Rare earth metals are a very big deal in our digital age.
An enormous deal, in fact. Some, like President Donald Trump, would even say HUGE.
There are 17 rare earth metals, but I won’t bore you with their names. It’s enough to point out that they’re used in the creation of a wide array of products: wind turbines and solar panels, smartphones and tablets, catalytic converters and electric vehicle batteries… even glass, lights, and magnets.
In other words, without rare earth minerals, the world as we know it would be dead in the water. So it’s pretty problematic that the world gets 70% of this resource group from a single country.
China.
To some degree, this is simply because China has the largest known reserves (around 75% market share). As the chart above shows, it far outstrips the competition.
Yet there’s also the fact that many countries don’t try to access rare earths at all, often for environmental or safety concerns. That’s why the U.S. has just one active rare earth mine despite it making the top 10 list of deposit holders.
It relies on outsourcing for everything else it uses. So the fact that so much comes from China, a nation that’s actively competing with the U.S. for global influence – and often through nefarious means such as stealing technology and manipulating currencies – is less than ideal.
It would be far more preferable to do business with almost any other country out there… including some that don’t make the top 10 list. That’s one of the biggest reasons why I’m excited to see President Trump and Ukraine President Volodymyr Zelensky sign a natural resources deal tomorrow.
This could be a global game changer in more positive ways than most people currently understand.
Digging Into the Rare Earth Resources Agreement Details
We learned yesterday that, after a lot of back and forth – which came complete with presidential name-calling on both sides of the Atlantic aisle – Presidents Trump and Zelensky have officially reached a rare earths deal they’ll be signing tomorrow.
To quote The New York Times:
Mr. Zelensky… had rejected at least one other draft of an agreement because it lacked specific U.S. security guarantees and because Mr. Trump was requesting mineral rights worth $500 billion [to repay the U.S. for its wartime contributions], along with other provisions that Ukraine considered unacceptable.
The resulting negotiations produced a:
… draft agreement [that says] Ukraine would contribute to a fund half of its revenues from the future monetization of natural resources, including critical minerals, oil, and gas. The United States would own the maximum financial interest in the fund allowed under American law, though not necessarily all. And the fund would be designed to reinvest some revenues into Ukraine.
In short, Zelensky won’t get his NATO membership. And the U.S. won’t get the full mineral rights Trump wanted. But the U.S. will still be profiting from the relationship while establishing a solid economic interest in keeping Ukraine safe.
In fact, the agreement adds language about supporting future development over there. Ukrainian Deputy Prime Minister Olha Stefanishyna reportedly even told The Financial Times that, “The minerals agreement is only part of the picture. We have heard multiple times from the U.S. administration that it’s part of a bigger picture.”
If we accept that as fact, then the impacts on both economies are literally untold.
Now, admittedly, some (around 40%) of Ukraine’s rare earth deposits are now in Russian hands. And while Trump does seem to be making inroads in peace talks, President Vladimir Putin has stated he won’t be handing back any of the land he’s taken.
Source: ISW, BBC
Like it or not, no matter what Trump is saying, I don’t think we’re in a great position to demand he back down on that stance. Not after we’ve depleted so much money and military resources there, while Russia still seems to be going strong.
But even so, there’s a definite silver lining to the situation you really need to know about. And it ties right back in with China.
Making a Deal
First, some bad news: Not only has Russia claimed Ukrainian territory that contains rare earth deposits… it’s claimed some of the best of those deposits.
Here’s the good news though: Putin says, “We would work with pleasure” in mining those metals “with any foreign partners, including with Americans.” And remember, Russia is already in the top 10 for reserves held.
I know you might be wondering why we would want to do business with a dictator like Putin. Yet we currently do massive amounts of business with a dictator like Xi Jinping, including with rare earths.
We also need to acknowledge how Russia is increasingly partnering with China. From trade deals to currency machinations, their collaborations embolden China’s goals of global domination… which automatically and intentionally destabilize the U.S.
Russia has definitely benefited from its growing association with China. Without Xi Jinping’s backing, Biden’s tariffs could have done actual damage to the country instead of failing miserably.
However, Putin knows the catches involved in dealing with China: how China is ultimately out for itself with no regard for anyone else. (Just look at its predatory Belt and Road Initiatives around the world for proof of that.)
Putin also has to recognize how desperately the U.S. – the world’s biggest consumer economy – needs the natural resources his country is rich in. And how much Trump wants to move away from relying on China, which doesn’t need Putin’s rare earths.
The Russian economy could make a mint by doing more business with the U.S. And Putin knows it. Otherwise, he wouldn’t be so quick to point out his country’s value to the U.S. like he just did.
As for the U.S., we’re far, far better off in a world where Russia has ended its hostilities against Ukraine…
Where Ukraine is free and thriving with everything it needs to exploit its natural resources…
Where there’s no longer an iron-clad alliance between China, Russia, North Korea, and Iran…
And where we’re getting what we need from more than just China.
I don’t know about you, but that’s a world I want to work toward. And I think this Ukraine rare earths deal is just the start to accomplish all that and more.
Regards,
Brad Thomas
Editor, Wide Moat Daily
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Do you agree that the rare earths deal will bring a more positive light than most people think? Write us at [email protected].