The information environment is so soiled right now, it is especially difficult to assess such matters. And I, like many others, am upset about the rhetoric and methods that have been applied from the American side. Nonetheless I think this may be a better deal than its current press indicates. Let me note a few features at the margin, rather than trying to assess the entire situation comprehensively:
1. I don’t know what those mineral rights in Ukraine are worth, but past some level of corruption there is a resource curse (though not for Norway). So losing half of that revenue may not be as bad for Ukraine as it sounds. Was all that oil and gas wealth so good for Russia?
2. For better or worse, the mineral rights deal will, de facto, be renegotiated many times. Read your Williamson and Tirole! So whatever your opinion of what ends up being put on paper this week, think more about solving for the equilibrium over the longer run. The American incentive and willingness to give future aid is now somewhat higher than it would have been, without a mineral rights deal.
3. Since this is Trump’s deal, the Trumpist American right will now have a strong stake in making the deal work. That is significant.
4. At least potentially, Ukraine is now in some funny way “U.S.-certified” by the presence of the mineral rights deal. I do understand the moral hazard problems here, but perhaps the alternative was a slow loss of the war, due to manpower problems of the Ukrainian side.
5. Many people are in denial about how much the current Ukrainian regime, whether justly or not, is unpopular with both Democrats in Congress and with the U.S. deep state. There are far fewer courses of action than many deal critics would like to believe, and it is a mistake to think of all of this as coming from Trump. How exactly would it go trying to push another major Ukraine aid package through Congress?
6. I am not sure what European defense efforts will amount to, but we do see various promises in a constructive direction. Overall I am skeptical, but still there is some motion here.
7. As the prospects for the deal have approached, the Ukraine government bond market has been pretty happy.
So I am hoping for the best, and I consider these views as very subject to rapid revision.
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