Geopolitical Update - Minerals Deal & Looking Forward
Trump, Putin, Zelensky & to a lesser extent the EU all attempt to play a complex game. Not all know what they are doing.
Article version of Original Post on Feb 27 2025
Politically, really has played out much as we discussed previously, and now we need to look further down the road. First, let's review what occurred.
In an impressively prescient thread, we discussed the unappreciated complexities the new incoming Trump administration meant for Russia, as well as the opportunities and dangers it presented to the Zelensky regime.
https://x.com/ZimermanErik/status/1857058004606025929
This was further discussed in January in this article:
The short end of it is that if Trump did not fully think all options through, and Zelensky had the slightest diplomatic skill & strategic thinking, things could get much more complicated (for everyone except Zelensky) very quickly. Here was the main idea.
VP Harris would be easy to predict and defeat. Trump, different ballgame. Since Trump's leverage on Russia is is limited, if not exhausted, Trump would be wise to first "ask" Ukraine first. If Zelensky is unwilling to end the war along current ceasefire lines, then there is no reason to get into a shoving match with Russia.
I went on to explain that of course Zelensky should support Trump's proposals in such a scenario, especially since Russia is likely to decline (as I explained then). However, I doubted Zelensky and the "entitled" Kiev regime would have the diplomatic foresight and correctly predicted that he would likely oppose Trump's efforts.
So we thought it likely Zelensky would play it poorly, but again this was contingent on Trump first "pushing" against UA as good strategy would dictate. We worried he might do otherwise. This is how it went first, for a few weeks.
https://x.com/ZimermanErik/status/1882464164876357656
Besides the poor choice of WWII language when dealing with the Titan that bled the Wehrmacht dry, the explicit threat was concerning, and precisely how we discussed this could go. This was not lost on the observant readers!
The situation where Zelensky would realize what was happening here; that Trump wants to end the war and he would support whoever agrees and pressures whoever disagrees could be nimbly used to turn Trump and Putin head to head (Zelensky's dream). He of course, realized nothing.
This went on for a while, and it included a Trump team and cabinet argument over the direction to take on Ukraine.
Ultimately, with Trump being nobody's fool, and being surrounded with intelligent folks, he wisely disembarked from this path as we thought most likely despite the danger. Zelensky did his part to help of course. His holier-than-though entitled mindset, possible only because of blind and fanatical support by the western mainstream media could not be a worse fit for Trump.
Ultimately this ensured a highly enjoyable set of exchanges where Trump threw so many (rather accurate) negative descriptions at Zelensky that one would have thought he was a reader of our discussions. The only one I've yet to see is regarding his green & olive shirts. As a soldier, that has always infuriated me.
Regardless of this turn (& we will get to where it is now, and the "rare earths" deal), the situation is still dynamic, and could even change again. The underlying fundamental issue remains, as stated in that same, impressively accurate post. We have heard comments from the likes of Peskov, Lavrov and Nebenzia stating quite clearly and resolutely that the regions (oblasts) that are now Russia per the constitution are not subject to negotiation.
As long as Zelensky opts to keep fighting (ie keep losing territory), then he keeps the US & Russia from having to face the issue. Otherwise, the issue is realistically solved (outside a UA capitulation) by continued fighting. And that requires Trump to reduce his eagerness in ending the war quickly, and take the accompanying flak.
This is precisely the way it seems to be going however. Zelensky mostly the cause as he at all costs simply wishes to keep the war going and ever greater Western treasure supporting it. Anyone who has read my posts since the outset of this war, knows one of my harshest criticisms of Kiev has always been that that they never had nor developed a strategy for winning the war (which they had a great hand in starting) as an actual war. There only strategy was and remains to involve the western world in essentially WWIII. Short of that, they wish to keep their countrymen (and Russian cousins if not brethren) dying as long as the West keeps paying the bill.
In the interest of brevity (at least of this part), we won't recount the amusing turn of events as Trump and Zelensky sparred, while the Euro-woke leadership scramble desperately to keep the war going and their pal Zelensky in power (ironically, his resignation or removal and replacement by someone more meanable would preserve more of UA territory for UA, not to mention more of its people alive), since this has been well recorded for all see.
I will say that I was pleased in seeing it culminate with the US and Israel voting contrary to Kiev's wishes at the UN in recent days.
Part II - The Rare Earths Deal
We now have Zelensky eagerly rushing off to DC, in order to sign the agreement that just recently he railed against. First let us discuss why the parties are doing this, and then we will take a closer look at the agreement. It is important to note that the deal gives virtually nothing to Ukraine, and certainly nothing concrete. It allows (more precisely grants the right for) the US to invest in the use & exploitation of a wide range of UA's natural resources defined as:
"deposits of minerals, hydrocarbons, oil, natural gas, and other extractable materials, and other infrastructure relevant to natural resource assets (such as liquified natural gas terminals and port infrastructure)".
Some may indicate that this at least will provide
US money for UA to develop these resources and infrastructure which it otherwise does not have. The reality is that while the agreement does not obligate the US to invest any amounts in anything, even if it did folks are always happy to invest in these things in any event.
I am addressing its general tone. If it doesn't at least end up doing what it seems to intend to do, then it doesn't do anything at all for either party). Countries don't do that because depending on their level of socialism or free-market, they (or the private individuals & companies that own the resource rights) make many individual deals with multiple parties regarding specific properties & resources. There is no need nor advantage in granting one country exclusive rights to invest domestically in crucial areas.
The more important and in demand the commodity in question is, the more true the above is. So Ukraine gets nothing economically for this, on the contrary, it sounds like the preliminary agreement in granting exclusive rights (at least perhaps rights of first refusal) to the US and/or US companies in Ukraine.
In exchange for? Nothing. So why is Zelensky doing it? For the the same reason he does so many things. His apparent belief that UA must retain western support to fight on no matter what (or perhaps its fight on no matter what INORDER to retain western support), and that he of course should lead it doing so.
After first being blindsided by a Western leader that doesn't blindly parrot the UA propaganda line, and reacting foolishly, he now desperately craves any appearance of relevance, of closeness with the new US administration.
In a most shameful display, he cares not how much wealth of how many generations of his citizens he is giving away. He is willing to sign this absurd deal, which promises Ukraine nothing, for a picture shaking hands with President Trump. Though he has expressed reservations about the deal (his staff & even supporters are well aware of the problems with it), he is willing to come sign (or at least negotiate) face to face. We must remember, not too many days ago, he was waiting for the giant army he has begged (I mean worked) so hard to fund to burst into the Palace and kindly relieve him of his duties.
If it seems that he is the impediment to US support, the failed war leader would likely think the coup is not long due.
So why is Trump signing the deal?
This is a more complex question, but I am happy to offer my estimate. Two things are driving Mr. Trump on this. First, it is in his nature to want to seek economic advantage for the US and never to allow economic disadvantage. He abhors more than anything, the massive financial support UA has received from the US in one form of another, with absolutely nothing in return. On face value, this deal is meant to recognize that value and attempt to repay it.
This is why it offers nothing (further) in return to Ukraine... it is meant as a gesture if not an act yet, for the UA to repay some of the past support. However, it obtains no future support guarantee. This is clearly one driving factor.
Of course Zelensky hopes that the mere act of being in partnership with the US, and negotiating with it, will lead to further entanglement and support.
But I believe he is being easily had. And this leads us to the second driving force behind Trump's proposed agreement. In short, it is merely an artifice, be it profitable or not in the future, that explains the continuation of the war. Trump is basically indicating that he came to the WH with the earnest desire of stopping the bloodshed.
He butted heads with Putin and butted heads with Zelensky. But if the losing side, the begging side, so vigorously wishes the war to continue, then so be it. But the US' support will be collateralized.
Again Zelensky hopes that this means that future support is being collateralized, but the plain meeting of the agreement is that only passed support is. Investments if any, only after the full agreement has been signed, will take a while to come and if they do before there is a ceasefire, would be in areas far west of the combat line. To the extent that this gives some implied security guarantees (as partially US assets), they would not be very relevant to the war. With the possible exception of certain mid-stream hydrocarbon & transportation infrastructure.
But these would exist if ever, years down the line (existing infrastructure is not included). The appearance of being in some sort of negotiation with, but not blind support of, Ukraine will allow Trump to continue to do the same with Russia. Also on economic terms first. Minerals, trade, the Arctic, easing of sanctions, etc.
As the US veers from the Biden state of affairs and normalizes relations with both parties (which means downgrading relations with one party from Uber-ally to just another country as the UA was pre 2022 if not pre 2014, and upgrading relations with the other from arch-enemy to also another country in the world community), it disengages and allows them to battle it out as long as they stay within certain limits.
Russia for example would be expected to fight for her incorporated regions but not to dash west of the Dnipro for example or attempt to seize Kiev (again). The natural effect of this policy would be the fulfilling of Russian territorial goals, as a less supported Ukraine and/or a less sanctioned Russia would greatly speed up the Russian advance.
Once Russian territorial goals are met, it would be easier to negotiate a peace or at least ceasefire on then current lines. Russia in any event would agree, and at that point a still stubborn government in Kiev would lose all (at least US) support. Russia would be freed to completely vanquish its opponent.
As you can see, the possibilities are complex, but they seem to me to add up to buying time, for Russia. Zelensky and his administration are one trick-ponies, and they are so accustomed to want to buy time, always hoping the next month will bring either enough western support to win or better yet western intervention, that they cannot realize when time plays against them.
Unless their interests, in holding on to power, are completely detracted from the people of Ukraine's interest. And this is why part III of a Jan 2025 discussion ended with this:
Could be wrong of course, but I believe Putin is now the one playing for time, and Trump is giving it to him.
Meanwhile, I suspect the headlines will all cheer the signing photo ops where Zelensky for once wearing a suit (I imagine Trump will require it) will gleefully sign away UA's wealth for the hope of a few more months, weeks, anything, of not wearing the suit in the Presidential palace.
Part III - More detailed analysis of the legal & economic aspects of the
First Posted here.
Let us note some important details about the deal.
UA recognizes that the US has provided with them with significant support.
The US meanwhile recognizes that they did something positive by abandoning their nukes (not fighting Russia or Donbass separatists etc).
The deal goes on to say that the US and UA will establish a fund to invest in UA resources and infrastructure. Hydrocarbons and ports seem as important (if not more than) rare minerals.
The US (or US companies) will invest in UA to exploit these resources. It remains to be seen in the more detailed agreement how much exclusive rights this fund will have vs any other folks from other countries that may want to invest.
The UA will contribute to the fund 50% of future government revenues of the relevant resources. It doe snot include current revenues that already are derived from these resources and thus also doesn't extend any implicit US protection to those existing assets.
It is not clear if the "future" 50% will be on revenues that the Fund helped develop or on ALL future related revenues as long as they are not current ones.
This will be an important detail to look for because if the contributions are from all resources, then they really are selling a lot of their sovereignty for nothing here. The US will be investing money to the fund for development (though it doesn't have to).
The future detailed agreement will also provide for distributions... that is how profit eventually will be distributed for the parties. There are a few important things to note here.
Typically the US doe snot invest in things like this. US companies do (of course the US gov't taxes their profits though). So if private companies make the investments, how will the US get distributions that make up for the support it previously gave UA?
Or will it be happy just to pass the exclusive rights, to the extent they will exist according to the detailed future agreement, to its private companies?
More importantly the ownership will be according to investment amounts. So even if the UA invests vast amounts of money in the fund due to the 50% revenues, it will then simply own more of its own fund. The US here is not really getting anything here other than some undefined exclusivity or first rights of investment.
No money or resources are being given away for free. Really the US is getting influence and preferential (if not exclusive) rights to invest in certain aspects of the UA. Which perhaps translates to preferential access to resources for its markets and influence on UA policy… But it's not free money, not for either side.
Also interesting is that agreement requires the UA to ratify the agreement as a treaty, because as I have explained, the agreement does obligate Ukraine to certain things. On the other hand, the US does not have to ratify it, because it really promises nothing in return.
And the few & vague concepts it may imply, will not be ratified by the Senate and thus not US law. It is an odd one-sided agreement that doesn't really mean much at this stage, other than a certain loss of sovereignty for the UA.
These oddities, and especially the lack of any financial reward for the US that is recognized (other than future investment) indicates to me that the deal is not very serious. It's importance is more in appearance than substance. It appeases various pressures without doing much in reality.
Once the actual Fund Agreement is negotiated, it will be much clearer of course. This preliminary draft is so vague, that the final agreement could have drastically different implications; it can go any way (and thus I suspect will be difficult to negotiate, thus also taking time).
Zelensky is aware of this as is his staff, and I will expect him to try to get in statements from Trump what he isn't getting in the deal... if not any guarantee at least some indication of the US's future support to continue the war. This may also lead to the deal being heavily renegotiated and/or not even signed at all. Zelensky is not coming in good faith, but rather to see how he can twist an agreement which on its face only thanks & gives restitution to the US for past help, into guaranteeing future help. Zelensky knows he is being played, but I am not sure that he cares very much.
He is so desperate to be seen with Trump, and supported by Trump, that he might even wear a suit. We shall see.