’s kind of — you’re laying out what both parties wanted. On the one hand, the United States wanted some sort of re- compensation for the aid that we’ve given and on the other hand, Zelenskyy assumes that, hey, if I’m in a long-term partnership with the United States, they’re going to want to protect their assets. So, I get some security.

BASKARAN: That’s right. He wanted an explicit security guarantee included. And then, President Trump argued that, you know, the cooperation in of itself was an implicit security guarantee, that there would be less likelihood of another invasion if there was a strong relationship with the U.S.

SREENIVASAN: OK. And now, let’s talk a little bit about kind of what are the minerals at stake here. Why are we intrigued by what is on the inside underneath the soil of Ukraine?

BASKARAN: It has a variety of resources. They’ve got everything from oil, gas, coal, but they’ve got graphite, rare earths, uranium, titanium. But what we were really after were the rare earths. And rare earths are a group of 17 elements and they’re actually a bit of a misnomer, because they’re not actually rare. In fact, they’re everywhere. But they tend to occur in small quantities and they’re very difficult to extract. But over the last five years, the U.S. has really prioritized rare earths because they’ve been weaponized by China. The earliest kind of weaponization was back in 2010. China cut off rare earth exports to Japan over a fishing trawler dispute. And then since then, we’ve seen them roll out a series of restrictions on the U.S. Now, rare earth, while used in energy technologies, are absolutely vital for our defense. We use them in missiles, lasers, tanks, warships, fighter jets, all munitions. And so, what the U.S. did, because China has 90 percent of the world’s rare earth processing capabilities, is we decided five years ago that we were going to leverage our Defense Production Act, and withdrew federal funds, put out $300 million to build rare earth separation facilities here at home in America. Now, the big dilemma is that geology doesn’t totally favor us. So, we have about 1.3 percent of the world’s rare earths, which aren’t really enough to feed the processing capabilities we’re building. So, what — even under President Biden, the Development Finance Corporation was already starting financing for a rare earth project in Brazil, Cerro Verde. And then we saw a rapid escalation of that under President Trump. We saw him talk about rare earths from Greenland, rare earths from Ukraine. So, he’s basically developing a strategy in a way to source rare earths from other parts of the world to bring them home, process at home and manufacture those defense technologies.

SREENIVASAN: How much of the area in Ukraine that might have some of these minerals is now under Russian controlled territory versus Ukrainian?

BASKARAN: Yes, Donbass region certainly is extremely resource rich. We have graphite there and we have rare earths there. There is a lot of coal in Donbass, but rare earths actually, from the very preliminary, you know, decades old mapping, do exist in other parts of the country. One thing that’s been quite noticeable, you know, is that there has been a lack of private sector voice in advocating for this agreement. And part of it is the private sector doesn’t know if they want to go there. You have multiple challenges. So, the first one is the mapping. The second is mining is incredibly energy intensive, you know, globally, it uses 16 percent of the world’s electricity. And a lot of that energy infrastructure has been damaged in the war. And the third thing is the looming risk that sits across the border. And this is where we disagreed and the negotiations kind of blew up is, you know, again, Zelenskyy is like, well, I want an explicit security guarantee. The private sector would also like an explicit security guarantee. Because, you know, from the time I start looking at an asset, it’s 18 years on average, globally, just to build the mine and then it’s another — that mine can run for another 30 to 80 years. So, you’re really looking at close to 100 years. And companies and President Zelenskyy are going well, not really sure if I’m willing to make that long-term bet. A mine can cost $500 million to a billion dollars. What if putin decides to kind of expand occupied land because he’s not letting go of it?

SREENIVASAN: What you’re pointing out is there’s sort of an interesting redrawing of alliances based on these minerals and how hard they’re going to be to get and especially how important and hungry we are for them right now. So, I mean, it seems like foreign policy is now potentially being driven by our access to these resources. And we’ve been in that boat before, 30 or 50 years ago, it might’ve been a different set of minerals.

BASKARAN: Absolutely. And it’s also we — I mean, we’ve done it with oil for a long time.

SREENIVASAN: Yes.

BASKARAN: But even if you look — I mean, I would say the reason China has built this huge comparative advantage is they’ve linked up their foreign policy in Africa, Latin America, Asia, to their domestic industrial strategy. People don’t realize, you know, they only have about 10 percent of the world’s nickel, cobalt, lithium, but what they’ve done is they process between 40 and 90 percent because they have strategically sourced from around the world and then they bring them back home for processing and they’ve established complete dominant. So, Trump, in a way, is trying to take a page out of this playbook to say, let me source from all these other countries and bring it back home.

SREENIVASAN: Which is a kind of a case example of how interconnected the world is. And while on the one hand, policy might say, I want to be America first, what you’re pointing out with this is that you’re interdependent on all these countries where the actual minerals are sitting in the ground, even if you have the factory capacity to process them, right?

BASKARAN: Absolutely. And I mean, you see this with President Trump’s executive order on energy. He talks about mining both at home and abroad. You know, so even in the American — you know, America first agenda he hasn’t taken out the fact that we have to go global if we want to secure minerals, because we do have limited geology.

SREENIVASAN: I guess explain to our audience a little bit about how China has shaped their foreign policy around mining and minerals.

BASKARAN: So, China’s investments in their foreign policy has largely targeted mineral rich jurisdictions. So, for example, you know, Chile was one of the first countries to become, you know, about part of the Belt and Road Initiative. And now, they supply a third of China’s raw copper that is now refined in China and then processed and manufactured into really important technologies. If we look at Africa, Belt and Road Initiative investment has been used very strategically. An interesting example back in 2007 was, you know, DRC had just come out of conflict, and what China did is they negotiated a deal. They provided $3 billion of infrastructure to the DRC in exchange for access to $93 billion of cobalt and copper and coal lazy (ph) down in the copper belt. Today, 15 of the 19 biggest cobalt and copper mines are owned by Chinese companies. So, it was a very strategic long-term bet where they provided the infrastructure to develop the country at a time when no other country really wanted to come in and provide that capital. But in exchange, I mean, they have secured almost all of their cobalt supply coming from the DRC.

SREENIVASAN: Yes. So, how does the U.S. stance towards China right now complicate things? I mean, right now we’ve been, you know, incredibly strong rhetoric, but also, we’re threatening tariff upon tariff.

BASKARAN: Our policy with China is actually driving us in the opposite direction. So, a lot of these efforts you’ve seen with aggressive kind of minerals diplomacy and efforts to build these supply chains is with the sole purpose of reducing reliance on China. You know, living in Washington I can tell you the most — the easiest way to convince someone of an idea is to explain to them that we are at risk at China and both the Republicans and the Democrats will move. Minerals are one of the most bipartisan issues in Washington. In fact, you know, shortly after inauguration, I was talking to a senator’s office and he said, you know, we actually think minerals might be one of the only areas we can co- write a bill in now. So, that is the area that we are in Washington is it touches on Departments of Defense, State, Interior, Commerce. It’s far reaching. In fact, I think there’s 15 government departments working on minerals, and it’s really a countering China effort.

SREENIVASAN: Is there a potential here? Are there any minerals that are so necessary to us that we would go to war over them? Is it what’s in my cell phone right now? Is it what might be in an electric car battery, or is it something that, as you pointed out, is maybe in a missile or some sort of other weapon system?

BASKARAN: So, I would say the ones that are in our defense technologies, which is actually where China has been hitting the hardest lately. So, some of the recent restrictions have been on antimony. Then we saw tungsten come out. People are worried about titanium because these are really hard materials. If you go back and you look at the restrictions China rolled out the first week of December in 2024, they actually left open a provision for other super hard materials. And sure enough, tungsten came right after that. So, those are the critical vulnerabilities we’re looking at right now, because for some of these the U.S. doesn’t have an alternate supply.

SREENIVASAN: You’re in Canada right now for a conference about this. And what are the people that are there thinking about, you know, look, they might be talking about mining and minerals most of the time, but the geopolitics of this has become very front and center, at least to the rest of us over the last couple of weeks.

BASKARAN: You know, there’s a certain amount of frustration. You know, it’s like you’re willing to go to Ukraine and make a deal with minerals that, you know, we don’t really know entirely what’s there and commercially attractive, but you’re trying to roll out tariffs on Canada, which is a really important ally and is the biggest supplier of nickel, which is vital for defense technologies automotive manufacturing, huge supplier of uranium, which is how we need our nuclear energy. We get one-fifth of our power in the U.S. from nuclear energy. We don’t really produce much uranium. So, it’s interesting is there’s this like cognitive dissonance that’s existing in the private — you know, the private sector, but even with policy makers worldwide who are in Canada this week for this conference to go, OK, we’re willing to go make these deals in places that are really hard and the private sector doesn’t want to go. But then, we have our really stable allies over here that we’re penalizing when they could be really strategic and reducing our reliance on China.

SREENIVASAN: So, if we are trying to do this, I mean, I guess, is the intention kind of in the right place? Because it seems like if China controls such an enormous quantity of minerals that we need intense sort of amounts, should we be trying to figure out how to acquire our own steady supply of those things?

BASKARAN: That’s the goal of what we’re trying to do. So, if we look at the last five years, you know, we have our development finance corporation, which is how the U.S. funds projects abroad. And we’ve seen, you know, we own part equity in a rare earth project in South Africa. We have part equity in a project — a nickel project in Brazil. We did a loan for a graphite project in Mozambique that feeds back to Louisiana. So, it is a growing effort. You know, what we’re doing now is we’re building on actually four really phenomenal years of what I like to call minerals diplomacy. Now, obviously Trump’s tactic is a lot more aggressive in terms of, you know, making it a potentially the end of a war, a hinging aid to it, talking about annexing. So, I mean, it is part of a strategy that we’ve been building over time because we’re not going to counter China alone. It’s physically impossible.

SREENIVASAN: You mentioned an interesting phrase, minerals diplomacy. I mean, what are the unintended consequences when a country gets incredibly rich, incredibly fast? You know, like how do you protect from making sure that that country doesn’t get aggressive towards its neighbors or that all of the money ends up going to a dictator that is horrible to their people?

BASKARAN: The short answer is that we can’t. We did, as a government, this $150 million loan to a graphite project in Mozambique. And then, the civil war basically ended the project and it went force majeure in December. Natural resources have historically driven an enormous amount of conflict globally, right? Anytime you can grab capital out of things very easily, it gives way to tensions and challenges. So, we’re starting to see that play out. I mean, look, the — right before this — Zelenskyy came to the U.S., President Putin announced that he, too, was willing to negotiate and try and make a minerals agreement. And he didn’t just negotiate with minerals on Russian land, he was willing to also do it with minerals on Russian occupied land, which is a little bit of a red flag. So, again, we’ve seen that he — his willingness to negotiate with land that’s not his is part of why the private sector is going, hey, that doesn’t mean he’s not going to further expropriate land take it once the investment is here. So, we have seen that driver of conflict certainly escalate.

SREENIVASAN: Are we creating sort of the odd incentives, right? I mean, if the price of titanium or whichever mineral just keeps going through the roof, then isn’t there an incentive for one country to look over across the border and say, well, he or she has some right there, let me just send in some tanks and try to secure that area?

BASKARAN: This is a lot of what’s happening with the Democratic Republic of Congo in Rwanda right now, right? In the DRC, President Shigeto last week also asked President Trump for a critical minerals agreement in exchange for military support, but for quite a while now, Rwanda, under Paul Kagame, has been going in and smuggling resources out and then bringing them back into Rwanda. Rwanda is a tiny country, and then they signed a critical minerals agreement with the E.U., you know, and the Congo is going, but those are our resources that you’re signing an agreement with and smuggling it through and it’s funding conflict. So, it does create a lot of perverse incentives. And look, speaking candidly, if the U.S. is to succeed in its minerals diplomacy, it’s going to better need to leverage security forces anyway. Ultimately, like, we need to make sure that when we’re going in and making investment that our people and our assets are safe. And when you talk to the private sector in a number of these places from Mali to the Congo to Ukraine, it’s like, we can’t go in there without a sense of protection because that risk does remain.

SREENIVASAN: Director of the Critical Mineral Security Program at the CSIS, Gracelin Baskaran, thanks so much for joining us.

BASKARAN: Thank you for having me.