From Humiliation to Historic Partnership?

After the highly publicized fallout between the presidents of Ukraine and the United States at the White House in March 2025, both leaders have now reconciled. By the end of April, U.S. Treasury Secretary Scott Bessent and Ukraine’s First Deputy Prime Minister Yulia Svyrydenko signed the “Agreement between the Government of Ukraine and the Government of the USA on the Establishment of a US-Ukraine Reconstruction Investment Fund,” subsequently referred to as USURIF.

Ukraine’s Parliament, the Verkhovna Rada, has already ratified the treaty, and the signature from their president has completed the ratification process. On 23 May 2025 the agreement entered into force. Additionally, the U.S. and Ukraine have signed two further agreements, which remain confidential. Based on the public agreement, it seems as if the U.S. was able to succeed in getting resources in turn for military aid. But, comparing the signed version with the two draft proposals, Ukraine seems to have had the better cards in the negotiations during the last months.

A Triumph for Ukraine?

The USURIF has been hailed as a „triumph for Ukrainian diplomacy“. This comes as a surprise, especially considering that the initial draft faced significant criticism, including from the present author. The original draft, titled the “Bilateral Agreement Establishing Terms and Conditions for a Reconstruction Investment Fund” (BARIF), contained troubling provisions and numerous gaps – most notably the absence of security guarantees from the U.S., no details on dispute resolution, and only a passing reference to Ukraine’s potential EU accession. It was particularly problematic because it appeared that the U.S. sought to exploit Ukraine’s dire situation caused by Russia’s unlawful use of force. As with any state, the U.S. is prohibited from benefiting from such unlawful acts. Pressuring Ukraine to sign a treaty that primarily benefits the U.S. and imposes costs on Ukraine – without offering any tangible benefits in return – raised serious concerns under Article 52 of the Vienna Convention on the Law of Treaties (VCLT).

These doubts seem to be off the table, and that with some merit.

First of all, Ukraine’s president announced in October 2024 a „Victory plan“ that included an offer to its strategic partners, namely “a special agreement for the joint protection of the country’s critical resources, as well as joint investment and use of this economic potential”. In essence, he planted the idea of a resource deal in Trump’s head.

Second, as will be demonstrated below, the USURIF is more favorable to Ukraine than the initial draft from February 2025 (the BARIF), as will be demonstrated later.

Third, it is also more advantageous than a reported intermediate draft – prepared after the BARIF but before the USURIF – which ultimately did not materialize. This draft was entitled “United States-Ukraine Reconstruction Investment Fund – Agreement of Limited Partnership” (future references are to specific PDF pages).

This draft established a limited partnership under Delaware law and was even more aligned with U.S. interests than BARIF. For example, it proposed a five-member board with three U.S. nationals who could outvote the two Ukrainian members (page 14). Given the current political climate in the U.S., it is not far-fetched to assume that these three U.S. nationals would have followed all directives from the U.S. president. Additionally, regarding any costs, conditions, or delays incurred, Ukraine would have been required to compensate the partnership, namely, by covering any missing funds (pages 6 and 40). It is almost self-evident that this deal included no security guarantees for Ukraine. The fact that this proposal did not materialize contributes to the understanding that the U.S. position has weakened over the last months while Ukraine’s position was strengthened.

The Contents of the USURIF

But what does the “triumph for Ukrainian diplomacy” actually look like? What are the substantial provisions of the deal? First, it is claimed that “Ukraine retains full ownership of its mineral resources, both countries share decision-making and royalties equally, and all revenues for the first decade will be reinvested in Ukraine,” as argued by Nigel Gould-Davies. However, this was already true under the BARIF.

Secondly, both parties in the intermediate draft “recognize that the contributions of the United States following Russia’s full-scale invasion of Ukraine in 2022 have provided material and financial benefits to Ukraine” and agree that such contributions “are deemed contributions to the Partnership as of the date hereof.” Although the USURIF does not explicitly mention this second point, it operates on the same principle. This is evident from its very first sentence: “The United States of America has provided significant financial and material support to Ukraine since Russia’s full-scale invasion of Ukraine in February 2022” – mirrors the wording in BARIF. Furthermore, Article VI(5) of USURIF states that “If, after the Effective Date, the Government of the United States delivers new military assistance to the Government of Ukraine in any form (including donation of weapons systems, ammunition, technology or training), then the capital contribution of the U.S. Partner shall be deemed increased by the assessed value of such military assistance, in accordance with the LP Agreement.” Essentially, all past actions are considered contributions from the U.S. to the fund that have already been provided. In effect, USURIF is a treaty that grants something to the U.S. in the future in exchange for weapons deliveries made in the past.

In other parts, USURIF closely resembles BARIF but provides more details on how enforcement will be ensured. Notably, Ukraine must ensure that 50% of all future royalties (rent payments), license fees, and amounts payable under production sharing agreements are transferred to the Fund (Appendix A). These details are to be specified in the Limited Partners Agreement (LP Agreement). The BARIF adopted a similar ‘framework approach,’ referring to the subsequent agreement as “Fund Agreement.”

However, two aspects stand out within USURIF. First, it includes dispute settlement provisions. The parties “endeavor to agree on interpretation and application of this Agreement and shall make every effort through cooperation and consultations to reach a mutually satisfactory resolution of any matter affecting its operation” (Art. IX [1] USURIF). If a dispute arises, it shall be resolved “by mutual consultation” (Art. IX [2] USURIF). That seems to be a challenging way forward, but at least dispute settlement is included.

Second, both the U.S. and Ukraine show greater sensitivity regarding Ukraine’s attempts to join the European Union. While the BARIF only mentioned EU accession in passing (“In drafting this Fund Agreement, participants will strive to avoid conflicts with Ukraine’s obligations under its EU accession or arrangements with international financial institutions and other official creditors”), USURIF explicitly references EU considerations multiple times (7^th preambular paragraph, Art. VII(1)(c),(2) USURIF). Most importantly, it states that “the United States acknowledges Ukraine’s intention to avoid conflicts between this Agreement and Ukraine’s obligations related to European Union accession” (seventh preambular paragraph).

The Contrasting (or Competing) European Approach

In comparison between BARIF and USURIF, Ukraine is better off with the now adopted text. After all, EU accession remains a vital interest for Ukraine and the EU member states alike. The EU and its member states have allocated more funds to Ukraine than the U.S. The USURIF states that its provisions are to be carried out or implemented “in accordance with applicable law and Ukraine’s EU obligations” (Arts. VII (1)(c),(2), VIII(3) USURIF). These obligations are to be understood as “existing international obligations of Ukraine to the European Union (EU) in force (…) related to Ukraine’s accession to the European Union, including those obligations contained in the Association Agreement between the European Union and the European Atomic Energy Community and their Member States (…) of 2014” (Appendix A).

Not explicitly mentioned, because it is not legally binding, is the “Memorandum of Understanding between the European Union and Ukraine on a Strategic Partnership on Raw Materials” (MoU) of 2021. This MoU represents the European approach to Ukrainian raw materials, which differs not only in legal nature from the USURIF but also in scope. While the U.S. is primarily interested in funds generated by natural resource assets – a reflection of President Trump’s (at least partial) transactional foreign policy – the EU adopts a broader perspective linked to Ukraine’s potential EU accession.

The MoU aims at “improving the legal and administrative framework” within Ukraine (Section I(1)). It is evidently more balanced than the USURIF, as it establishes closer integrated value chains for raw materials. Specifically, the partners agree to exchange information on potential trade barriers or other challenges faced by investors, with a view to overcoming them collaboratively (Sections II, IV). Both sides commit to fostering joint ventures as well as research and innovation initiatives (Section II). Importantly, the MoU explicitly states that it does not “represent any commitment from either side to give preferred treatment to the other Side” (Format Section).

Finally, the MoU envisions sustainable projects in Ukraine that could enable Ukraine’s eventual membership in the EU (Section III). Sustainable or durable joint projects are central to this agreement, focusing on strengthening local value creation rather than draining Ukrainian resources or funds without benefit: a reloaded resource curse.

Summary

Again, after comparing the BARIF and the USURIF, Ukraine is better off with the now-adopted text. Considering the visible deterioration of the U.S.-Ukrainian relationship, this is at least somewhat surprising. This is not to say that the USURIF is a perfect treaty or a good thing for Ukraine. Circumstances seem to indicate that the treaty is not void under Art. 52 VCLT.

The U.S. praises and describes the new treaty as a “first-of-its-kind historic partnership”. However, the success of this example is itself questionable: many uncertainties remain, and the relationship between wealth derived from natural resources and the ability to defend against armed attacks remains problematic. Its ultimate success will not be judged in isolation but within a broader context, particularly the peace agreements brokered by the U.S. and other partners. If Ukraine survives and its natural resources help fund that survival, it will probably – and regrettably – mark the end of the ongoing legal debate highlighted here.