How 50% became stumbling block in Ukraine-US relations

I hope that is not the case. I understand that it can only refer to 50% of revenues from new extraction licenses.

But in that case, it’s like being invited on a blind date or solving an equation with two unknowns. From what has been published in the press, it remains unclear how much they are willing to invest in the fund mentioned in the document, and we cannot say for certain where and how much of these resources that interest the US we actually have.

If this proposal indeed concerns unexplored resources, it means that before any extraction can begin, costly exploration work must be carried out to determine whether extraction is economically viable. This process could take anywhere from 5 to 20 years and does not guarantee a positive outcome.

Ukraine indeed has significant potential in oil, gas, critical materials, and mineral resources, but exploration and analysis of these reserves have not been conducted. We only theoretically know they exist, but no one can say for sure how much exploration would cost or whether extraction would be economically feasible.

For example, I’ll cite figures from Naftogaz's 2021 corporate strategy, which was prepared by experts with international experience and an understanding of financial markets. Just financing development programs, seismic exploration, and extraction from new gas fields (brownfield) would require an investment of $20 billion over ten years.

It strongly appears that the American proposal was not an economic agreement but a political arrangement. It could have been an economic deal if the US had clearly defined its financial commitments to the fund and its willingness to invest specifically in the exploration of potential, as yet unconfirmed, deposits.

It will be interesting to see whether discussions on the development of Ukraine's resources continue and when.

Source

About the author: Lana Zerkal, Ukrainian diplomat, former Deputy Minister of Foreign Affairs of Ukraine for European Integration

The editorial board does not always share the opinions expressed by blog authors.