What's the deal with Ukraine's rare earths?

Key Market report for Tuesday, 25 February 2025

What's the deal with Ukraine's rare earth minerals? A whole diplomatic row erupted over the Trump administration's demand that Ukraine turn over their rare earth resources to the US in compensation for the military and financial aid the U.S. provided to Ukraine. In last week's wide-ranging interview with Catherine Herridge, Secretary Marco Rubio said that president Zelensky responded favorably to this request but demurred over a legislative approval, only to publicly reject the US deal:

"We discussed mineral rights with Zelenskyy and said we want to be in a joint venture with you.... We need to be paid back some of the $200B in taxpayer money we've given you. He said 'Sure, I need to run it through my legislative process.' I read two days later he's saying he rejected the deal. That's not what happened in that meeting. We're trying to help these guys. Ukraine doesn't directly impact the daily lives of Americans, there should be some gratitude here. When you see him accusing the President of disinformation, that's highly counterproductive. President Trump isn't going to take that. He's not going to get gamed. He hopes Zelenskyy isn't trying to hustle the United States, that's not going to be productive here."

It seems extraordinary that the same Zelensky who is desperate for continued US support has responded to Trump's request in such a brazen manner, including insulting Trump. The explanation may have emerged from a Czechoslovakian publication AENews, citing leaks from Ukraine's intelligence. AENews reported that Zelensky is unable to cut the deal with the U.S. because he already signed over Ukraine's mineral resources to Britain. The rare earths deal isn't a new thing: Zelensky already offered it to Trump last September when the two met in New York.

Starmer’s stealth act of piracy

To preempt Trump, Keir Starmer rushed to cut the deal with Zelensky who signed over Ukraine's resources in the framework of the "One Hundred Year Partnership..." The new partnership was signed on 16 January of this year, only four days before Donald Trump's inauguration. Allegedly, it includes a secret Appendix, which provides that after the end of hostilities, the UK would gain control of all of Ukraine's ports, power plants, natural gas concessions, storage facilities and pipelines, titanium deposits and more.

Apparently, Zelensky signed over these resources in exchange for the UK's commitment to Ukraine's security, support for NATO membership and "no less than £3 billion a year," for "as long as needed to support Ukraine." The intelligence leaks cited by AENews may or may not be true, but reading through the "One Hundred Year Partnership" certainly makes them seem plausible. To begin with, it is very unlikely that the UK has committed to providing such generous support to Ukraine out of pure charity. Also, the 100-year partnership is not the "whole agreement."

Customarily, agreements contain the "whole agreement" clause which stipulates that contracting parties' commitments are limited to that which is explicitly spelled out in the agreement. Instead, the partnership's Article 11 refers to unspecified "further agreements or arrangements as necessary and appropriate to implement this agreement."

A secret appendix would also explain Keir Starmer's urgent request to meet with Donald Trump. It may also explain why Trump's statement that Zelensky was a dictator caused such a hysterical reaction in the UK. If Zelensky was not the legitimate representative of Ukraine at the time when he signed the agreement with Starmer (he was not), then the whole 100-year UK-Ukraine honeymoon could be null and void.

Flooding the zone around Trump (again)?

That's is why it would now be urgently necessary to somehow persuade Trump to leave Ukraine's resources in the capable British hands. Perhaps there might be ways for Sir Keir to persuade Trump. Starmer himself made it clear after his emergency summit at the Champs Elysees palace that "US backstop is vital," to make the British agenda in Ukraine stick.

Over the last few months I published a number of articles elaborating the heavy British investment in Ukraine; their last-minute grab for Ukraine's resources under Donald Trump's nose might be yet another sign of their panic and desperation. In fact, given last September's talks between Trump and Zelensky about the issue of these resources, I expect that Trump and his government are fully well aware of the British stealth act of piracy. Pressing Zelensky for the resources, calling him a dictator and coercing him to hold elections are probably Trump's way of trolling the British. If so, this could turn out to be an amazing episode of poetic justice: Britain's use of Ukraine in a proxy war on Russia could now turn into U.S. use of Ukraine in a proxy war against Britain.

Not a government of morons

Having painted themselves into a corner, the British are clearly panicking and making one mistake after another. Their customary approach of manipulating other powers to do their bidding tended to work out quite well, especially where such powers were led by degenerates and morons. It would work a charm if, say, Kamala Harris were in the White House. However, Trump's team is too savvy to get hoodwinked by empty slogans and British accent.

Trump's team are clearly far more discerning about the cost/benefit scenarios and can read the writing on the wall: Ukraine lost the war; Russia is in the driver's seat and Britain has nothing to offer. Vladimir Putin added to the trolling in the interview published today, stating that Russia has a great abundance of rare earth minerals and will welcome cooperation with any foreign power including the U.S.

In the coming weeks (who knows, maybe hours) we might look forward to the US lifting all sanctions against Russia and opening a new chapter in international relations. From the economic development point of view, this could be extraordinarily beneficial to Russia as well as the U.S. On the other hand, Britain is likely to remain stuck with its failed investment in Project Ukraine and an avalanche of bad debts.

Britain’s headed for an epic collapse!

This will likely lead to a catastrophic collapse of the British pound and government gilts - perhaps one of the most interesting investment themes to pay attention to in the near future, which is why this report includes the pound, the gilt, as well as FTSE 100.

I will elaborate this report further and post it on my personal Substack, today or tomorrow.

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Trading signals for Key Markets, 25 Feb. 2025

With Yesterday’s closing prices we have the following signals: