February 26th, 2025 

Politics - Minerals Agreement initialed by both parties

- Zelenskyy to Washington on 28th for formal signing 

Ground Ops - Russian gains in Kursk Salient

Weather

Kharkiv

23 and cloudy. Partly to mostly sunny Thursday and Friday, then 5 days of clouds; snow on Sunday. Daily lows will be in single digits to low teens through the weekend, daily highs will be in the upper 20s, no significant windchill for the next four days. Winds variable,  less than 5kts.

Melitopol

24 and partly cloudy, windchill 18. Sunny on Thursday and Friday, then party to mostly cloudy for the following week. Daily lows will be in the teens to low 20s, daily highs in the low 30s, windchills 4-5  degrees colder.  Winds easterly, 5-10kts.

Kyiv

33 and clear, windchill 25, gusting to 20. Mostly sunny tomorrow followed by a week of heavy clouds, snow on Saturday. Daily lows in teens tomorrow, 20s on Friday, around 30 all next week, daily highs in the mid 30s, windchills 4-5 degrees colder. Winds southerly, 5-10kts.

Politics and Diplomacy

The US and Ukrainian have reportedly initialed an agreement on mineral resources, and President Zelenskyy will travel ti the US and Friday will formally sign the document with President Trump.

The agreement provides for a Joint Reconstruction Investment Fund; the Ukrainian Government will contribute 50% of all future revenue from mineral resources and other infrastructure to the fund. Existing revenue streams will not be included.

The US will voluntarily contribute funds.

The revenue with invested in projects promoting the “safety, security and prosperity of Ukraine."

The text is below.

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BILATERAL AGREEMENT ESTABLISHING TERMS AND CONDITIONS FOR A RECONSTRUCTION INVESTMENT FUND

WHEREAS the United States of America has provided significant financial and material support to Ukraine since Russia’s full-scale invasion of Ukraine in February 2022;

WHEREAS the American people desire to invest alongside Ukraine in a free, sovereign and secure Ukraine;

WHEREAS the United States of America and Ukraine desire a lasting peace in Ukraine and a durable partnership between their two peoples and governments;

WHEREAS the United States of America and Ukraine recognize the contribution that Ukraine has made to strengthening international peace and security by voluntarily abandoning the world's third largest arsenal of nuclear weapons;

WHEREAS the United States of America and Ukraine wish to ensure that those States and other persons that have acted adversely to Ukraine in the conflict do not benefit from the reconstruction of Ukraine following a lasting peace;

NOW, THEREFORE, the Government of the United States of America and the Government of Ukraine (each, a "Participant") hereby enter into this Bilateral Agreement Establishing Terms and Conditions for a Reconstruction Investment Fund to deepen the partnership between the United States of America and Ukraine, as set forth herein.

1. The Governments of Ukraine and the United States of America, with the aim of achieving lasting peace in Ukraine, intend to establish a Reconstruction Investment Fund (Fund), partnering in the Fund through joint ownership, to be further defined in the Fund Agreement. Joint ownership will take into consideration the actual contributions of the Participants as defined in Sections 3 and 4. The Fund will be jointly managed by representatives of the Government of Ukraine and the Government of the United States of America. More detailed terms pertaining to the Fund’s governance and operation will be set forth in a subsequent agreement (the Fund Agreement) to be negotiated promptly after the conclusion of this Bilateral Agreement. The maximum percentage of ownership of the Fund’s equity and financial interests to be held by the Government of the United States of America and the decision-making authority of the representatives of the Government of the United States of America will be to the extent permissible under applicable United States laws.
   
   Neither Participant will sell, transfer or otherwise dispose of, directly or indirectly, any portion of its interest in the Fund without the prior written consent of the other Participant.
2. The Fund will collect and reinvest revenues contributed to the Fund, minus expenses incurred by the Fund, and will earn income from the future monetization of all relevant Ukrainian Government-owned natural resource assets (whether owned directly or indirectly by the Ukrainian Government), as defined in Section 3.
   
3. The Government of Ukraine will contribute to the Fund 50 percent of all revenues earned from the future monetization of all relevant Ukrainian Government-owned natural resource assets (whether owned directly or indirectly by the Ukrainian Government), defined as deposits of minerals, hydrocarbons, oil, natural gas, and other extractable materials, and other infrastructure relevant to natural resource assets (such as liquified natural gas terminals and port infrastructure) as agreed by both Participants, as may be further described in the Fund Agreement. For the avoidance of doubt, such future sources of revenues do not include the current sources of revenues which are already part of the general budget revenues of Ukraine. Timeline, scope and sustainability of contributions will be further defined in the Fund Agreement.
   
   The Fund, in its sole discretion, may credit or return to the Government of Ukraine actual expenses incurred by the newly developed projects from which the Fund receives revenues.   
   
   Contributions made to the Fund will be reinvested at least annually in Ukraine to promote the safety, security and prosperity of Ukraine, to be further defined in the Fund Agreement. The Fund Agreement will also provide for future distributions.
4. Subject to applicable United States law, the Government of the United States of America will maintain a long-term financial commitment to the development of a stable and economically prosperous Ukraine. Further contributions may be comprised of funds, financial instruments, and other tangible and intangible assets critical for the reconstruction of Ukraine.
   
5. The Fund's investment process will be designed so as to invest in projects in Ukraine and attract investments to increase the development, processing and monetization of all public and private Ukrainian assets including, but not limited to, deposits of minerals, hydrocarbons, oil, natural gas, and other extractable materials, infrastructure, ports, and state-owned enterprises as may be further described in the Fund Agreement. The Government of the United States of America and the Government of Ukraine intend that the investment process will lead to opportunities for distribution of additional funds and greater reinvestment, to ensure the sufficient supply of capital for the reconstruction of Ukraine as set out in the Fund Agreement.
   
   The Participants reserve the right to take such action as necessary to protect and maximize the value of their economic interests in the Fund.      
6. The Fund Agreement will include appropriate representations and warranties, including those necessary to ensure that any obligations the Government of Ukraine may have to third parties, or such obligations that it may undertake in the future, do not sell, convey, transfer pledge, or otherwise encumber the Government of Ukraine’s contributions to the Fund or the assets from which such contributions are derived, or the Fund’s disposition of funds.
   
   In drafting the Fund Agreement, the Participants will strive to avoid conflicts with Ukraine’s obligations under its accession to the European Union or its obligations under arrangements with international financial institutions and other official creditors.
7. The Fund Agreement will provide, inter alia, an acknowledgment that both the Fund Agreement and the activities provided for therein are commercial in nature.
   
   The Fund Agreement shall be ratified by the Parliament of Ukraine according to the Law of Ukraine "On International Treaties of Ukraine".
8. The Fund Agreement will pay particular attention to the control mechanisms that make it impossible to weaken, violate or circumvent sanctions and other restrictive measures.
   
9. The text of the Fund Agreement will be developed without delay by working groups chaired by authorized representatives of the Government of Ukraine and the Government of the United States of America. Contact persons responsible for preparing the Fund Agreement on the basis of this Bilateral Agreement are: from the Government of the United States of America: the Department of the Treasury; from the Government of Ukraine: Ministry of Finance and Ministry of Economy.
   
10. 10.This Bilateral Agreement and the Fund Agreement will constitute integral elements of the architecture of bilateral and multilateral agreements, as well as concrete steps to establish lasting peace, and to strengthen economic security resilience and reflect the objectives set forth in the preamble to this Bilateral Agreement.
    
    The Government of the United States of America supports Ukraine’s efforts to obtain security guarantees needed to establish lasting peace. Participants will seek to identify any necessary steps to protect mutual investments, as defined in the Fund Agreement.
11. 11.This Bilateral Agreement is binding and will be implemented by each Participant according to its domestic procedures. The Government of the United States of America and the Government of Ukraine commit to proceed forthwith to negotiate the Fund Agreement.

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President Trump commented that the deal would grant Ukraine “military equipment and the right to fight on.”
  President Zelenskyy noted that 8 countries have “reacted positively” to the idea of contributing to a peace-keeping force, the Nordic-Baltic Eight:

Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden.

On the subject of peace-keepers, Trump added:

”Something will be done that’s going to be satisfactory to everybody… It’s actually something I did discuss. A form of peacekeeping that’s acceptable to everybody. Ultimately, we’ll be able to agree on something, I’m sure.”

Ground Ops

KURSK SALIENT

Russian forces continue to make gains in the Kursk Salient, particularly along the north edge and in the west near the Ukrainian border. Russian gains remain unconfirmed (in part due to poor weather) but reporting suggests that the Russians continue to push east and south-east from near the Ukrainian border and have pinched the bottom of the salient; some sources place Russian forces as close as 2 miles from the major road that carries logistics support to Ukrainian forces inside Russia

NORTH OF KHARKIV

Fighting continues near Vovchansk (Northeast of Kharkiv) as well as near Lyptsi (due north of Kharkiv), but there were no confirmed changes to the front lines.

South of Kupyanske, in the general area east and north-east of Borova, the UGS reported continued fighting but there were no changes in the front lines.

Further south, Russian forces made some gains west and south-west of Terny.

BAKHMUT

North-east of Bakhmut there are unconfirmed reports that Russian forces have pushed into the west side of Bilohorivka and now control the entire town, though there are conflicting reports that suggest some small pockets of Ukrainian troops remain inside the town. It is probable that Russian forces have overrun the town, but that isolated Ukrainian elements remain inside the town. Whether they can hold on and Ukrainian forces can force their way back in, or the Russians can clear the town remains a toss-up at this point.

There were no changes in the lines in Chasiv Yar., although fighting appears to have picked up in the last few days, and Russian sources claim gain in the south and west side of the town.

In Torestk there are conflicting reports of gains and losses that seem to cancel each other out, and there continue to be reports of isolated Ukrainian elements inside the town.

DONETSK CITY

Fighting continues along most of the perimeter of the salient with conflicting reports of gains and losses. Of note, Ukrainian forces appear to have pushed Russian forces back in the vicinity of Kotlyne (west of Pokrovsk) and Russian forces may have fallen back as far as the T0406 Roadway.

There were no confirmed changes in the lines on the south side of the salient.

Russian forces continue to attack north-west from the Velyka Novosilke area, following the line of the Mokri Yali river and appear to have gained ground on Burlatske, and appear to be pushing into that town form the east and south.

SOUTHERN UKRAINE

Fighting is reported west of Orikhiv - near the eastern most point of the Dnepr, in the towns of Kamyanske, Mali Shcherbaky and Pyatykatky; Russian sources  insist Russian forces have occupied all or most of the town but this has not been confirmed. 

Air Operations

During the night of the 25th Russian forces launched 177 x Shahed drones into Ukrainian air space. The UAF claimed it shot down 110 drones and 66 drones were “lost” (defeated by EW).

Final count on the Russian strike on the night of the 24th:  213 x drones and 7 x Kh-101 cruise missiles; the UAF claimed 133 shot down and 79 “lost” (defeated by EW), 1 drone was unaccounted for, as were the 7 cruise missiles. Ukrainian officials reported infrastructure damage in Kharkiv, Sumy and Zhytomir. Russina sources claimed port facilities struct in Odessa.

Ukrainian reporting from the Pokrovsk area suggests that Russian forces are using fiber optic trailing wire controlled drones to ram larger Ukrainian ordnance carrying (“Bomber”) drones 

Other Activity

John Daly, an analyst at Jamestown Foundation, reports that anti-naval drone barriers have been set up in Balaklava Bay, and suggests that the Russian navy is is using the old sub base again. He notes that the tunnels are too small for a kilo class submarine and suggests it would be used for patrol boats.

Balaklava Bay is located on the south-west coast of Crimea, about 8 miles south of Sevastopol; Sevastopol is located on the north side of a promontory, Balklava Bay is on the south side.

Economic Reporting

Feb22   Mar 7   Jun10-22 Jun8-23 Jun7 Dec9 Jan8 Feb7 Feb25 Feb26

Brent      94.71      119.50 120.90    75.58      80.06 72.63 76.69 74.89 74.30 72.59

WTI     92.10      123.80 119.50  71.29      75.81 68.85 73.94 71.17 70.27 68.63

NG       3.97       4.45     8.41      2.15      2.82 3.17 3.66 3.37 4.03 3.99

Wheat     8.52       12.94    10.71    6.17       6.40 5.59 5.37 5.86 5.87 5.81

Ruble     85         145.70  58.48     82.59      88.77 100.84 105.18 96.88 86.48 86.88

Hryvnia Pre Oct 2023 fixed at 36.4 41.55 42.33 41.46 41.75 41.65

Urals 56.56    67.61 66.19 71.76 68.32 67.76 65.49

ESPO 77 78.19 ??? 75.80 74.09

Sokol 65.32 72.79 70.92 71.52 69.76

Thoughts 

Russian forces continue to make ground gains from Velkya Novosilke pushing north and west, generally following the Mohkri Yaly River.  They have pushed through Skudne and are less than a mile from the the last Ukrainian defensive line in the south. Behind that line, which runs east - west from a point just north of Skudne, and there are no more defensive positions unit the next east-west line, about 6-8 miles further north, which is to say, if Russian forces can get past that line, they have an opportunity to take a good deal of terrain. Said differently, Ukrainian forces need to hold that line.

That said, it sure feels like we are getting near to a ceasefire… say a prayer. But my sense is that President Trump certainly did not push forward this mineral agreement in isolation from the development of a ceasefire and a peace agreement, at least a temporary one. 

v/r pete