Trump, Ukraine Mineral Rights, and Basic Economics
And why Canada should take Trump's annexation threat seriously
I think Trump's insistence that Ukraine hand over its mineral rights helps explain why there are so many bankruptcies in his business career, namely a lack of a basic understanding of finance and economics. I have compiled all the USGS annual metal supply data going back to 1930 and produced graphics so that I can understand who dominates the supply of the 50 key energy and metal commodities. The chart showing what percentage of each metal that China and Russia together supply compared to America is a good example. I've also produced similar charts featuring only Canada, Russia and Ukraine. Canada has an area nearly 17 times bigger than Ukraine and nearly 5 times bigger than Greenland, though if you subtract Greenland's ice sheet covered part Canada is a hundred times bigger. Canada is the second largest nation. The largest, Russia, has a land mass 70% bigger than Canada, while China's is slightly smaller.
It is very instructive to compare the raw material production charts of Canada, China and Russia. China overwhelmingly dominates in most materials, which is before we add the output from the refining and smelting of imported concentrates. Russia has a somewhat wider range of materials than produced by Canada, and it generally produces more than Canada in each category. But there is no reason Canada could not double its production in many categories, and even start producing some that it is missing, especially those in the critical mineral category. Canada, however, is punching below its weight for several reasons.
One is that Canada's mines must adhere to environmental standards which are not much of a priority in Russia and China. This creates a higher cost for Canadian mines, but its metal output has to be sold at global market prices, what one might call the "China price". Another is that Canadian deposits need to meet economic development hurdles, which is not the case in China whose state-owned enterprises need not operate at a profit if both profit and strategic power show up downstream such as is the case for rare earths and magnets. Canadian mine related decisions must contend with the China price for metals where China dominates in such metals, prices that can fluctuate according to the strategic goals of Xi Jinping's autocracy. This also used to be the case for the Soviet Union, though today Russia's oligarchs are not very keen about operating at breakeven or at a loss to feed downstream sectors in which they do not have a stake.
A third disadvantage for Canada that has become a major problem during the past decade is the NIMBY anti-mining lobby which former prime minister Justin Trudeau put on steroids by signing UNDRIP and putting the final say about Canada's natural resources in the hands of First Nations who represent 3% of the population. NIMBY NGOs such as Mining Watch Canada have exploited First Nations to help push an anti-mining agenda. This has inhibited exploration and development of mineral deposits, as a result of which Canada is punching far below its metal supply capacity.
When you look at the same chart for Ukraine at first glance its metal supply almost compares to that of Canada until you realize its percentage scale only goes to 10% whereas the three for Canada, China and Russia go to 100%. Ukraine's top metals are iron ore and manganese of which it supplies about 3% of global production. There is no security of supply problem for iron and manganese. Then you notice titanium and zirconium which supply between 1%-2%, probably from mineral sand deposits of which Australia has a great abundance. Uranium production is 0.2% of global supply. Ukraine does not produce most of the minerals deemed critical by the United States.
Why is that? The obvious answer is that the grade of whatever mineralization exists in Ukraine is well below the economic threshold as defined by the China price. If the endowment for any metal were rich enough it would have been developed a long time ago. Another answer is that exploration for minerals has never been a priority for Ukraine since the Soviet Union fell apart; it would take years to discover and delineate deposits that make money at the China price, with no guarantee that economic orebodies emerge. Trump's proposal that Ukraine repay America for its support by developing metal deposits is thus ludicrous, which may explain why Zelensky is willing to exchange its mineral rights for a protection guarantee.
If Russia were to give up its assault on Ukraine, where would the money to develop Ukrainian deposits come from? Ukraine's priority will be rebuilding its infrastructure which you can rest assured will not be paid by Russia which caused the damage. When Trump says future mines that supply America with metals it needs will repay America's contribution to Ukraine's defense against Russia, where does he think the cash to make it happen will come from? Who is supposed to put up the CapEx to develop a deposit, especially when the OpEx is going to be higher than China price determined revenues? Does Trump not grasp basic economics?
Canadians should take seriously Trump's threat that America will annex Canada because Canada has the potential to supply most of America's future metal needs. Neither Greenland nor Ukraine have any serious potential to help solve America's metal supply vulnerability. Canada has the potential to play a key role in supplying the Global West, a critical role if the Global South ends up aligning itself with the Global East. Trump's thuggish behavior toward Canada is not endearing America to Canadians, but it is serving as a useful wake-up call that Canada has an important role to play in preserving the democracy based world order that the United States established after World War II and which Trump and his Putin Poodles seem hell-bent on dismantling. America may escape the autocratic ambitions of the likes of Donald Trump, JD Vance and Elon Musk, but it still needs to solve its metal supply vulnerability to avoid the autocratic ambitions of China and Russia. Trump's dream that he can somehow subjugate China and Russia is delusional. Canada is a major potential solution to this problem. First Nations need to join with the rest of Canadians to launch the biggest exploration boom in the history of Canada, and all of Canada's political parties need to embrace this goal.