Ukraine, entering its fourth year of war with Russia, makes up only 0.4 percent of the Earth’s surface and is home to approximately 5 percent of all the world’s critical raw materials.
Politicians aren’t alone in their fascination by the place.
“There’s a lot of great geology packed into one country,” said John McLeod, founder of Tulsa-based Source Rocks International.
All that geology and resources have been in the news lately as an agreement is in the works between the United States and Ukraine whereby Ukraine will use its mineral resources to repay the United States $500 billion for military aid previously provided. The agreement does not designate the rights of $500 billion-worth of minerals revenues to the United States nor does it include a security guarantee for Ukraine, but rather a joint reconstruction investment fund. The agreement (and it hasn’t been signed as of this writing and could be renegotiated with different terms) includes minerals deposits, oil, natural gas and other relevant infrastructure, but does not include resources that are already serving as a revenue source to Ukraine.
The Geology
Whatever the ultimate deals, from a purely geologic perspective, Ukraine packs quite a wallop.
McLeod said the country’s resources include “A compressional mountain belt (Carpathians), and an associated foreman basin, a deep rift basin (Dnieper-Donets), a productive coastal plain and offshore area (Black Sea), and a very productive mineral belt (Ukraine Shield), and fabulously productive glacial soil covering a large portion of the country.”
From an outsider’s view, the value of Ukraine minerals and hydrocarbons is speculative, McLeod admitted, adding, “The mining and extraction industries of known commodities are mostly mature but with remaining potential.”
In 2022, McLeod wrote a comprehensive piece distributed by Research Gate called, “Geological Resources of Ukraine,” in which he not only discussed the country’s geology, but it’s history, geography, infrastructure, native vegetation, rainfall, land use, as well as its tectonics, basins and oil reserves.
In it, he noted that Ukraine is the world’s largest wholly European nation, by land mass, and holds abundant geologic resources.
“It holds some of the world’s largest reserves of iron ore, titanium and coal. It also controls more than 25 percent by volume of glacially derived black soil (chernozem) that has enabled it to become an agricultural powerhouse,” said McLeod. “Although much of Ukraine is low-relief and covered by thick soil, its buried storehouses include the Precambrian Ukrainian Shield mineral belt (containing some of the oldest known rocks), the Paleozoic Dnieper-Donets Basin (one of the deepest on earth) and the southern portion of the Cenozoic Lviv-Volyn Trough that contains both coal and oil and gas.”
The country also has large reserves of uranium with Soviet-era nuclear power providing much of its electricity.
“Ukraine also may – or may not - contain economic deposits of lithium, rare earth elements, strategic minerals and shale gas. Its southern mountains – the Carpathians and the Crimeas, and Black Sea Basin, are telltale of a complex Mesozoic-Cenozoic plate collision and subduction that formed the mountainous landscape of southern Europe,” McLeod explained.
Even though much of the country is arid or semi-arid, the impounded Dnieper River provides flood control, hydropower and irrigation water for its once-thriving agricultural export economy.
Where Geoscience Meets Geopolitics
For McLeod, personally, Ukraine was one of those places that just spoke to him.
“I did this project originally as a new ventures challenge – (to) learn as much as I could about the geologic resources of a place that I was almost totally unfamiliar with,” he said.
He wants others, when they speak of the place, to understand the nuances of what’s at stake. To do that, it is important to understand the difference between rare earth elements and critical minerals.
In the Energy Act of 2020, a “critical mineral” is defined as any mineral, element, substance, or material designated as critical by the secretary of the interior, acting through the director of the U.S. Geological Survey. Rare earths, by contrast, are chemical elements defined by similar chemical composition and behavior as organized in the periodic table of elements.
The problem, said, McLeod is that “critical minerals” is a politically-defined term, not a scientific one, and are designated by governments that “come and go,” which means that what one authority deems critical might not be shared by the next authority, or might change due to demand or other market forces.
The recent proposed agreement between the two countries, generally, and that dynamic, specifically, got his attention.
“At the time I researched the geological resources of Ukraine for an online presentation in 2022 for the Tulsa Geological Society, Ukraine was not producing any rare earths,” he said.
Rather, he said, the main commercial critical mineral the country produced was titanium. In fact, in 2020, Ukraine was in the top ten of worldwide titanium reserves and production.
And of some note, he said, “Unlike some other mining districts, the three titanium oblasts are beyond the current borders of Russian occupation.”
He said that of all the known geologic resources of Ukraine – iron ore, uranium, titanium, oil and gas, coal – it derives the most economic value from its organic-rich glacially-derived soils (chernozem).
“The quality and thickness of this soil enables Ukraine to be the breadbasket of the world,” he said.
But getting back to that rare-earth dynamic, he said the country is something of a wild card.
“Rare earths are difficult to extract from ore and China competes not only because of its rare earth abundance, but also on cheap labor,” he said.
In Ukraine, McLeod explained, “the critical minerals are seen in more mature deposits and mines and would likely not see meteoric growth without unforeseen exploration success.”
Geopolitical Poker
If the deal goes through with Ukraine, one of the questions of primary interest is: What will be its ultimate value to the United States?
It’s not a simple answer. For instance, McLeod cites a statement by the Ukrainian Geological Survey in 2022 in a discussion of estimated yttrium and other rare earth reserves:
“The ores of most objects in Ukraine are classified as poor or ordinary. There is no experience of commercial extraction and enrichment of such ores in the world practice yet, so the question of their involvement in production is complicated,” said McLeod.
This uncertainty is exacerbated by politics and war entering the discussion.
“At one time, Ukraine was highly ranked for shale gas potential but its underwhelming performance in adjacent Poland and a couple of dry holes dampened enthusiasm,” noted McLeod.
That enthusiasm was especially muted, he said, when at about the same time the Crimea was seized.
“So from 2014 onward, there was unacceptable political risk that outweighed any geological risk for foreign companies to operate in Ukraine,” he said.
The geological risks were (and are) huge.
Industry experts estimate it will take up to $2 billion to get a rare earth mine operational, which would constitute a major commitment and investment, even if there wasn’t a war going on. According to the proposed agreement, Ukraine will also retain all revenues from existing mines, which might preclude the United States from accessing the handful of underway mineral projects in Ukraine, including a 90-year-old graphite mine and two early-stage lithium mines.
The hope is that, once the war ends – if it ends – and the rebuilding of the country begins, the political and geological dynamic will change.
Both countries are playing poker, in a manner of speaking, and they might both be bluffing – or holding really good cards.
“Our government or Ukraine likely knows more about reserve estimates and economic potential and they could be better – or worse – than what has been reported,” said McLeod.