Q&A of the Day – What Is the Real Deal Behind the Failed Ukraine – US Rare Earth Deal?
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Today’s Entry: Hi Brian, I am confused by the so-called deal for “rare earths” between US and Ukraine. The elements that I have heard include nickel, titanium, lithium and maybe several others. NONE OF THESE are rare earths. So, what’s going on? Is there a part of the deal that we are not hearing about?
Bottom Line: Friday’s unscripted theatrics in the Oval Office that led to Ukrainian President Zelenskyy’s White House ouster – has many underlying storylines attached to it. Did Zelenskyy come to the White House to meet with President Trump in good faith or was he seeking a publicity stunt aimed at attempting to make President Trump look bad (and curry favor to his preferred position of greater US involvement in the Russia-Ukraine war)? Did Trump potentially set Zelenskyy up with an ambush in the Q&A after becoming displeased with Zelenskyy’s seeming unwillingess to follow through with the deal that had been conceptionally agreed to between the two presidents prior to Zelenskyy’s visit? But to the point of today’s question. What’s the full picture of what the deal that Trump had on the table (but has since rescinded) that involved a negotiated ceasefire with Russia and what were described as “rare earth” rights for the US? Let’s dive in.
The actual draft of the now botched deal was made public prior to the Zelenskyy visit so we can see for ourselves what specifically the framework was that fell apart. That framework included five minerals found in Ukraine that would have been part of the deal. Those minerals are:
- Cobalt
- Graphite
- Lithium
- Nickel
- Titanium
Now, to the point of today’s note... cobalt, graphite, lithium and nickel – while important to many aspects of our economy, and national defense, are not considered rare earth minerals. While there is some debate about the classification of titanium – native titanium is considered a rare earth mineral. For this reason, it was technically accurate for the deal’s framework to have been said to include rare earth minerals. As for why President Trump’s interest in these minerals is high – I'll break it down this way and it will reveal a theme.
World’s top producer of each mineral:
- Cobalt: Congo
- Graphite: Indonesia (Russia 2nd)
- Lithium: Chile
- Nickel: Indonesia (Russia 2nd)
- Titanium: China
On the surface there may not seem to be much commonality however consider this... Which country is the top miner/exporter of these minerals by country? China. With every one of them. While perhaps no one other than President Trump was paying attention to what was happening with these key minerals last fall – China was rapidly sureing up its position for minerals in Chile, Congo, and Indonesia (plus Russia is China’s strongest ally).
Something that was largely overlooked last week during what was a huge news week yet again – was an executive order signed by President Trump pertaining to cooper. In the order it is stated: President Trump recognizes that an overreliance on foreign copper, in all its forms, could jeopardize U.S. defense capabilities, infrastructure development, and technological innovation. Foreign overcapacity in smelting and refining, coupled with potential export restrictions from other nations, threaten to disrupt copper availability for U.S. defense and industry needs.
The point is twofold. First, clearly President Trump is seeking to sure up the US’s position in securing essential minerals (whether “rare” or not) which is what China was doing rapidly prior to Trump’s ascension to office. Second, and related, the top producers of the specific minerals included in the Ukrainian deal are either China – or are currently most closely aligned with them... Hence the risk identified by the copper order.
The United States has less than 2% of what are considered to be essential minerals (whether rare or not). Ukraine, at a fraction of the size, has 5%. That’s what’s of value to the U.S. It’s not so much about what’s rare and what isn’t. It’s about securing an ongoing supply of what we need so that China doesn’t gain a permanent upper hand which could result in serious national security concerns. For this reason, it’s likely Trump will put the deal back on the table if Zelenskyy decides to do an about face (or is ousted and replaced).