The Ukrainian minerals myth

Someone’s been messing with President Donald Trump. The Donald is stating that Ukraine will use their very valuable rare earth deposits as security for the military aid that the United States will provide. The problem is that Ukraine doesn’t have any valuable rare earth deposits. 

No, really. 

Now yes, that factoid has long been rolling around policy circles. There are $6 trillion of minerals in Ukraine. Therefore let’s all do what we can to secure access to them. We know this because the World Economic Forum tells us so. Senator Lindsey Graham says so. The sensible would therefore insist that this cannot be so. The sensible would also be correct on this. 

No one’s statistics are ever perfect but the United States Geological Survey is the best we’ve got on minerals. And it’s possible to check the veracity of these varied statements about Ukraine and minerals — say, that there’s lots of lithium there. In terms of production, reserves or resources Ukraine doesn’t even make the list. Nor does it for rare earths. For titanium someone, somewhere, is getting very confused indeed between titanium oxide, for pigments, and titanium sponge, a form of the metal for the military and aerospace. The difference is that the second is a matter of having a factory, not a mine. The largest producer of the basic material, the oxide — what is then put through the factory to make the sponge — is actually the United States.

We can go on through whatever list of metals or elements we desire and make the same points. Even xenon, where Ukraine is a major supplier (it’s vital for certain stages of computing chip production) is a matter of having access to the atmosphere and the right factory — not a mine nor deposit at all.

The mistake is — well, it’s not actually a mistake, it’s the grossly vile error of not understanding the subject in the slightest. 

There are mineral deposits everywhere. There are only the 90 elements if we ignore some of the fun radioactive ones and that’s what the whole of the planet is made up from. Therefore any particular part of the Earth will have some amount of those 90 in it. Your back yard is a mineral deposit just as my garden most certainly is. 

Mining is about what happens next. A mineral resource is what we think might be worth digging up and processing. A mineral reserve is what we’ve proven is worth digging up to process. The proof being that the elements we extract will be more valuable than the cost of doing that extracting.

Ukraine might well have — okay, will have — deposits of all sorts of mineral loveliness. Of those reserves, the things we’ve already proven are worth worrying about, not so much. Between, in fact, none and some trivial amount dependent upon which element we’re talking about. Certainly nothing out of the ordinary compared to what can be found in our own wider backyards of the US, Canada, the UK and on and on.

What’s actually happened here is that someone’s started waving around old Soviet era surveys of mineral deposits and then shifted the meaning to mineral reserves. Which is that grossly vile error — at least we should all hope it’s an error not a plan.

But it is widely believed all the same. Thus the President: “We’re looking to do a deal where they’re going to secure what we’re giving them with their rare earth and other things.” “We’re putting in hundreds of billions of dollars,” says Trump, “They have great rare earth. And I want security of the rare earth, and they’re willing to do it.”

There isn’t the rare earth there to be the security for anything.

This is all rather a proof of Hayek’s Nobel Lecture, “The Pretence of Knowledge”. The centre never will have the information to be able to plan things. Sadly, this doesn’t stop the centre trying to do so but the concept is why those plans so rarely do turn out as envisaged. 

Obviously, this could all just be me — all those politicians couldn’t be wrong now, could they? Except this very idea has been tested before. There was that idea that Afghanistan was sitting on a trillion dollars of minerals and that would justify eternal war. When push came to shove and the Pentagon needed to think through that claim they ended up quoting some random Englishman. From the 2018 report by SIGAR (Special Inspector General for Afghanistan Reconstruction):

More recently, and more colloquially, the British economic writer Tim Worstall commented on the U.S. government’s view of Afghanistan’s large deposits of iron, copper, and lithium: “The problem with all of this is that those minerals are worth nothing. Just bupkis.” The reason for his assertion: “The value of a mineral deposit is not the value of the metal once it has been extracted. It’s the value of the metal extracted minus the costs of doing the extraction. And as a good-enough rough guess the costs of extracting those minerals in Afghanistan will be higher than the value of the metals once extracted. That is, the deposits have no economic value”—“As we can tell,” he adds, “from the fact that no one is lining up to pay for them” 

Sure there are minerals in Ukraine. Sure there are rare earths. Mineral reserves, minerals proven to be actually worth extracting and refining, not so much.

The Donald’s going to be real pissed when he finds out, isn’t he?