US, Ukraine hold tense talks as mineral deal remains elusive, source says

By Andrea Shalal

WASHINGTON (Reuters) - U.S. and Ukrainian officials met on Friday on a U.S. proposal to gain access to Ukraine's mineral wealth, a source with knowledge of the matter said, adding that prospects for a breakthrough were scant given the meeting's "antagonistic" atmosphere.

The strains in the Washington talks stemmed from the Trump administration's latest draft proposal, which is more expansive than the original version, the source said.

"The negotiating environment is very antagonistic," the source said, pointing to the "maximalist" draft submitted by the Trump administration last month.

A Treasury Department spokesperson confirmed the discussions, calling them "technical in nature."

The latest draft would give the U.S. privileged access to Ukraine's mineral deposits and require Kyiv to place in a joint investment fund all income from the exploitation of natural resources by Ukrainian state and private firms.

The proposed deal, however, would not provide U.S. security guarantees to Kyiv - a top priority of Ukrainian President Volodymyr Zelenskiy - for its fight against Russian forces occupying some 20% of its territory.

The source said that one of the "Easter eggs" found in the document was a U.S. demand that the U.S. government's International Development Finance Corporation take control of a natural gas pipeline from Russian energy giant Gazprom across Ukraine to Europe.

The Ukrainian government has hired law firm Hogan Lovells as an outside adviser on the minerals deal, the source said.

Zelenskiy on Wednesday said a minerals deal should be profitable for both countries and could be structured in a way that would help modernize Ukraine.

Top Ukrainian officials including Prime Minister Denys Shmyhal and Finance Minister Serhiy Marchenko will be in Washington in two weeks for International Monetary Fund and World Bank meetings, including a Ukraine-focused ministers' meeting on April 25, multiple sources familiar with the plans said.

U.S. President Donald Trump is seeking a deal covering Ukraine's minerals, which include prized rare earths, as part of his effort to end the war and as a way to recover billions of dollars in U.S. military assistance to Kyiv.

(Reporting by Andrea Shalal, additional reporting by Gram Slattery; writing by Jonathan Landay; Editing by Don Durfee and Cynthia Osterman)