27
FEB
2025
According to consistent reports, the United States and Ukraine have agreed on a commodity pact, which is expected to be signed tomorrow, Friday, during a visit by President Volodymyr Zelenskyy to Washington. According to the current status, the pact provides that half of all proceeds from the sale of Ukrainian mineral resources will be paid into a fund to which the United States has access. Parts of the fund are to be used for investments in Ukraine.[ 1] As the New York Times reports, the pact in its current form does not affect the deposits, which are already being exploited today, but only new finds to be developed. However, income from the transport and shipping of raw materials is also included. The original US demand that Kiev must transfer a total of 500 billion US dollars to Washington is no longer included. In addition, the term "security guarantees" is included in the text of the treaty; Kiev had insisted on this. However, according to the New York Times, it is only found in the wording that the USA "supported" the "strives of Ukraine to obtain the necessary security guarantees". 2] What exactly is to be understood by "support" is not stated in the wording.
US President Donald Trump justifies his demand that Washington should have access to the Ukrainian raw materials or to the income from their sale, especially by indicating that the US has largely paid its support for Ukraine as subsidies and has not granted it more than loans like others, including the EU. That's true. More precise information can be found in an analysis published in January by the Comité pour l'abolition des dettes illegitimes (CADTM) from Liège. According to this, Kiev's debt to the EU has increased from 5 billion US dollars at the beginning of 2022 to a good 43 billion in November 2024. If you add Kiev's loans to the European Investment Bank (EIB) and the European Bank or Reconstruction and Development (EBRD), you get a sum of almost 50 billion US dollars. According to the calculations of the CADTM, this is about 44 percent of all foreign debt of the Ukrainian state. More will be added foreseeable. As part of its share of the 50 billion euro G7 aid package, which the G7 agreed to in 2024, the EU will again award approximately 85 percent as a repayable loan - 33 billion euros. Of this, 12.4 billion have already been paid; more than 20 billion euros in debt will be added in the next two years.[ 3]
As can be seen from the CADTM analysis, the EU is thus the main creditor of Ukraine - and with considerable distance. 18 percent of Ukrainian foreign debt goes back to World Bank loans, 15 percent to loans from the International Monetary Fund (IMF); four percent must be settled by Kiev in Canada, one percent in Japan. About 18 percent consists of debts with private creditors, especially investment funds such as BlackRock. 4] The CADTM emphasizes that Ukraine must repay its World Bank and IMF loans even during the war; the IMF demands interest of up to 8 percent, it is said. Kiev had to repay him almost 9 billion US dollars from 2022 to 2024. The country that has the dominant influence at the IMF – the United States – is significantly responsible for this. It should also be taken into account that Ukraine must meet a large number of conditions in return for the granting of loans and initiate so-called reform measures; this was not only demanded by the World Bank and the IMF, but also by the EU. The CADTM indicates the number of binding conditions and measures to be met, citing the Ukrainian Ministry of Finance, as 325.
With the now apparently guaranteed US access to the proceeds from the sale of Ukrainian raw materials, there is no financial source from which Kiev could repay its debts to the EU. In return, another source may be opening up from which profit could be made in one way or another - the Ukrainian arms industry. This has grown rapidly since the beginning of the war. The Stockholm research institute SIPRI, for example, points out in a current analysis that the defense company Ukrainian Defense Industry (formerly UkrOboronProm) was able to increase its revenues by 69 percent to 2.2 billion US dollars in 2023 alone.[ 5] Smaller defense companies are also booming. The Australian Strategic Policy Institute (ASPI), for example, reports that the number of startups that supplied the Ukrainian armed forces more than doubled in 2024 and now is around 1,500. 6] They manufactured a wide variety of products - from drones that are controlled by fiber optic technology and therefore cannot be jammed, to remote-controlled machine guns for unmanned ground vehicles and drone defense drones. SIPRI calls the industry "dynamic, diverse and innovative". 7] In addition, their products are, it is regularly said, war-tested.
Ukrainian agencies, but also industry experts, regularly point out that investments in Ukrainian defense companies - especially in some startups - could be very worthwhile for Western companies in the long term. Some Western European corporations, including Rheinmetall, have now gained a foothold at Ukrainian locations. Although the volume of investments is still small so far, a total amount is reported, which is at most between 20 and 40 million US dollars. But in the meantime, it is said, a noticeable upswing is emerging. 8]
In addition, the Ukrainian arms industry is beginning to hope for lucrative arms exports. Recently, Ukrainian gunsmiths called on the government in Kiev to relax a current export ban due to the war. In the meantime, production capacities have been created, some of which went beyond what the Ukrainian armed forces would need, an industry representative said in December: "Everything that our army does not need or cannot buy, we propose to export to countries of the Ramstein Group in a controlled manner". 9] There was talk of an export potential for armaments worth more than ten billion euros. The manufacturing costs in Ukraine are far below those in Western Europe; taxes and duties flush money into the heavily indebted state treasury with increasing production of weapons, which favors the repayment of the billions in loans to the EU.
[1] Robert Putzbach, Majid Sattar: Trump and the "big deal". Frankfurter Allgemeine Zeitung 27.02.2025.
[2] Andrew E. Kramer, Constant Méheut: Draft of Minerals Deal Features Vague Reference to Ukrainian Security. nytimes.com 26.02.2025.
[3], [4] Eric Toussaint: La dette de l'Ukraine : un instrument de pression et de spoliation aux mains des créanciers. cadtm.org 13.01.2025.
[5] Kateryna Kuzmuk, Lorenzo Scarazzato: The transformation of Ukraine's arms industry amid war with Russia. sipri.org 21.02.2025.
[6] Oleksandr Ihnatenko: The underexploited potential of Ukrainian defence tech. aspistrategist.org.au 17.02.2025.
[7] Kateryna Kuzmuk, Lorenzo Scarazzato: The transformation of Ukraine's arms industry amid war with Russia. sipri.org 21.02.2025.
[8] Kollen Post: Ukraine's long-awaited weapons tech investment boom is finally kicking off. kyivindependent.com 17.02.2025.
[9] Clara Marchaud: Ukrainian defense industry pushes for exports abroad. euractiv.de 12/16/2024.