What is strange about the resource agreement between the USA, Ukraine, and Russia?

^{Titan quarry in Zhytomyr region. Photo: Roman Pilipey / AFP / Scanpix / LETA}
The issue of achieving peace in the Russia-Ukraine war is largely tied to agreements on the extraction of rare earth metals. Kyiv is proposing to extract these metals in its territory to secure funding and security guarantees for economic recovery. In response, Moscow emphasizes that Russia has several times more reserves of these metals and suggests that their extraction could also be initiated in the recently annexed territories of Ukraine.

Why does the US need these metals? Why might their importance be potentially overstated?

Mikhail Korostikov, a researcher at the Belgrade Center for Security Policy, clarified this issue for the Carnegie Politics project.

Why does the US need rare earth metals?

Donald Trump's attention to rare earth metals is not coincidental. This group of 17 elements is crucial for producing high-tech products ranging from electric vehicles and solar panels to reusable rockets and aircraft. For example, each F-35 aircraft uses about 400 kg of rare earth metals. At the same time, the US imports over 70 percent of these metals solely from China.

Washington has been trying to overcome this dependency for quite some time, but these efforts have so far been unsuccessful. In 2018, the US attempted to increase tariffs on rare metals coming from China, but soon had to abandon this idea. This is because China mines 60 percent of the world's rare earth metals and processes 90 percent of them—there is no alternative that can replace its position in this field.

In 2019, in response to the trade war, Beijing announced it would limit the supply of rare earth metals to the US. This caused a short-term panic, with the prices of some metals rising by 150 percent.

Following these threats, Washington immediately announced a "Federal Strategy for Ensuring the Supply of Critical Minerals." This document outlined plans to sharply increase production volumes. Since then, various US government agencies have spent billions of dollars in this direction. Among the largest projects are the construction of the Lynas Rare Earths Ltd plant in Texas and the expansion of the Mountain Pass mine in California.

These efforts have not been in vain. The US produced 28,000 tons of rare metals in 2019, and by 2024 this figure is expected to reach 45,000 tons. However, due to the increase in consumption, the overall balance has not changed: from 2019 to 2024, China's share of US rare earth metal imports averaged 72 percent.

Why is mining rare metals difficult?

Establishing control over the production and supply of many minerals is one of the main levers in China's trade war with the US. In December 2024—before Donald Trump is re-elected—Beijing fully banned or severely restricted the export of tungsten, gallium, germanium, and graphite in response to US sanctions against Chinese semiconductors. Although these metals are not classified as rare earth elements, Washington had included them in its list of the most critical minerals for industry.

This restriction led to serious economic losses for the US—tungsten prices soared by 200 percent, and the country's GDP decreased by $3.4 billion. At the same time, China controls only 48 percent of global tungsten production, meaning this was merely a warning. If Beijing were to actually limit the supply of rare metals to the US, it would deal a significant blow to all of the US's high-tech sectors, from smartphones to military aircraft, with losses amounting to hundreds of billions of dollars.

There are several reasons for the US to address the problem of reducing its dependence on rare earth metals from China. First, the characteristics of the mines that contain such metals. Unlike their name suggests, rare earth metals are widespread on the Earth's surface, but their concentration, which is economically viable for extraction (for example, 1-2 percent of metals per ton of waste soil), is very rare. The US has proven reserves of 1.9 million tons, while Russia has 3.8 million tons. However, these figures are nothing compared to China's massive reserves of 44 million tons. Additionally, not only does China have a large reserve, but the concentration in their ore composition is also high.

Second, the characteristics of their extraction. Mining and processing rare earth metals require huge investments. At least $500-700 million must be spent in the initial stages of a project, not including additional costs. Moreover, the market prices of the metals are highly volatile, making these projects risky investments. As a result, in 2024, 84 percent of the rare earth metal projects worldwide were funded by state budgets, with the private sector showing little interest.

Third, these metals never occur in pure form in nature; they are found in complex compounds that are difficult to separate. This process requires special technologies. Over the last 30 years, almost no one other than China has made serious investments in this field. Chinese leaders view rare earth metals as an opportunity to utilize modern technologies, willing to pay any price—financial, social, and ecological—for this direction. In 1992, when Deng Xiaoping visited Inner Mongolia, he said: "There is oil in the Middle East, and rare earth metals in China."

^{Bayan-Obo mining region in western Inner Mongolia. 2010
DigitalGlobe / Getty Images}
Finally, fourth, mining rare earth metals causes serious environmental damage. The most common method of separating them involves washing with various strong chemicals, including strong acids. When applied on a large scale, this process poisons the soil, water, and air.

The world's largest mine—the Bayan-Obo mine in Inner Mongolia mentioned above—is a vivid example of this. The water, air, and soil there are filled with toxic metals, acids, and radioactive isotopes. This not only causes ecological issues but also significant social problems. Due to environmental standards in Western countries, such production has not developed for a long time. Only in recent years, with the emergence of relatively clean technologies, have changes been observed in this field.

Why are agreements on metals important for negotiations?

The process of mining and processing rare earth metals is very complex and requires significant costs. Therefore, producing them in the short or medium term in the territories of Russia or Ukraine would be difficult for the US.

Most of the mines in Ukraine remain under Russian control or are located in areas that can be reached by its artillery strikes. Even if these areas are reclaimed, the risk of developing mines in these regions without long-term peace guarantees is very high for investors.

Whether the US government will agree to invest in these projects is also a big question. If an American facility in the Kharkiv region were to be hit by a stray shell, could Washington view this as a direct attack and retaliate? The US has been trying to avoid such risky situations in recent years.

Even if a long-term peace agreement is signed, issues will remain unresolved. Mining rare earth metals requires a huge amount of energy, and Ukraine's energy system is insufficient for this. After three years of war, Russia's energy system has been almost completely destroyed. This further increases the costs of launching mines—since each plant will require a separate power station.

Additionally, there are no security guarantees from the US for Ukraine in the discussed agreements. Donald Trump has made his position clear: "I will not provide excessive guarantees on security. Let Europe do that." This creates a situation where the US benefits from Ukraine's resources, but Europe must bear the costs of protecting them.

The project proposed by Russia may seem theoretically easier, but it also faces nearly insurmountable problems.

The US could invest in Russian mines located further from the border, but this raises issues of transportation infrastructure—these mines are located far from major trade routes. There is also the problem of using technologies—most of them are under sanctions. But the biggest obstacle is the issue of property rights protection. Over the past two years, Russia has nationalized the assets of several foreign investors with almost no compensation.

^{Kovdorsk iron ore mine in Murmansk region
Lev Fedoseyev / TASS / Profimedia}
Moreover, Putin's proposal contradicts the interests of Russia's most important partner—China. Considering that China plays a crucial role in stabilizing the Russian economy, it is hard to assume that Moscow would go against Beijing's interests.

Therefore, the likelihood of this agreement being realized is very low. The Trump administration is a unique phenomenon in the US political system, and the next president will likely try to revisit its most controversial decisions. Even if an agreement with Russia is reached, it will not last long and will be canceled.

For now, all the projects related to rare earth metals being discussed in Moscow and Kyiv seem to be designed merely to achieve tactical advantage in negotiations. Even if official documents are signed, they are likely to be quickly forgotten. Real projects in this field can only be implemented if the Russia-Ukraine war ends with stable peace. Even then, it will not happen quickly.