The Ukraine-U.S. Minerals Deal: Impossible Choice for a Nation at War

The newly signed Ukraine-U.S. Agreement on the Establishment of a U.S.-Ukraine Reconstruction Investment Fund (the Framework Agreement) has been widely regarded as a breakthrough in Ukraine-U.S. relations. Still, the media has paid little attention to the Ukrainian leadership’s difficult tradeoffs in its effort to create commercial incentives for the United States to continue providing military assistance to Ukraine, which is critical in its defense against Russia. 

The White House touted the agreement as strengthening the U.S.-Ukraine strategic partnership for Ukraine’s “long-term reconstruction and modernization,” signaling to Russia that the United States has “skin in the game.” President Trump also stressed that the primary reason for the deal is to ensure a return on the U.S. investment in Ukraine’s defense since 2022, which, in his view, may ultimately exceed $350 billion. Ukrainian President Volodymyr Zelenskyy noted that the agreement is “truly equal” and mutually beneficial for the parties. Among other things, the Ukrainian government celebrated the absence of repayment obligations for previous U.S. military assistance, the preservation of Ukraine’s control over its natural resources, and the potential to attract American investments in Ukraine.

However, members of the Ukrainian parliament, who ratified the Framework Agreement on May 8, were not all that cheerful—including some from Zelenskyy’s party. Besides the lack of explicit security components in the agreement, the parliament did not have access to a limited partnership agreement (the LP Agreement), and related instruments which contain key commercial terms, including those related to partnership management, the parties’ contributions, and revenue sharing. Indeed, the extent of Ukraine’s concessions depends on the undisclosed commercial agreements. And, language in the Framework Agreement and information available in Ukrainian media suggest some of these concessions may be troublesome.  

Terms of the Partnership

The Framework Agreement outlines selected parameters of the partnership and specifies Ukraine’s substantive obligations under international law, including its commitment to ensuring the partnership’s operation. The U.S. has only nonconsequential procedural obligations about consultations in case of any disputes between the parties. Also, like any other legally binding agreements ratified by the Ukrainian parliament, the Framework Agreement prevails over all Ukrainian legislation except for the Ukrainian Constitution. It can only be terminated if both parties agree to do so.

To implement the Framework Agreement, the U.S. Development Finance Corporation (DFC) and the Ukrainian Agency on Support Public-Private Partnership (the Ukrainian Agency) signed the LP Agreement, which established the fund as a limited partnership, reportedly under Delaware law rather than international law or Ukrainian law. The Framework Agreement heavily references and effectively obliges Ukraine to ensure the performance of the LP Agreement.

Under the LP Agreement, DFC and the Ukrainian Agency act as limited partners. They both make contributions to the fund and have rights to the partnership’s revenue. At the same time, a previous version of the LP Agreement, disclosed in Ukrainian media, revealed that the partnership is most likely managed by a general partner—a newly created Delaware limited liability company (General Partner). U.S. and Ukrainian officials announced that both parties would have three board members in the General Partner, implying equal control over its decision-making. However, the Ukrainian journalists familiar with the signed LP Agreement reported that American representatives would prevail (3 to 2) in investment and administrative committees responsible for investment decisions and governance matters. At the same time, Ukrainian representatives would prevail in the committee responsible for searching for investment projects, while both parties would have equal representation on the audit committee. It is unclear from public information how the board would interact with the respective committees and whether it can effectively overrule their decisions. The American representatives would also reportedly have exclusive powers over substantial matters such as investment decisions and valuation of U.S. military assistance as a contribution to the partnership. If the Ukrainian side violates the agreement, its managers will reportedly lose their voting rights in the General Partner’s board and committees. The American side, however, is reportedly not subject to the same condition.

Investments and Preferential Rights

The fund will reportedly pool contributions from the parties and invest in various projects in Ukraine that are expected to generate returns for the partnership. Importantly, the agreement encompasses more than just minerals. At some point before the agreement’s conclusion, Treasury Secretary Scott Bessent noted that “it's not a minerals agreement. It's a general economic agreement.” Indeed, the investment activities of the fund will cover projects related to 55 minerals (listed in Appendix A, but the parties may agree on additional ones), oil and gas production (including liquified natural gas), and what the Framework Agreement calls “significant infrastructure relevant assets.” The latter term is not defined in the Framework Agreement, but a previous iteration of the LP Agreement defined these “relevant assets” as:

infrastructure and facilities that are substantially related [to the minerals, oil and gas projects] including, but not limited to roads, rail, pipelines and other transportation assets; ports, terminals and other logistics facilities and refineries, processing facilities natural gas liquefaction and/or regasification facilities and similar assets (emphasis added).

According to a member of the Ukrainian parliament familiar with the LP Agreement, there are no limits on types of infrastructure projects the fund can invest in.

Importantly, as explained by market players and experts, it may take at least a decade to discover and develop mineral mines. At the same time, the hydrocarbon and infrastructure projects can potentially begin and start generating revenue much earlier.

The Framework Agreement privileges the partnership over other potential investors in respect of the relevant investment opportunities in Ukraine. Namely, any licenses, special permits, agreements on subsoil use or production sharing agreements on the relevant minerals and hydrocarbons, as well as agreements on the construction or operation of the relevant infrastructure assets, shall require their recipients “to make relevant investment information available to the Partnership” whenever they decide to raise capital. If the partnership “expresses formal interest” to invest in these projects, the mentioned instruments shall require the recipients to “engage in good faith negotiations with the Partnership” and “refrain from granting to any third party materially more favorable financial or economic terms for a substantially similar investment opportunity.” In a similar fashion, DFC or a designee of its choice would get a right to negotiate offtake rights over the minerals and hydrocarbons on market-based commercial terms, and the holders of relevant licenses and permits would be obliged “to refrain from offering to any third party materially more favorable financial or economic terms for offtake of a substantially similar quantity or quality of product.” The undisclosed LP Agreement provides detailed conditions and procedures regarding these privileges.

Importantly, the Framework Agreement’s preamble mentioned the parties’ wish “to ensure that States and other persons that have acted adversely to Ukraine in the conflict do not benefit from the reconstruction of Ukraine following a lasting peace” (emphasis added). The qualification “acted adversely to Ukraine in the conflict” is broader than just being a warring party such as Russia and North Korea. It may also cover those who supported Russia by providing specific components and technology used in its military production, including —reportedly—China. The White House’s fact sheet on the partnership interprets this provision as including any “state, company, or person who financed or supplied the Russian war machine.” Nevertheless, there is some uncertainty about the exact adverse acts covered by this. It remains to be seen whether this qualification would be extended to cover states that reportedly helped Russia evade sanctions, such as Turkey, Kazakhstan, and Azerbaijan.

Concerns About Contributions and Revenue-Sharing

The Framework Agreement provides only partial information on how the parties will make contributions to the partnership. The specific details of this are fleshed out in the LP Agreement, including those on potential voluntary contributions. Under the Framework Agreement, Ukraine shall make a mandatory initial contribution by giving the partnership an “irrevocable right” to 50 percent of “all royalties (rent payments), license fees, and amounts payable under production sharing agreements [received by the Ukrainian authorities]” related to new licenses or special permits on the specified minerals and hydrocarbons. Ukraine has an obligation to ensure that all the relevant sums are eventually remitted to the partnership. This will concern only the licenses and permits issued on or after the effective date specified in the LP Agreement, with one exception: dormant licenses that have not been industrially exploited before the effective date.

At the same time, the Framework Agreement does not mention any required contributions from the United States—only voluntary ones. Namely, if the U.S. decides (without any obligations in this respect) to deliver “new military assistance” to Ukraine “in any form (including the donation of weapon systems, ammunition, technology or training),” its assessed value will be counted as U.S. contributions to the partnership, thereby increasing the United States’s share. The wording “military assistance in any form … including the donation” may potentially be interpreted to cover the sale of weapons as a U.S. contribution, which then would force Ukraine to make a “double payment” in the form of both the weapons purchase price and the increase in the U.S. share of the partnership’s revenue. The U.S. “Leahy Law” defines “security assistance” to include “sales of defense articles or services.” Although this definition does not govern the Framework Agreement specifically, it plausibly suggests that “assistance” may conceivably mean sales. If this is the case, the Trump administration’s approval of arms sales to Ukraine following the conclusion of the Framework Agreement may already be considered a U.S. contribution to the partnership. The disclosure of the LP Agreement would provide clarity on this point.

In addition to the military assistance, the DFC is reportedly expected to make other contributions under the LP Agreement, which may include equity, debt, insurance, and guarantee instruments, as well as technical and management assistance. The potential influx of billions in U.S. investment, if proved to be reality, would be positive news for Ukraine, and the minerals, hydrocarbon, and investment projects in the partnership’s portfolio could be initiated. It is unclear, however, whether the LP Agreement requires the U.S to make any of these contributions. A reported prior iteration of the Framework Agreement—before the rocky Oval Office meeting between Trump and Zelenskyy—included a U.S. promise to “maintain a long-term financial commitment to the development of a stable and economically prosperous Ukraine.” This commitment is absent in the signed Framework Agreement.

The undisclosed LP Agreement defines how the revenue from the partnership is shared and how the parties’ contributions (which define their revenue share) will be valued. According to Ukrainian officials, revenues would be reinvested in the Ukrainian economy and distributed to the limited partners only after the first 10 years of the partnership. And there is a significant risk that the United States’s share may end up being much larger than Ukraine’s. According to Ukrainian representatives, U.S. contributions in the form of military assistance have priority rights to revenue (so-called Class A Units), meaning that the revenue would be disbursed to them first before being paid for Class B Units supposedly held by both the Ukrainian and American sides for non-military contributions. An earlier leaked draft of the LP Agreement provided that the U.S. would also receive “4% per annum (compounded annually)” on its Class A military assistance contributions. It is unclear whether the 4 percent interest provision was preserved in the final text; however, if it was, it would significantly increase the U.S. revenue share. Moreover, the valuation of the U.S. military assistance contributions will reportedly be controlled by the U.S. representatives. Notably, some members of the Ukrainian parliament have expressed reasonable concerns about the risks of U.S. overvaluation. While these potentially lucrative returns for the U.S. may motivate the Trump administration to provide military assistance, depending on the terms of the LP Agreement, it may also mean that Ukraine receives relatively little revenue from the partnership in the future. Considering this, and subject to the success of the investment projects, President Trump’s plan for the U.S. to receive more than $350 billion in long-term revenue is realistic. Moreover, under the Framework Agreement, the partnership's contributions and income will be fully exempt from Ukrainian taxes. Therefore, fighting the war became significantly costlier for Ukraine in the long term, as the more assistance the U.S. provides, the less revenue will remain for Ukraine to receive from the partnership’s projects in the future.

Ukrainian leadership did find some relief by avoiding some of the United States’s harsher demands, including compensation for military assistance the U.S. has provided since 2022. Among other things, it used this fact to justify the agreement’s conclusion to Ukrainians. In turn, the U.S. may have used these previous reimbursement demands as an anchor in negotiations to eventually make other potential concessions in the undisclosed LP Agreement appear more palatable to the Ukrainians in comparison.

The Absence of Explicit Security Components

In his “Victory Plan” presented in the fall of 2024, President Zelenskyy suggested that Ukraine’s strategic partners, including the U.S., invest in Ukraine’s natural resources. He linked this proposal to the possibility of Ukraine receiving security guarantees from international partners. Zelenskyy also pitched the idea to then-candidate Trump in an effort to secure U.S. military aid in case he won the election. The Trump administration’s hesitance to commit to the guarantees and U.S. backstop for the potential European contingent in Ukraine was reportedly one of the main stumbling blocks in the notoriously tense negotiations.

At the end of the day, the Framework Agreement essentially contains nothing in terms of explicit security components, only affirming that it is “a tangible demonstration of U.S. support for Ukraine’s security.” It omits some potentially useful security wording included in an earlier draft of the agreement before the Oval Office meeting, which reflected “U.S. support of Ukraine’s efforts to obtain security guarantees” and stated that it would constitute “integral elements of the architecture of bilateral and multilateral agreements,” potentially hinting at the U.S.-Ukraine Security Agreement signed during the Biden administration. The fact that the Framework Agreement is not connected to the Trump administration’s explicit endorsement of the security agreement between the countries is a problem for Ukraine. But there is still some hope. The Trump administration has not withdrawn from the U.S.-Ukraine Security Agreement, indicating that the U.S. still maintains these security commitments.

The economic partnership agreement does have some positive security implications for Ukraine. It provides the aforementioned commercial incentives for the U.S. to offer military assistance and thus presents an argument for why it is worth supporting Ukraine to those with a more transactional approach within the Trump Administration and the Republican Party. This may explain Russia’s reported nervousness that “the deal could represent a new alignment between the U.S. and Ukraine that could close a window of opportunity for Russia to secure a peace deal on advantageous terms.” Indeed, in light of the increased likelihood of U.S. military assistance to Ukraine, Russia’s long-standing desire to halt the security cooperation between Ukraine and its Western partners appears increasingly unrealistic. 

The Trump administration has stated that the American “skin in the game” created by the deal sends “a strong message to Russia” and is “in essence a tacit security guarantee.” However, it seems that President Trump himself is not entirely sure whether that guarantee is genuine, as he previously stated that the primary American goal in this partnership is revenue, not security. Even so, for the U.S. to achieve the planned returns on long-term investments, Ukraine’s security environment must be attractive for investors, which would hinge on a credible post-war security arrangement. This will largely depend on the terms of a potential armistice or ceasefire between Ukraine and Russia, as well as the related security commitments of Ukraine’s partners.

Degrading the Ukrainian Parliament and Seeds for a Potential Dispute

Under Ukrainian law, for the Framework Agreement to be concluded, it had to be ratified by the Ukrainian Parliament since it pertained to the use of Ukraine’s natural resources and necessitated amendments to Ukrainian legislation. The parliament ratified the agreement with 338 votes in favor, including from opposition parties, and none against. However, the parliament did not have access to the LP Agreement with the partnership’s detailed commercial terms. Note that the Framework Agreement heavily references the LP Agreement, essentially requiring Ukraine to ensure its execution and implementation by its agencies and instruments, including by “adopting, maintaining and enforcing Ukrainian legislation.” Therefore, when considering whether or not to ratify the agreement, the parliament was unaware of all the terms of the partnership and could not properly assess its overall appropriateness. Indeed, the parliament’s expert body responsible for the scholarly analysis of bills essentially found that “comprehensive analysis of the agreement in all its aspects (economic, security, etc.) and its long-term consequences” is not possible without the parliament’s access to the LP Agreement.

Upon insistence of the opposition parties, the parliament specified in the ratification statute that it did not have access to the LP Agreement or any other commercial instruments at the moment of ratification. The statute also provides that the parliament’s ratification of the Framework Agreement did not mean “automatic approval” of the LP Agreement and related instruments, and that these additional agreements cannot “go beyond the terms of the Framework Agreement.” It is not clear whether the statute’s text was included in the exchange of notes between the parties under the Framework Agreement, and whether it may have any legal effect on the Framework Agreement’s provisions. Still, Ukrainian lawmakers’ inability to access the LP Agreement creates significant risks that the Ukrainian Parliament did not give proper and informed consent to the partnership in its entirety. In case of any future disputes, including under the LP Agreement (it reportedly provides for resolution of disputes in arbitration), Ukraine could make an argument that the Framework Agreement is invalid under international law ( due to potential manifest violations of Ukrainian law of fundamental importance), and that the LP Agreement is invalid under Delaware law ( due to potential public policy violations and duress). It could do so by relying, for example, on the absence of required informed parliamentary ratification and the robust U.S. pressure on Ukraine during negotiations, including the halting of military assistance essential for the country’s survival, that most likely contributed to the government’s decision to “blind” the parliament. Assessing the plausibility of such arguments requires an in-depth separate analysis.

The reason for not making the partnership’s terms public may have been that the Ukrainian government was not sure that the Ukrainian parliament and Ukrainian citizens would be excited about the terms of the agreement, including the aforementioned U.S. priority rights to revenue from military assistance contributions. Although many members of parliament did not appreciate being kept in the dark and were concerned about significant risks, their overwhelming support for the agreement was likely motivated by a need to maintain American military assistance and positive relations with the United States. Indeed, in the run-up to the vote, President Zelenskyy opined that the U.S. should consider revoking visas for members of parliament who voted against ratification. Such treatment of the Ukrainian parliament diminishes its institutional role and agency by effectively denying it meaningful participation in the consequential national choices within its constitutional powers. If the parliament can be sidelined in this instance, Russia and the U.S. might be wondering why it could not be sidelined in the context of peace talks. The hope is that the Ukrainian lawmakers would take a stronger stand in the latter context.

It would be in the interest of both the Ukrainian and American people to understand the nature of the partnership they have to avoid surprises and disappointments down the road that may harm the U.S.-Ukraine relations and result in legal disputes. As Curtis Bradley, Jack Goldsmith, and Oona Hathaway previously argued in Lawfare, under the Case-Zablocki Act, the U.S. secretary of state shall publish and report the LP Agreement to Congress, considering its connection to the Framework Agreement. The Ukrainian lawmakers' efforts to obtain the commercial agreements from the Ukrainian government have been unsuccessful so far, with the Ukrainian agency relying on its confidentiality obligations to DFC under the agreements.

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The publicly available information suggests that Ukraine likely traded robust commercial incentives for continued U.S. military assistance to defend itself against Russia for less or little revenue from the partnership in the long term. Indeed, the more assistance the U.S. provides, the less long-term revenue from the fund Ukraine would get. One member of parliament succinctly summarized the Ukrainian choice: “This is about the fact that the world is pragmatic and cynical, and we need to survive in it.”