Assessing the U.S.-Ukraine Investment Fund Agreement

Executive summary

• After a back-and-forth negotiation, the U.S.-Ukraine Reconstruction Investment Fund Agreement represents an important milestone for Washington and Kyiv on post-war economic reconstruction in Ukraine. Signed on April 30 and entering into force on May 23, the agreement establishes the framework for a new bilateral investment fund tasked with promoting new extractive and infrastructure projects to further Ukraine’s growth and development.
• While much attention has centered on its role in critical minerals, the agreement also opens the door to potential future projects in oil and gas exploration and infrastructure development, albeit details remain sparse.
• The fund still must overcome major implementation challenges outside of its control, especially the ongoing conflict and the risk it poses to any private sector investment. As both sides build out the fund, they will also need to address gaps in investment guarantees and derisking mechanisms, a hobbled U.S. bureaucracy, and persistent local corruption and governance risks.
• However, the deal also creates a promise for sizeable commercial opportunities to support Ukraine’s long-term recovery and economic resilience.

Background

While a Trump administration initiative, the origins of U.S.-Ukraine Reconstruction Investment Fund Agreement can be traced back to the Biden administration’s 2023 Ukraine Plan for Reconstruction, which identified critical minerals, energy, and infrastructure among six strategic sectors of an economic recovery.

At the time, Senator Lindsey Graham (R-SC) floated the idea of leveraging Ukraine’s mineral wealth in June 2024 — pointing to the “$10-12 trillion dollars of critical minerals” as a basis for an American economic interest in defending Ukraine.¹ Then candidate Donald Trump later expressed interest for an agreement to exploit those mineral reserves during a Summer 2024 meeting with a Ukrainian Parliament (Rada) faction leader facilitated by beleaguered former New York City Mayor Rudy Giuliani. In September 2024, Senator Graham pushed for an agreement for joint U.S.-Ukraine critical minerals exploitation and for a summit modeled after a December 2023 defense industrial base summit to provide “matchmaking” opportunities between American and Ukrainian defense companies for co-production.

Later in fall 2024, President Zelenskyy proposed a 5-point “Victory Plan” for Ukraine, as an opening argument for a likely push for peace talks after the 2024 U.S. presidential election. One of the points in the plan noted the “strategic economic potential” of “critical resources”² — which he discussed with both President Biden and President Trump on the margins of the UN General Assembly in September 2024.

The Victory Plan created the impetus for working-level negotiations on a critical minerals agreement between State Department and Ukraine’s Ministry of Economy. Talks covered two components: 1) technical assistance from the U.S. Geological Survey to map minerals, their purity, and difficulty to access, and 2) greater access to the 15-member U.S.-led Minerals Security Partnership and its financing networks.³ After the 2024 presidential elections, talks were paused by Ukraine to wait until the new Trump administration, lest Trump abandon it as a rebuke of Biden.

Trump’s negotiation efforts began during Treasury Secretary Scott Bessent’s trip to Kyiv in January 2025. He offered a blunt take-it-or-leave-it draft agreement — ditching the elements of Biden’s proposals and asking for a transfer 50% of Ukraine’s mineral rights to the United States as repayment for past U.S. security and economic assistance.⁴ The Biden to Trump shift showed their starkly different approaches: one focused on incremental and technical support versus the latter with a nearly mercantilist logic, trading security for extraction. Unsurprisingly, the proposal was rejected by Kyiv. However, it began a process of negotiations that led to a first draft.

Despite initial difficulties, those talks resulted in a remarkably robust February joint framework with seven components:

1. limited mining exploration projects by and with Ukrainian state-owned enterprises;
2. devoted fund revenues to Ukraine’s reconstruction;
3. guaranteed compliance with the EU accession process;
4. contained provisions that would reinforce the sanctions regime against Russia;
5. explicitly reaffirms Russia’s full-scale invasion and Ukraine’s existence as sovereign, independent country;
6. speaks about preventing countries that acted adversely to Ukraine from benefitting from reconstruction (this could include Russia but also China); and,
7. included mild support for Ukraine’s efforts to obtain security assurances.

But the agreement lacked both weapons provisions and security guarantees sought by Kyiv, and Trump’s much-desired aid repayment plan. Despite its broad compromises, the disastrous Oval Office meeting with Zelenskyy in February derailed the framework.

Renewed talks in March led to a new U.S. proposal, a 56-page maximalist, legal document, that returned to a focus on Ukraine repayments to the United States. Fearing another disaster, Ukrainian negotiators reiterated the importance of falling afoul of the EU’s rules, which would risk the country’s aspiring membership. Cooler heads ultimately prevailed and allowed for another round of talks in Washington around the World Bank-IMF meetings. A Memorandum of Intent was signed on April 18. This was followed by a final agreement signed on April 30, approved by an overwhelming majority of the Rada on May 8 and entered into force on May 23.

Final agreement

Despite being “final” the agreement is only a framework to be completed by a separate Limited Partnership (LP) and other supplementary agreements. At its core, it reflects much of the substance of pre-Oval Office meeting draft:

1. prioritizes Ukraine’s long-term reconstruction and modernization
2. acknowledges Russia’s full-scale invasion and the damage it has caused
3. establishes a board comprised of three U.S. International Development Finance Corporation (DFC)-selected American members and three Ministry of Economy-selected Ukrainian members who will make investment and fund allocation decisions
4. drops a reference to repayment for Biden-era military and economic assistance
5. asserts that 50% of generated revenue will be reinvested into reconstruction through the fund with lower and longer-term U.S. dividend withdrawals.
6. aims to prevent actors that were party to the conflict against Ukraine from benefitting from the reconstruction fund, namely Russia but with possible impacts on North Korea and China
7. allows for agreement revisions or cancelations
8. protects against conflicts with the EU accession process and Ukraine’s current membership in the EU-Ukraine Free Trade Area.⁵

In its implementation, Ukraine has also emphasized its ownership over natural resources and territory, protects current Ukrainian ownership of state-owned enterprises, and removes the need for corollary agreements to require parliamentary approval.⁶ Ukraine has also emphasized that technology transfer from the U.S. and participating companies is one of the “key components” although it is unclear to what degree.⁷

Scope of the agreement

The Agreement covers future projects related to critical minerals and hydrocarbon exploration. It does not include currently operational projects, but leaves ample room for interpretation, making it broader than earlier drafts limited to projects under the auspices of state-owned enterprises.⁸

As expected, the agreement focuses on Ukraine’s potential in critical minerals leading to the “critical minerals agreement” shorthand. The emphasis on minerals is somewhat strategic: it makes the agreement look forward looking by supporting high-tech supply chains and it aims to counter China’s dominance in the sector, meeting both U.S. and European search for alternatives. At current estimates, Ukraine possesses 7% of global titanium supply, 6% of graphite, has world’s third largest reserve of iron, one third of Europe’s lithium and is the world’s fifth largest gallium producer. The European Bank for Reconstruction and Development (EBRD) estimates that critical minerals could generate $10 billion in annual revenue by 2035. However, a significant portion of these supplies are in Russian-occupied territories or near the lines of contact.

Some companies have already begun exploratory conversations with DFC on potential critical mineral development under the agreement. For example, TechMet, a Dublin-based investment fund and DFC client in Brazil, is currently exploring development rights of the Dobra lithium mine in the Kirovohrad region.⁹ DFC has also noted a Ronald Lauder-backed critical mineral consortium in Ukraine.

The deal also covers future oil and gas exploration. Ukraine has Europe’s second largest gas reserves.¹⁰ This includes conventional gas deposits and shale gas deposits in Yuzivska (partially under Russian occupation) and Olesska (fully Ukrainian-controlled), which have garnered interest in the past. Chevron and Shell previously entered into a production-sharing agreement, which was axed after Russia’s invasion.

As a third pillar, the deal references infrastructure, leaving the fund’s remit on inactive or damaged infrastructure open to interpretation and negotiation. For example, the gas transit pipeline previously used to bring Russian gas to Europe or Europe’s largest gas storage facility, in Bliche-Volitsko-Uherske in Western Ukraine.¹¹ Building additional enabling infrastructure for projects is also unclear like rail and ports in places like Odesa, Chornomorsk, and Mykolaiv.

Fund operations

The agreement punts on the fund’s operations to a future LP agreement. The Fund’s location, contribution sizes, the role of U.S. military assistance, detailed investment opportunities, market-based purchasing rights for extracted minerals and energy permitting, and compensation allocations are all to be finalized.¹² The framework agreement does, however, clarify the fund’s tax-exempt status, dollar-convertibility, and visibility into potential agreements with competitors (subsoil, investment and concessional information should be provided to the fund partnership).

Stakeholders

The agreement positions DFC as the new center of gravity in U.S.-Ukraine economic partnership. However, the agency is currently in a holding pattern, awaiting Trump-appointed leadership to clear the Senate.¹³ The agency could also face staff cuts, as part of Elon Musk and the White House’s DOGE agenda, despite being one of the only agencies to have a proposed budget increase.

Over the past 8 months, DFC has established a Ukraine “tiger team” and hired an investment banker as a contractor to better support DFC’s Ukraine projects. Overall, the launch of the fund could be hampered by growing staffing constraints and the Trump Administration’s push to funding domestic projects beyond the agency’s legal remit.

Despite barriers, DFC continues its existing 5-6 projects in Ukraine and expects to lead a potential post-ceasefire/peace Reconstruction Fund. Already, DFC/Ukraine staff is in conversations with interested critical mineral companies on potential future exploration projects in Ukraine. It also remains unclear what proportion U.S. contributions to the fund will ultimately take — between direct DFC capital or future U.S. military assistance.¹⁴

On the Ukrainian side, fund responsibility will sit in the Ministry of Economy’s Public Private Partnership Office (PPPO) — adding to its growing role as a fulcrum for Ukraine’s post-war reconstruction. The office is the central coordinator for: 1) the Project Preparation Facility — funded by the United States and UK and administered by the World Bank — meant to conduct the feasibility preparation to broaden the number of bankable infrastructure projects able to absorb public and International Financial Institution (IFI) capital; and 2) strategic planning for the G7+ Ukraine Donor Platform-backed Strategic Investment Council and Single Project Pipeline.¹⁵

That said, turf wars and internal tensions around reconstruction and economic recovery between the Ministries of Economy (MoE), Finance (MoF), and Community and Territory Development (MCTD) have become more acute. After a September 2024 cabinet reshuffle, the new Deputy Prime Minister for Restoration, Oleksii Kuleba, tasked with inter-ministry cooperation on reconstruction, has been criticized for doing the opposite. Officials, in Ukraine and elsewhere are frustrated by a lack of consensus on issues related to transportation infrastructure, pre-project planning and projects associated with reconstruction.

Business challenges and opportunities

Challenges

• Ongoing war. The Trump administration significantly underestimates the prohibitive risk associated with undertaking investment in greenfield exploration while Ukraine is in the middle of a war. President Trump’s peace push has yielded no results thus far. While Ukraine has committed to an unconditional 30-day ceasefire, Russia remains unwilling to do so. Ukrainians (and most Europeans) fear that a bad peace or patchwork ceasefire will only delay the war, preferring to fight on than to end up caught in a simmering conflict, with risk of a new Russian offensive. Project insurers and financers are likely to agree.¹⁶
• Lack of guarantees and derisking. The agreement does not create specific de-risking instruments that could help investors begin to consider investment.¹⁷ While threats like continued bombings are impossible to de-risk, a wholesale reconstruction strategy will need to tackle deteriorated transportation infrastructure, energy infrastructure, and labor force. Security guarantees will help reduce the risk of a new Russian invasion. Moreover, good governance measures will need to tackle long-standing corruption in mining, energy and infrastructure sectors.
• Corruption and political risk. Oft-repeated corruption concerns and post-Zelenskyy political instability may chill enthusiasm for investment. Promises of a rapid reconstruction or accession to the EU will quickly meet reality after the war, likely leading to political swings. Moreover, Trump’s scorched earth negotiating style has burned a great deal of trust in Kyiv. While the Rada ratified the framework agreement, many Ukrainian politicians feel that the agreement was jammed through the parliament lacking thorough review and clarity on the source of financing and off-take rights and preferential treatment of American companies.¹⁸
• Economic competitiveness. Threaded through de-risking constraints is the comparative advantage of investing in Ukraine. Critical minerals are unlikely to be cost-competitive vis-à-vis Chinese-processed minerals. Hydrocarbons will be subject to competition from long-term contracts signed after the start of the war. Operational costs in Ukraine are likely to remain high due to insurance risk, higher wages and a constrained labor force, possible environmental concerns, and a regulatory environment in flux. The Fund has the potential to address some of these concerns, but will require a long-term vision and local buy-in.
• Lack of geo-physical survey data. Geo-physical data on Ukraine’s deposits were developed in the 1980s and are in forms that will not allow for modern modelling. Easily assessable geo-physical survey data on the depth, quality and environmental byproducts of the resources will be necessary prior to any meaningful private sector engagement. The Ukrainian Ministry of Environmental Protection and Natural Resources has indicated it would soon declassify Soviet data for all resource areas except uranium. But capital-intensive mapping will likely require EU, member state, or World Bank-style financing and technical assistance.

Opportunities

• Presence of a reconstruction planning system increasingly able to accommodate greenfield projects. Providing the feasibility studies for potential exploration will also be a challenge but one that could potentially be addressed in the PPFs under development by the Ministry of Economy and the World Bank as well as an EU PPF under development by the EBRD and The European Investment Bank (EIB). Moreover, EU, member state and IFI support could also address other potential obstacles including financing and technical assistance to address geophysical mapping.
• Concurrent to EU accession talks and common market access. The EU-Ukraine Deep and Comprehensive Free Trade Agreement (DCFTA), concluded in 2014 and debate around which was the key spark that led to the Maidan Revolution and Russia’s illegal annexation of Crimea in early 2014 and subsequent invasion of eastern Ukraine, provides Ukraine with robust market access for its exports in critical minerals and energy. This access will be deepened with Ukraine’s eventual EU accession, a Ukrainian and European priority. The Commission opened the first cluster of accession chapters (on fundamentals) in January. While first cluster negotiations continue to be blocked in the Council by Hungary, Ukraine has already submitted the screening report for the second cluster of negotiating chapters and Commission President von der Leyen has stated if they continue at this speed and quality, perhaps Ukraine could accede earlier than 2030. Ukraine will also be fully integrated into the EU electricity market at record speed by 2027. Ultimately, Ukraine’s reform progress is essential to reassuring international investors.
• Presence of incumbent infrastructure. The density of Ukraine’s population means that there remains a strong amount of infrastructure density. In the area of gas, for example, legacy transit infrastructure could be repurposed to supply Ukrainian gas to EU markets.
• Diversification from China. In the mid-term, Ukraine provides one potential source to diversify high-demand minerals like germanium, gallium and graphite currently sourced from China. Overdependence on Chinese critical minerals is seen as a strategic security vulnerability in both the U.S. and the EU. The EU recognized this potential in 2021 when it signed its 2021 Strategic Partnership on Raw Materials prior to the full-scale invasion.¹⁹