Dispatches from Ukraine. Day 1,164

U.S. and Ukraine Sign Minerals Agreement

After a failed February signing and a recent breakthrough in the Vatican, the U.S. and Ukraine have signed a historic economic partnership agreement. The agreement grants Washington unprecedented access to Ukraine’s critical minerals in exchange for long-term investment and reconstruction aid.

After months of behind-the-scenes negotiations, the accord establishes a reconstruction investment fund, described by U.S. President Donald Trump as a way to balance the books on past aid provided to Kyiv. The deal comes as Trump faces pressure to deliver on his promise of achieving peace between Ukraine and Russia within 24 hours, along with growing frustration with his erratic economic policy, which has triggered a 0.3% contraction of the U.S. GDP in the first quarter of 2025.

“This agreement signals clearly to Russia that the Trump Administration is committed to a peace process centered on a free, sovereign, and prosperous Ukraine over the long term,” U.S. Secretary of the Treasury Scott Bessent said in a statement on Wednesday.

The minerals pact had become a political flashpoint, briefly collapsing after a heated Oval Office clash between Trump and President Volodymyr Zelenskyy in February. For months, negotiations stalled, and only in recent days did talks regain traction. The breakthrough came last weekend in Vatican City, during an impromptu tete-a-tete Zelenskyy-Trump meeting on April 26 at Pope Francis’s funeral.

The deal was signed despite a last-minute standoff over governance terms and transparency measures. Both governments hail the agreement as a milestone. Treasury Secretary Scott Bessent said it “signals clearly to Russia” that the Trump administration is “committed to a peace process centered on a free and sovereign Ukraine.” On the Ukrainian side, First Deputy Prime Minister Yulia Svyrydenko signed the agreement and described the fund as a tool for attracting global capital into Ukraine’s resource-rich but war-ravaged economy.

Under the terms of the agreement, Ukraine commits to directing 50% of profit from new extraction licenses into a joint fund and must follow the agreement’s terms even if they conflict with future domestic laws. Experts warn of a potential erosion of the legislative sovereignty of Ukraine, citing asymmetrical obligations and vague dispute resolution mechanisms. Additionally, the lack of clear exit terms and possible frictions with EU integration raises questions about long-term strategic flexibility.

Nonetheless, the agreement has some favorable clauses for Kyiv: all profits for the first decade will be reinvested in Ukraine’s reconstruction, and, importantly, the agreement avoids any debt obligations to the U.S.

Russia’s Attacks on Ukraine and War Developments

Kharkiv region. Russian attacks on Ukraine’s eastern province between April 21-29 killed six and injured more than 87 civilians, with casualties resulting from drone strikes, aerial bombs, and artillery shells. Additionally, three people were killed by remnants of explosive ordnance.

Donetsk region. The death toll in the embattled eastern region has surged since April 21 as relentless Russian strikes have killed 25 and wounded at least 56 locals, according to daily reports of Vadym Vilashkin, the head of the regional military administration.

Dnipropetrovsk region. Since April 25, Russian drone strikes have killed six residents in the central oblast, or region.

Kherson region. Russian drone and artillery strikes in the southern region killed two people and injured five others on April 26-27.

Odesa region. A Russian drone strike on the regional capital early May 1 killed two civilians and injured 15 others, damaging several apartment blocks and a nearby school.

Russian President Vladimir Putin announced a three-day ceasefire starting at midnight on May 7, calling it a “humanitarian gesture” to mark the 80th anniversary of World War II victory celebrations. Ukraine and the U.S. dismissed the gesture as insufficient, with the Ukrainian Minister of Foreign Affairs Andrii Sybiha calling for an immediate and lasting peace.

Russia previously declared an “Easter ceasefire” on April 21, which Ukrainian authorities acknowledged led to a reduction in attacks but noted they never fully ceased. Soon after the truce ended, Russian forces launched an overnight assault on April 22, deploying more than 50 drones.

Ukraine’s Air Force lost a Su-27 fighter jet during a Russian aerial attack on April 28. The aircraft was conducting a combat mission, supporting ground troops. The loss follows the earlier downing of the second F-16 fighter jet, which reportedly occurred in the Russia-bordering northeastern region of Sumy on April 16.

Russia and North Korea have officially acknowledged the deployment of North Korean soldiers in Russia’s Kursk region. The acknowledgment comes eight months after Ukraine’s military incursion into the region. Both Moscow and Pyongyang emphasized that the North Korean military’s involvement is limited to this area and is in line with their bilateral defense agreement.

President Vladimir Putin said that the Korean troops participated as part of a mutual defense commitment. On April 26, Russian General Staff Chief Valery Gerasimov reported to Putin on the recapture of the Kursk region.

Ukrainian President Volodymyr Zelenskyy soon denied the claims. However, Ukrainian OSINT think-tank DeepState indicates that Ukraine maintains control over only a tiny fraction of the territories it seized in Russia, primarily limited to a few border villages.

Global Military Spending Surge

Global military spending reached $2.7 trillion in 2024, marking the steepest increase since the Cold War, with Europe leading the charge. Amid tensions with the U.S. and the war in Ukraine, European military expenditures surged by 17%, reaching $693 billion.

Russia and Ukraine saw the largest spikes, with Russia’s military budget jumping nearly 40% to $149 billion, consuming 7% of its GDP. Ukraine’s military burden, in turn, reached 34% of the nation’s GDP, the highest level in the world.

However, the trade war sparked by U.S. tariffs, which roiled global markets, has driven oil prices down, straining Russia’s economy. With oil revenues making about a third of the federal budget, the country is vulnerable for commodity price changes and now bracing for a downturn.

Already dealing with $240 billion in war expenses and depleting two-thirds of its National Wealth Fund, Russia will be forced to adopt austere measures, including cuts to public spending. In particular, the Finance Ministry is preparing for a $35 billion fall in oil revenues. Notwithstanding these economic challenges, however, defense spending remains the Kremlin’s priority, and reductions in defense spending seem unlikely.