U.S. Rare Earth Check Mate - Ukraine Peace Deal Close

Is world peace close again? With tensions in Israel/Palestine simmering down with the continued ceasefire, could we see the war in Ukraine come to an end soon too? The noise between the U.S., Russia, Ukraine and the rest of the world – has today seen the hopeful end of the Ukraine war, with sources suggesting a deal is imminent and the war is likely to end within days. The proposed deal sees Ukraine cede more territory to Russia, Ukraine withdrawing from its attempt to join NATO, and Ukraine giving up 50% of its future revenues from "extractable materials" (minerals like lithium, titanium, and rare earths, plus oil and gas) after operating expenses. 

But what is this deal all about and why is the U.S. pressuring Ukraine to hand over billion’s worth of mineral rights? Why has Russia offered a similar deal to the U.S.? Has the U.S. just won a major battle against China in the race to secure rare earths that China currently controls?

Ukraine war in Numbers

Zelensky has stated that 46,000 Ukrainian troops have died, with 350,000 injured and 10s of thousands of soldiers missing either captured or dead. But other news sources report that civilian and soldier losses in Ukraine and Russia are closer to 1 million people. Within Ukraine – 3.7 million people have been displaced from their homes, with 6.9 million Ukrainians fleeing the country as refugees.

A staggering US$400 billion of aid has been sent to Ukraine, with 28 countries (including Australia) sending more than US$1 billion. The U.S. committed 0.55% of its GDP toward Ukraine, bigger contributors using this measure were Germany (1.31%), the UK (0.93%) and Canada (0.67%).

Rare Earths

Rare Earths are emerging as the next ‘gold rush’ moving on from the world’s reliance on energy from oil which has dominated world politics over the past 80 years. There are 17 rare earth elements – some of these include cerium, yttrium and lanthanum. The applications for rare earth metals mostly fall under advanced computing technology – being used in computers and smartphones. At this point, most rare earth metals are concentrated in China – controlling nearly 44 million metric tons. Vietnam and Brazil are estimated to have around 20 million tons each, with Australia, India and Russia also having relatively large deposits. While the U.S. only has 1.5 million metric tons.

When considering rare earths – the U.S. has a huge competitive disadvantage compared to China; one that appears to be rapidly shifting.

World Map with tonnage of rare earths

The Ukraine Deal

After 3 years of fighting, loss of territory and life, Ukraine looks set to get exactly nothing from the huge toll. Initially, the war was said to have been started by the invading Russia in response to Ukraine wanting to join NATO. The final proposed deal is as follows:

• The U.S. gets 50% of the future revenue from Ukraine’s mineral wealth as repayment for funding the war
• Ukraine doesn’t join NATO
• A demilitarised zone on the border
• Ukraine concedes more territory – though this has not been finalised the current occupation zone sees the area around Crimea expanded
• 

Overall, it seems like Ukraine has given up everything and Russia has conceded very little, if anything.

The Russian Deal

Yesterday Putin came out announcing a proposed deal with the U.S. to send 2 million tonnes of aluminium per year to the U.S. as well as a joint exploration of Russia’s rare earths reserves. The proposal has shocked the rest of the world, indicating the strengthening of Russia-U.S. relations – which has the potential to upend long-held alliances. Take for example BRICS (Brazil, Russia, India, China, South Africa) – as the U.S. threatens the rest of the world with Tariffs and takes 50% of Ukraine’s mineral resources – the strengthening of the Russian-U.S. relationship with Putin’s offer shifts balance of power from BRICS back to the U.S. The U.S. has huge energy resources and has already caused issues within the OPEC+ alliance over the last decade due to it now being the largest producer of oil. But most rare earths had previously been controlled by the BRICS alliance led by China which extracts 70% of rare earths and refines 90%, being the only large-scale producer in the world. With the U.S. control of Ukraine’s resources and Russia's offer, this balance looks to be shifting.

New World Order

As alliances change and rare earth control shifts, the new world order under President Trump will see a different world emerge in the next four years. So, get ready for a new game of chess – allies are no longer friends – they could be turned into the 51st State and enemies could soon be partners. As the scramble for resources reshapes global influence, the role of traditional stores of value like gold and silver remains as relevant as ever, quietly underpinning stability in an increasingly uncertain landscape.