As the ink was drying on the recent Ukraine-United States agreement, questions quickly arose: could this approach, which puts mineral resources at the heart of security diplomacy, serve as a model for mineral producing countries in Africa and beyond? Today’s announcement of a U.S.-brokered agreement around the conflict in the Democratic Republic of the Congo (DRC) with Rwandan-backed rebels raises the possibility of a frequently mentioned linked U.S. minerals deal being a next step, making it timely to consider implications of the Ukraine deal elsewhere.

With the Trump administration having set the tone by aggressively linking U.S. diplomacy to commercial and geopolitical mineral competition, a wave of state-to-state mining agreements may well be coming—with some focused on the minerals-security nexus.  

Some governments and stakeholders in mineral-producing countries may view these new deals with trepidation, not least given the intense diplomatic pressure pushing them to the negotiating table, the role minerals have long played in conflicts and some negative experiences with somewhat analogous resource-for-infrastructure deals in past decades. Others may welcome a novel structure to support their broader security or development ambitions. Regardless of their orientation, lessons from Ukraine's newly signed deal and earlier African country experiences can help governments navigate this environment of deal-making in the pressure cooker of the current geopolitical moment.

Choices made by Ukraine and other countries in the context of war and an urgent need for international support should be understood accordingly. Still, governments have important lessons to draw upon, including around the importance of transparency, the need to look beyond rhetoric to the concrete lasting obligations, the challenges of valuing mineral resources and what’s received in return, and how to advance long-term objectives while prioritizing short-term security needs.

Transparency is essential

The frequent lack of public information about state-to-state mineral partnerships often makes them difficult to scrutinize. As with mining contracts generally, transparency—including around the parties involved and responsible for implementation—is essential to building public trust, deterring corruption and helping ensure fair returns to a country’s citizens.

In this sense, it is noteworthy that one of the main agreements constituting the Ukraine-U.S. deal was published by the Ukrainian government (though not simultaneously by the U.S. government) and approved by the Ukrainian legislature. This publication at least allows stakeholders to probe some of the details around two main features of the deal, namely (i) a joint investment fund for the reconstruction of Ukraine using, in part, Ukrainian government resource revenues, and (ii) commitments by the Ukrainian government to the U.S. regarding investment opportunities and offtake rights in future resource projects in Ukraine.

However, some key terms—namely those detailing contributions and withdrawals from the fund, are not set out in the published agreement, but in a separate “LP agreement,” reportedly signed weeks later, which has not been disclosed. Without transparency of the full deal documentation, stakeholders cannot have a full understanding of the deal.

African experience with resource-backed loans or resource-for-infrastructure arrangements reinforces the importance of transparency. Like today’s mineral-security deals, those deals involved mineral-producing countries using their natural resources to achieve largely unrelated benefits (e.g., financing for infrastructure in exchange for future natural resources) and often involved a global power government. For example, transparency concerns have plagued multiple stages of the DRC-China Sicomines deal, from the initial agreement to a 2017 amendment, the latest 2024 renegotiation and its ongoing implementation.

Civil society organizations in the DRC have raised concerns that a potential U.S. mineral deal risks repeating the opacity that characterized the Sicomines deal. The fact that the Congolese public apparently first learned of the potential deal with the U.S. through American media rather than their own government underscores this concern. On the other hand, the DRC government has recently published the names of the team coordinating the U.S. negotiations, aiming to reinforce public trust and preempt potential corruption concerns. The government should continue to prioritize transparency, particularly in any next step economic negotiations, allowing the public to have a better understanding of the DRC's expectations in this process.

Rhetoric doesn’t always match reality…

Transparency is important in part because with complex arrangements such as mineral partnership agreements, the devil is in the details. In negotiating or evaluating a deal, producer-country governments and stakeholders —such as civil society and parliamentarians— must look beyond the rhetoric to understand the actual terms and lasting obligations.

For example, media coverage of the Ukraine-U.S. agreement, has focused on U.S. preferential access to Ukrainian minerals and Ukraine avoiding an obligation to repay earlier U.S. for earlier military assistance. But in each of these cases, the actual terms of the agreement provide less certainty than the political rhetoric suggests.

On U.S. access to Ukrainian minerals, the White House fact sheet suggests that future natural resource projects in Ukraine are there for the U.S.’s taking: “If the United States decides to acquire these resources for ourselves, we will (sic) given first choice to either acquire them or designate the purchaser of our choice.” In practice, Ukraine achieved agreement terms that are more nuanced, clarifying that any preferential offtake terms apply only to certain resource projects and would need to be negotiated based on “market-based commercial terms.” And while the agreement mentions “certain restrictions” on offtake by others (to be detailed in the LP Agreement), the published agreement does not mention a U.S. right to designate a purchaser.

On Ukraine not repaying the U.S., this is, strictly speaking, accurate and an improvement for Ukraine from earlier Trump administration positions. However, the only specified financial commitment from either party in the published agreement is Ukraine contributing “Ukraine Agreed Revenues” (i.e., 50 percent of royalties, fees, etc. from certain resource projects) into a fund reported jointly and equally owned by the Ukraine and the U.S.. And while some sources reference the US also making financial contributions into the fund, the published agreement includes no such commitment.

Furthermore, mention in the published agreement of future military assistance counting as an “increase” in the U.S. contribution could be interpreted (unless otherwise addressed in the LP agreement) as the U.S. having already contributed to the fund. In such an interpretation, the agreement’s provisions could be viewed as a sort of conversion of “debt” (for prior U.S. military support) into “equity” for the US in the fund. Nevertheless, the narrative that Ukraine owes no repayment to the U.S. has prevailed. Ultimately the real balance seems to depend on (i) the eventual significance of the “Ukraine Agreed Revenues” and (ii) the eventual rules around withdrawal of money from the fund and any further commitments to contribute into the fund, which were to be set out in the separate undisclosed LP Agreement.

…but perceptions matter too

While analyzing deal terms is essential, the Ukraine experience shows that it is not only hard contractual obligations that matter. Even if the deal is, as some commentators have noted, unlikely to lead to significant resources or revenues changing hands anytime soon, signing it does appear to have contributed to changing the dynamic between the U.S. and Ukraine.

It has relieved pressure on Ukraine from the Trump administration and opened the door to further U.S. diplomatic support, putting the possibility of additional US military assistance back on the table for the first time under this administration. In that sense, the deal has perhaps already helped Ukraine achieve some of its short-term objectives with a U.S. administration eager to tout “deals,” even if future U.S.-Ukraine relations remain uncertain in a volatile geopolitical context. As African governments weigh the pros and cons of similar deals, these relationship considerations will certainly be a factor driving decision amidst imperfect choices.

More broadly, the Ukraine deal shows that even in power imbalances, it is possible to improve terms through negotiations. Ukrainian officials were able to at least partly resist pressure and improve the deal terms from the earlier White House proposals with apparently significantly worse terms for Ukraine, though this also depends on the terms of the undisclosed LP agreement.

Governments need to rigorously assess the value of mineral resources and what is offered in return

Fairly valuing mineral resources is always challenging in mining deals due to uncertainty around geology, prices and costs. For the Ukraine agreement, estimating the value of the “Ukraine Agreed Revenues” comes with its own challenges, but using data from Ukraine’s EITI reports on previous government resource revenues and various scenarios on the value of Ukraine’s mineral resources, while not foolproof, could help.

The valuation challenge is even greater in mineral-for-security or resource-for-infrastructure deals when assessing what is received in return for minerals. For example, the Sicomines deal has been criticized for trading significant mineral wealth for inadequate roads and poor equipment.

Security deals add further complexity because military and diplomatic assistance are often opaque and harder to value. The valuation needs to also account for the impact of such assistance. For example, while a deal between Kinshasa, Kigali and Washington could potentially address the conflict with the Rwandan-backed M23 rebels, valuing that security assistance and its impact on human rights and the economy, including on the mining sector—is difficult given there are more than 140 armed groups active in Eastern Congo.

In mineral security arrangements, a key potential benefit for producer countries, be it Ukraine or DRC, is the promotion of future resource-sector investment. But in practice achieving this often goes well beyond what is covered in the agreement. For example in Ukraine, the significant private sector investment required is unlikely until the conflict ends, especially as an estimated half of the country’s mineral wealth is currently under Russian occupation.

In the DRC, besides the security context, other challenges hindering Western mining investment include: lack of sufficient energy and transport infrastructure, a difficult business environment and Chinese market dominance. Many known deposits have already been ceded to foreign companies, limiting the DRC government’s options. Also, lack of certified geological data in certain areas, notably in rebel-controlled areas, further complicate valuation.

Short term security needs will understandably be prioritized, but impacts on long term objectives should also be considered

Any eventual DRC-US agreement may therefore also be judged by Congolese stakeholders partly on whether it supports or undermines these ambitions. This is complicated by the possibility that a DRC-U.S. deal could involve Rwanda. One report suggests an eventual deal could involve “the creation of an industrial zone in Congo that would export processed metals via its neighbors,” while others indicate that Kigali sees negotiations “as an opportunity to legitimize access to Congolese resources and attract investment to expand its own existing metals processing.” The latter outcome could face criticism that negotiations prioritize short-term political survival of the governing coalition over the country’s long-term development goals.

Conclusion

The new context of state-to-state mining agreements may reshape what a “good deal” means for mineral-producing counties. As the DRC and others consider such arrangements—especially minerals-for-security deals—lessons from Ukraine and earlier resource-for-infrastructure deals can offer valuable guidance.

Given the polarized geopolitical context in which these deals are being negotiated, producer countries can benefit from maintaining strategic neutrality as much as possible. This is important for countries like the DRC to safeguard sovereignty and retain control over policy- making and the national development trajectory.

Ultimately, any deal will be judged on its implementation and impact. Transparent and measurable implementation will be essential to ensure benefits reach the population.

As the world moves away from fossil fuels, there is a growing demand for renewable energy technologies—and the minerals and metals needed to build them. To reach net zero globally by 2050, the International Energy Agency estimates that the world will require six times more mineral inputs in 2040 than in 2021. For some minerals, the demand could even reach 30 times current levels. Demand remained strong in 2023, despite more volatility in prices. While the development of new technologies or policies to reduce consumption and increase circularity could have a crucial mitigating impact on this demand, the coming decades will no doubt see many new mines come online.

As demand for these essential materials booms, there is risk of a corresponding increase in corruption, with harmful impacts on communities and nature, the state budgets of mining countries, and humanity’s collective ability to realise a just energy transition. In past commodity booms, fast-paced dealmaking and the promise of windfall profits encouraged graft and self-dealing. At the same time, the scale and pace of activity hampered the ability of oversight actors to keep pace with developments in the sector, making it harder to spot corrupt behavior. These problems could easily repeat themselves in transition mineral projects, not least given the added pressure of tackling the climate crisis.

Other characteristics of the current mineral boom could further increase corruption risks. First, NRGI’s research finds that many players in today’s transition mineral supply chains are assuming new roles in different stages of the supply chain and negotiating unprecedented deals, such as in cobalt supply chains.

As offtakers and consumer product companies manage unfamiliar risks and dominate multiple stages of the supply chain, their anticorruption processes may be poorly equipped, perhaps even intentionally, to address the challenges posed in the extraction and processing of transition minerals. 

Second, reserves of key transition minerals are concentrated in countries that have struggled to control corruption. Transparency International Australia identified that as much as 94 percent of rare earth reserves and 70 percent of cobalt reserves are found in countries that score poorly on Transparency International’s Corruption Perceptions Index. Some minerals, such as rare earth elements, are found in countries with contested governments or ongoing violent conflict.

Corruption in mineral supply chains threatens a just energy transition both by increasing the risk of harms associated with mining, and delaying and disrupting the supply of minerals needed to deliver the necessary scale-up in renewable technologies required to fight climate change. Taking steps now to identify, prevent and redress corruption can help avoid the mistakes and harmful outcomes of the past, as well as new harms, lost opportunities and the reproduction of inequities.

This report presents the scoping study on the disclosures of Mongolia’s state-owned mining enterprises, conducted by the Natural Resource Governance Institute (NRGI). The study was supported and funded by the Extractive Industries Transparency Initiative (EITI) International Secretariat and the European Bank for Reconstruction and Development (EBRD).

Mongolia's extractive sector is significant for its economy, contributing 31.6 percent of government revenue, 92 percent of export earnings, and 28.2 percent of GDP. A variety of companies operate in the sector, with state-owned enterprises (SOEs) playing key roles in the exploration, extraction, and management of mineral resources. Erdenes Mongol LLC is the biggest player, acting as a holding company. For instance, it holds stakes in the Oyu Tolgoi copper mine (34 percent ownership), Tavan Tolgoi coal mine (65 percent), Shivee-Ovoo coal mine (90 percent) and Baganuur coal mine (75 percent), as well as Erdenet Copper Mine and projects managed by Mongolrostsvetmet. These are all projects exploiting deposits that are defined as “strategic”, meaning that the equity holding in these projects is prescribed by legislation. Erdenes Mongol also has stakes in gold, silver, and uranium exploration and operation companies.

Despite playing a key role in Mongolia’s economy, state-owned enterprises (SOEs) in the mining sector face challenges related to governance and transparency. This is evident in the NRGI’s Resource Governance Index (RGI) scores, where Erdenes Mongol is among the “poor” performers due to its lack of transparency in financial transactions and production. The EITI validation report highlights a need for more comprehensive disclosure on Mongolia's SOEs in the extractive sector. This includes financial relations, spending practices, and corporate governance. In addition, mining SOEs have been marred by high-profile corruption and bribery cases over the years. The CEO of Erdenes Mongol, for example, admitted to taking bribes, leading to his dismissal, and most recently a former CEO of Erdenes Tavan Tolgoi, the key coal exporter and a subsidiary of Erdenes Mongol, was convicted of abuse of power. In December 2023, the State Great Hural, or the parliament of Mongolia, held public hearings on the so-called ‘coal theft’ scandal which revealed significant problems associated with SOE coal sales, transportation and tax payment irregularities or outright squandering of public assets. For instance, hearing witnesses testified that a significant number of trucks crossed the border empty, raising concerns that this was a scheme to evade royalty and tax payments. Under these circumstances, the importance of transparency and public scrutiny of SOEs is unquestionable.

The EITI, being a leading initiative to promote good governance in the extractive sector, has long recognized that transparency of SOEs is a crucial element of transparency and good governance in mineral resources. Its 2010 EITI Rules, for instance, emphasized the need for the EITI reports to include all companies including SOEs, and to specifically disclose SOE production in addition to the requirements for all companies. Since then, the Rules evolved into a global standard, and its latest edition, the 2023 EITI Standard, includes many more detailed requirements and expectations on SOE transparency and state participation. Specifically, the Standard states the objectives of EITI in terms of disclosures related to the state participation, defines the scope of the term SOE, and provides a list of specific information that is required, encouraged, or expected to be disclosed under the national EITI reports that are disclosure requirements for all companies. Given that the latest version of the standard was adopted in 2023, countries including Mongolia need to revisit their own documents and plans to ensure that the national EITI reports meet the standard in full, including in terms of disclosure requirements for SOEs.

While EITI is one of the leading initiatives driving reforms and increased disclosures in Mongolia, other initiatives and developments led by the government also contribute to the increased disclosures and strengthening of the transparency of SOEs. For instance, Mongolia is a member of the Open Government Partnership, under which the government pledged to improve the transparency of SOEs. Also noteworthy are the Public Information Transparency Law and Glass Accounts Law. The former details specific information that the government and SOEs are required to disclose to the public, and the latter builds an integrated framework for public reporting of budget entities and SOEs. For example, Glass Accounts contains information on disclosures of individual financial transactions by SOEs, which has led to disclosure of information with granularity that allows all stakeholders to analyze the state of financial affairs at SOEs at an unprecedented level. Another important player that contributes to good governance and transparency of SOEs is the Independent Agency Against Corruption (IAAC). The IAAC leads the implementation of the National Anti-Corruption Program which aims to limit political interference at SOEs, streamlining procurements processes, enhancing transparency and disclosures, and improving clarity of objectives and policies such as dividend policies. 

However, many of these initiatives are not comprehensive in addressing extractive sector governance challenges, and coordination among these initiatives is weak. In that light, EITI remains a key process in the sector with its enhanced global standard, functioning processes, and involved stakeholders. As such, this report will inform EITI stakeholders with the aim of taking the EITI in Mongolia to the next level, focusing on one of the key areas of sector governance, namely SOE disclosures and reporting.

This report presents the scoping study on Mongolia’s contract transparency, undertaken by the Natural Resource Governance Institute (NRGI). The study was made possible with the support and funding of the Extractive Industries Transparency Initiative (EITI) International Secretariat and the European Bank for Reconstruction and Development (EBRD).

Mongolia's mining sector is the backbone of its economy, significantly contributing to gross domestic product, exports, government revenue, and foreign investment. It creates high-paying jobs and boosts local economies, especially in the mining regions. Coal, copper, gold and other minerals are major government revenue drivers, generating export earnings of USD13.9 billion in 2023. This constitutes 92 percent of the country’s total exports and 29.9 percent of the government revenue. While Mongolia’s oil production is relatively small, it still contributes to government income and benefits local communities. In 2023, the oil sector produced 4.7 million barrels of crude oil, generating USD364.7 million in export earnings and accounting for 1.3 percent of government revenue.

Despite its economic importance, Mongolia’s mining sector faces numerous challenges that hinder its development. Corruption scandals have plagued the sector, while environmental and social issues remain significant. A widespread perception persists that Mongolia does not receive its fair share of mining profits. Frequent policy changes, often driven by populism rather than thorough analysis, have eroded investor confidence. This is evidenced by ongoing disputes with investors, a decline in new foreign direct investment, and a lack of new discoveries and projects.

Recognizing the mining sector’s vital role in Mongolia's economy and the need for good governance, the country joined EITI in 2006 to promote transparent and accountable management of the extractive sector. The EITI sets a global standard for transparency and good governance in the extractive sector. It requires companies and governments to disclose detailed information on revenues, payments, production volumes, commodity sales, mining company ownership, and extractive contracts governing relationships investors. Since January 2021, the EITI Standard mandates full disclosure of contracts and licenses, enhancing transparency and allowing citizens to understand the impact of extractive projects on their nation.

Contract disclosure is a crucial ingredient of good governance and transparency in the extractive sector, benefiting all stakeholders involved. For instance, it enables governments to strengthen regulatory systems and ensure efficient oversight, mitigates reputational risks for companies and fosters trust with other stakeholders, and empowers citizens to hold governments and companies accountable. This transparency allows citizens to monitor revenues and other areas of impact of mining on their country.

Contract disclosure in Mongolia has evolved significantly both within and outside of the EITI framework. The latest EITI Validation Report indicates that Mongolia has largely met EITI requirements by publishing numerous contracts on a dedicated portal. However, there is room for improvement in government policies and practices regarding full contract disclosure.

Domestic legislation has also evolved, mandating the disclosure of certain mining sector contracts. Additionally, initiatives like the Open Government Partnership, prioritize transparency in extractive sector contracts. Finally, some companies, particularly those listed on stock exchanges, disclose contracts voluntarily due to legal requirements, or to mitigate corruption risks and public perception issues.

While the government and companies have published many contracts, it remains unclear if all relevant contracts are disclosed. The disclosure process also lacks clear regulations and a systematic approach, as discussed in the next sections of this study.