The mineral deal that US President Donald Trump has offered Ukraine “amounts to reparations” that are worse than those imposed on Germany in the Versailles Treaty at the end of WWI, The Daily Telegraph reported on February 19, having obtained a copy of the draft agreement.

“If this draft were accepted, Trump’s demands would amount to a higher share of Ukrainian GDP than reparations imposed on Germany at the Versailles Treaty, later whittled down at the London Conference in 1921, and by the Dawes Plan in 1924. At the same time, he seems willing to let Russia off the hook entirely,” The Daily Telegraph’s leader writer Ambrose Evans-Pritchard reported.

Trump has demanded a $500bn “payback” from Ukraine, while Ukrainian President Volodymyr Zelenskiy has been trying to entice the US into continuing its support, specifically by providing a genuine security guarantee, in exchange for Ukraine’s considerable mineral resources. However, after seeing the draft agreement presented last week in Kyiv, Zelenskiy ordered his staff not to sign the deal and has since embarked on a whirlwind tour of the Middle East reaching out to the Arab nations for investment and trade deals.

Trump’s deal goes far beyond US control over the country’s critical minerals. It covers everything from ports and infrastructure to oil and gas, and the broader resource base of the country, Evans-Pritchard says.

“The terms of the contract that landed at Volodymyr Zelensky’s office a week ago amount to the US economic colonisation of Ukraine, in legal perpetuity. It implies a burden of reparations that cannot possibly be achieved. The document has caused consternation and panic in Kyiv,” Evans-Pritchard wrote.

The deal covers most of what is valuable in Ukraine including: “mineral resources, oil and gas resources, ports, other infrastructure (as agreed)”, leaving it unclear what else might be encompassed. “This agreement shall be governed by New York law, without regard to conflict of laws principles,” it states.

And the terms are harsh. Kyiv would have to pay half of anything that is earned not only on US joint venture contracts, but on all concessions that Ukraine might sign with other countries as well. In addition, it grants a lien on all revenues. In other words, if Ukraine fails to pay its share then the US takes full ownership of the deposits. “That clause means “pay us first, and then feed your children,” a source close to the negotiations told Evans-Pritchard.

The deal grants the US the right of first refusal for the purchase of exportable minerals for all future licences and Washington will have sovereign immunity and acquire near total control over most of Ukraine’s commodity and resource economy.

The fund “shall have the exclusive right to establish the method, selection criteria, terms, and conditions” of all future licences and projects. In other words, the US will take full control of all Ukraine’s natural resources, Evans-Pritchard reports.

According to Trump, the US has spent some $300bn on the war so far, which the US president says he wants to recover. In fact, the total approved by Congress has been some $177bn, of which Zelenskiy complained earlier this month $100bn is “missing” and has not arrived in Kyiv. Trump said it would be “stupid” to hand over any more money, threatening that if Ukraine rejects the deal, it may be handed to Russia on a plate.

“[Ukraine] may make a deal. They may not make a deal. They may be Russian someday, or they may not be Russian someday. But I want this money back,” Trump said last week in the run-up to the start of the ceasefire talks between the US and Russia in Riyadh, to which neither the EU nor Ukraine were invited.

EU vs US three-stage plans

Europe has been left scrambling to respond to Trump’s aggressive and self-serving tactics. French President Emmanuel Macron called an emergency meeting of key military EU powers in Paris on February 18 to work out a response to being excluded from talks in Riyadh, but the meeting quickly got bogged down in a discussion about who could send peacekeepers to Ukraine in the event of a ceasefire.

What has emerged is both the EU and the US are proposing a three-stage path to peace, but the two versions are very different. Fox News' White House correspondent, quoting sources at the talks, reported that the US plan calls for a ceasefire, followed by presidential elections and only then will a peace agreement be signed.

Russian Foreign Minister Sergei Lavrov told reporters that he "has not seen information" regarding the "three-stage peace plan" described by Fox News sources.

Given that Zelenskiy’s popularity has been sinking as the situation on the battlefield continues to deteriorate and the state’s conscription drive becomes increasingly aggressive due to a chronic manpower shortage, if elections were held this weekend the formerly heroic figure would probably lose to former commander-in-chief General Valerii Zaluzhnyi.

The Kremlin would welcome a change of leadership and has called Zelenskiy “illegitimate” since his term in office officially expired last May, although the Ukrainian constitution forbids elections while the country is under martial law. The Bell speculates that the Kremlin believes that it could engineer the election of a replacement president who would be much more compliant in the subsequent negotiations.

"Putin assesses the likelihood of electing a puppet president as quite high and believes that any candidate other than the current president of Ukraine will be more flexible and open to negotiations and concessions," diplomatic sources told The Bell.

Trump has also noted that Zelenskiy's popularity has been falling, suggesting he sees the wartime leader as an obstacle to ending the conflict quickly.

Europe has also suggested a three-stage process to bring the conflict to an end, but on very different terms. The President of Finland Alexander Stubb outlined the three steps for achieving peace in Ukraine at the Munich Security Conference (MSC) but from a position of strength:

• The first stage involves preliminary negotiations, during which allies should rearm Ukraine and apply sanctions pressure on Russia.
• The second stage includes a ceasefire monitored externally by Europe and the US. If Russia attacks Ukraine again, it should automatically receive Nato membership.
• The third stage comprises peace negotiations, which may take some time. This stage will address more complex issues, including territorial disputes, security guarantees and compensation.

The EU is trying to prepare the ground for its version and is proposing to provide Kyiv with one of the largest military aid packages since the beginning of the war with the immediate transfer of €6bn worth of military aid and setting up an enormous €700bn support package to sustain the country thereafter, according to German Foreign Minister Annalena Baerbock, who added that the details will not be disclosed until after the German general election on February 23.

Politico reported that the €6bn military support package will include 1.5mn artillery shells, air defense systems and other military equipment. Depending on the contribution of individual countries, the total amount could grow to €10bn. The decision is likely to be made by a coalition of Ukraine supporters; not at the EU level. Hungary has said it would block any new EU military support packages. The issue will be discussed at a meeting of EU foreign ministers next week.

Ukraine is currently in good financial health, which will allow it to sustain the war for the rest of this year at least. For the first time since hostilities broke out, Ukraine has received its annual foreign aid in advance from the EU. Thanks to the $50bn Extraordinary Revenue Acceleration (ERA) programme financed by Russia's frozen assets, Ukraine will fully cover its $38bn budget deficit this year, according to the Center for Economic Strategy. Consequently, the country's parliament can allocate an additional $5bn-7bn for defence using income received from frozen Russian assets.

Sanctions relief

Relations between the EU and US will be further strained after Secretary of State Marco Rubio suggested that the US might unilaterally lift some of the thousands of sanctions on Russia. As bne IntelliNews has reported, sanctions are one of the most effective bargaining chips available to the White House.

Rubio sought to assure European diplomats that sanctions would not be lifted until an agreement is reached to end the war in Ukraine. However, he also stated that ending the conflict could “unlock a historic US-Russia economic alliance”. 

Answering a journalist's question, Rubio also implied that the White House didn’t intend to coordinate sanctions relief with the EU: "The sanctions were imposed as a result of this conflict. To end any conflict, all parties must make concessions. We cannot say in advance what they will be. We are definitely not discussing this today or at this press conference. But there are other parties that have imposed sanctions [on Russia]. The EU should also be at the negotiating table, because there are sanctions imposed by them."

The big win for Russia on sanctions relief would be to return to the SWIFT messaging service that would allow Russia to send and receive dollars. 

Russian media jumped on the comments as a signal that some sanctions would be lifted. TASS came out with the headline: "Rubio: The West will have to lift sanctions against Russia in the event of a settlement".

The US plan also does not seem to include peacekeepers in a mooted demilitarised zone (DMZ), whereas that is a key element of the plan being developed by the EU. Russian Foreign Minister Sergei Lavrov once again ruled out peacekeepers as part of any deal. He said in Riyadh that the presence of Nato troops in Ukraine is "unacceptable" to Russia.

"The presence of troops from Nato countries, whether under foreign flags, EU flags, or their own national flags, does not change anything. This is, of course, unacceptable to us," Lavrov said during a press conference following negotiations with US officials.