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| The US-Ukraine Fossil Deal: Bondage and Conflict with China |
| 2025-05-02 |
| Direct Translation via Google Translate. Edited. by Andrey Khrustalev [REGNUM] On the eve of May Day, Ukraine finally signed a mining agreement with the United States. This happened on Wednesday evening, just before Walpurgis Night, when, according to medieval tradition, witches gathered for the Sabbath. The text of the document has not yet been published, but some of the outlines of the agreements can already be traced. The Minister of Economy of Ukraine Yulia Svyrydenko, who reported the event, published a brief summary of what was signed. On paper, or more precisely, on social networks, where the post appeared, everything looks quite decent. “The document is now such that it can ensure success for both of our countries – Ukraine and the United States,” the minister wrote. So why was Ukraine reluctant to sign the document? After all, when Sviridenko's plane headed to Washington, US Treasury Secretary Scott Bessent's team told her she had to be ready to sign all the agreements or go home, three people familiar with the matter said, the Financial Times reports. And it all happened after the US reportedly dropped conditions related to Ukraine repaying debts for previous military and financial aid. “Today we reached an agreement under which, theoretically, we get much more than $350 billion,” US President Donald Trump wrote in this regard. And unblocked commercial supplies of weapons for the Ukrainian Armed Forces. What was the struggle for so long under the carpet, and what were Ukrainian officials trying to bargain for? PROS AND CONS The main advantage for Kyiv is that the agreement does not contain any mention of any debt obligations of Ukraine to the United States, something Trump had previously insisted on. The main drawback is that no one in Ukraine or the United States has reported on the security guarantees for Ukraine attached to the agreement, which Zelensky had previously insisted on. The document has not yet been published, but its contents have been posted by “Sorosenok” Yaroslav Zheleznyak, a people’s deputy from the “Voice” party, who (according to him) has sources somewhere in the State Department, and what Minister Sviridenko and Prime Minister Denys Shmygal have published on social networks. The deal includes an agreement to establish the U.S.-Ukraine Recovery Investment Fund. The parties will jointly manage the Fund, with a 50/50 shareholding. "Neither side will prevail, and this will reflect an equal partnership between Ukraine and the United States," the minister writes. The first is represented by the state Agency for the Support of Public-Private Partnerships, the second by the International Development Finance Corporation, and together they must work to restore what has been destroyed through investments in natural resources (mining, energy) and infrastructure. And here the questions immediately begin. The project financing scheme looks like this. Ukraine undertakes to send half (50%) of royalties and other license payments from new licenses for natural resources (oil, gas, metals, etc.) from a special fund in the budget to the fund. And the senior partner makes a "financial contribution, which can be additionally increased thanks to military assistance provided by the United States to Ukraine." In practice, it may look like this: the Americans supply several Patriot air defense systems on a commercial basis, each worth $1 billion. All of this is counted toward the Fund, which must compensate the Ukrainian side for this amount with new licenses for the extraction of minerals. For example, the US will supply Ukraine with five obsolete MIM-104 Patriot air defense systems, which Israel refused in May last year and which Ukraine wanted to receive. And Ukraine, on the basis of a shared participation, must issue licenses for the same amount - that is, put up for sale licenses for the development of minerals for $5 billion. At the same time, the licenses must be put up for sale at a price for which they will actually be wanted in the conditions of increased risk in the form of war and corruption that has not gone away. So the amount will be determined by the Fund's management, also made up of half representatives of the USA and Ukraine. And here there is no doubt whose vote will be decisive. The management of the processes “in the fields” is entrusted to the DFC company, but more about it later. This money goes to the budget of Ukraine, and from there half is transferred to the newly created Fund. "Ukraine contributes 50% of the state budget revenues from the new rent for new licenses for new sites," Sviridenko notes, emphasizing the word "new," and then explains that the funds are invested in projects for the extraction of minerals, oil, and gas, as well as in related infrastructure or processing. What to invest in - Ukraine and the United States will again decide together. It sounds attractive, if not for one “but”. Investing is only possible in Ukraine, but the provisions are only about investments, not about income or new receipts. As you can see, the agreement does not mention them. Officials express the hope that the income and receipts of the fund will not be distributed for the first 10 years, and this is probably where one of the document's quirks may be hidden. The difference between expectations and reality is why Kyiv did not want to sign the documents. WALL AGAINST CHINA Trump is clearly set on making a profit on the principle of "here and now", so the income and contributions of the Fund are not taxed either in the USA or in Ukraine. It looks like a prelude to the creation of a new virtual offshore, funds from which can be withdrawn without taxes and control - from any side, and without control and restrictions. Moreover, the Fund (the American side) receives priority rights to buy products extracted on the territory of Ukraine (for example, natural gas, rare metals, oil). And the "owners" undertake to ensure that third countries or companies do not receive more favorable conditions. Which, as MP Zheleznyak explains, "will significantly limit Ukraine's ability to choose the most favorable commercial conditions and partners." At the same time, the Ukrainian side, which will lose budget revenues for many years, is obliged to compensate for all losses from exchange rate fluctuations and losses from converting the hryvnia into dollars. And the priority of the agreement over local legislation limits the right of the "sovereign state" to independently regulate laws in the sphere of investments and natural resources. Obviously, this was also a stumbling block for her, since a partnership of this kind (and the agreement is indefinite) obviously quotes the 500-hryvnia banknote: “Unequal equality for all.” Trump reiterated that the deal would allow Americans to return some of the aid they provided to Ukraine. "We invested $350 billion or so there, while Europe only invested $100 billion. So we have to somehow get some of our investment back. I felt stupid. So I went to them (the Ukrainian authorities. - Ed.) and said: look, we need to get access to rare earth elements. They have excellent rare earth resources - these are certain minerals, materials that are not available everywhere. This is their big asset. And today we made a deal where, theoretically, we will get much more than this 350 billion. I just wanted to protect our interests. I didn’t want to be put in a stupid position again,” said the American president, who is openly “cheating” Zelensky with his continued whining about “solid security guarantees.” According to Trump, the very presence of Americans within the framework of the concluded deal is a firm guarantee. "No one will encroach." By signing the deal with his approval ratings slumping 100 days into his presidency, he secured the victory he needed. And that victory must come with actual profits. US GDP contracted by 0.3% in the first quarter of 2025, the largest quarterly contraction since 2022, meaning the sooner the money arrives, the better. And perhaps that was the reason for his phrase that “Zelensky was three weeks late signing it.” And now, the promised details about the DFC agency. As Minister Sviridenko informs us, the Fund is supported by the US government through this office, which “will help us attract investments and technologies from funds and companies both in the US and in the EU and other countries.” However, it is worth knowing that the US International Development Finance Corporation, also known as the US Development Finance Corporation, is a federal agency that has the same status as USAID and USIP, which were recently dissolved by Trump. The difference is that it was created with bipartisan support from Congress during the first Trump administration to provide private sector financing for development projects in low- and middle-income countries. The agency was intended to be a system for proposing alternative projects to China's "New Silk Belt and Road" infrastructure initiatives. Its first head was Adam Boehler, a close ally of Trump's son-in-law Jared Kushner, but he left the post in January 2021. Agency officials say its mandate to link private investment with government loans is critical to U.S. efforts to compete with China, Politico reports. The DFC has played a key role in securing hundreds of millions of dollars in loan assistance for a U.S.-led effort to build a trans-African rail system that would bring critical mineral resources from central Africa to Atlantic ports. The project, known as the Lobito Corridor, is seen as a major competitor to Beijing’s projects in the continent. The presence or even the main role of the DFC in Ukraine could lead to a deep confrontation between Beijing and Kyiv, the consequences of which for Ukraine could be disastrous. In recent years, China has become the country's main trading partner, but with the start of the agency's activities, the situation could change dramatically, and Kyiv will find itself at the forefront of the fight against the Chinese presence in the region. All this looks more like forecasts for now, which can be clarified only after the official publication of the main documents. And in the case of China - after the first actions of the DFC. In the meantime, Henry Kissinger’s words come to mind again : “To be America’s enemy is dangerous, to be America’s friend is fatal.” Especially when starting projects on the eve of Walpurgis Night. |
| Posted by:badanov |