The environmental risks from a critical minerals rush in Ukraine

Since February 2022, Ukraine has sought to attract international investment and political partnerships by licensing critical mineral deposits. In this analysis, Iryna Babanina and Rob Watson examine how the demands of the conflict, economy and recovery are exacerbating the threats that their exploitation could pose for Ukraine’s environment.

Contents

Critical minerals in Ukraine

The environmental risks from critical mineral exploitation in Ukraine

Safeguards or sacrifice? Tensions in environmental protection

Further reading

Critical minerals in Ukraine

Background

In contrast to most European countries, Ukraine hosts a wide variety of critical mineral deposits and is increasingly examining their potential to support its economic recovery. Critical minerals refer to the elements necessary to produce the chips and batteries found in high-tech devices such as smartphones and laptops. They are also essential for the manufacturing of renewable energy technologies such as wind turbines, electric vehicles and solar panels.¹

In spite of their global importance,² supplies of critical minerals are at risk of disruption due to the concentrated nature of their extraction and production. Some such as copper are relatively widespread,³ whereas others such as cobalt can only be found in a few places at economic concentrations.⁴ Furthermore, whilst the distribution of critical mineral deposits varies, their processing is currently concentrated in China.⁵ This means that events like the COVID-19 pandemic can expose supply chains to disruption.⁶

These risks and geopolitical imbalances have increased attention on developing sources closer to key markets such as Europe, and it is in this context that the critical mineral resources of Ukraine have attracted increased global interest.

The location and status of Ukraine’s critical mineral deposits

We mapped the locations of 37 critical mineral deposits in Ukraine using publicly available information.⁷ Of these 11 are already operational, seven have been licensed to mining companies – although extraction has not yet begun, and the remaining 19 are ready for auction. Where possible, we also obtained information on their licence holders.

All the lithium deposits in territory still controlled by Ukraine have been licensed for exploitation. The Polokhivske deposit (deposit 1) has been licensed to ULM, a Ukrainian lithium mining company. ULM is lobbying internationally for further outside investment because the deposit is complex and extraction will be costly.

Foreign investors include the Australian mining company European Lithium, which already has operations in Austria, and which claims to be ‘ready to invest $1bn in lithium mining in Ukraine’. The company has provisionally obtained the licences to mine at Shevchenkivske (deposit 4), which is located only a few kilometres from the present frontline, and at Dobra (deposit 2) where lithium ores occur alongside a deposit of rare earth elements (REE) including tantalum, niobium, rubidium and cesium. The licence for Dobra was bought from a Ukrainian company PetroConsulting LLC in 2023.⁸

Elsewhere, Turkey’s Onur Group has invested $50m to mine graphite at the Burtynske site (deposit 22), and controls seven other mining assets in Ukraine. Another Australian company, Volt Resources, has acquired the rights to mine graphite at Zavallivske (deposit 19) until 2035. Volt showcased its plans for the deposit in London in June 2023 at a meeting on the planned Ukraine-EU strategic partnership for critical mineral mining.

Velta LLC, a joint Ukrainian-US venture, has been developing the Birzulivske site (deposit 5) since 2006, and has also obtained a licence to mine titanium at the Likarivske deposit (deposit 13). It also operates the largest titanium processing facility in Ukraine. However, it is the Ukrainian-US BGV Group that has the largest and most diverse stake in Ukraine’s critical minerals. BGV has obtained licences to mine major deposits of graphite at the Balakhivske deposit (deposit 21); zirconium and REEs at the Yastrubetske deposit (deposit 25); and beryllium at the Perzhanske deposit (deposit 32). Concerns have been raised over the process through which BGV obtained the permit to mine at Perzhanske.

Occupied deposits

Of the 37 deposits we examined, seven are in territories occupied by Russia since 2022. These include the Kruta Balka lithium deposit; the Mazurivske deposits, which are rich in tantalum, zirconium, niobium and other REEs; and the graphite deposits at Troitske and Mariupilske. As noted above, the strategic Shevchenkivske lithium deposit near Donetsk is located close to the frontline.

The extent to which control over Ukraine’s confirmed deposits of critical minerals, as well as its gas reserves, has played a role in Russia’s strategic calculus since 2014 has been discussed. At the peak of the occupation in 2022 it was estimated that more than $12tn of Ukraine’s natural resources were under Russian control. More recently it has been suggested that Russia plans to exploit resources under its control to help fund the war.

Exploiting the occupied deposits would not be straightforward. Only one – the niobium and zirconium mine at Mazurivske East – was operational before February 2022. Russia would need to make significant investments in both infrastructure and personnel to exploit the remainder. While Russian legislation includes a form of environmental impact assessment and a procedure called a ‘governmental/state environmental review’ – any research to inform it, and any subsequent decisions made, will be made under political pressure and thus risking their integrity. Legitimate public participation in the process is unlikely. More profoundly, Russia’s exploitation of Ukraine’s mineral resources in areas under occupation for the benefit of its coffers would likely constitute the crime of pillage.

Impact of the full-scale invasion on critical mineral exploitation in Ukraine

The overall effect of the invasion has been to stall the development of Ukraine’s critical mineral deposits. Investors are wary of committing to projects in Ukraine, while the Ukrainian state does not have the funds spare to develop the infrastructure to exploit many of them. Indeed, existing critical mineral exports have been hampered by the conflict’s constraints on sea and rail transport, even as domestic demand for critical minerals such as titanium, which has numerous military applications, has grown.

However, preparations for extraction at scale for international markets after the war ends have accelerated, having begun with the signing of a Memorandum of Understanding on raw materials between Ukraine and the EU in July 2021. The EU is seeking to ‘onshore’ production and develop new strategic ties to reduce reliance on Chinese imports. In November 2022, the Ukrainian Geological Survey signed a partnership with the European Bank of Reconstruction and Development, to digitise geological data and translate historical prospecting and survey documents into English. Changes were subsequently made to simplify and accelerate Ukraine’s procedures for environmental impact assessments. The EU’s Critical Raw Materials Act, passed into law in March 2024, further cemented these ties.

Ukraine’s government is encouraging foreign investment in its subsoils; meetings took place throughout 2023, including at the  Ukraine Recovery Conference. Ukrainian law firms have provided strategic and legal guidance for investors and interest is growing. In 2023 the Ukrainian government granted more than 400 special permits to exploit subsoil, a 10% increase from 2021. The state revenue raised through these permits amounted to UAH2.3bn – around $60m.

The environmental risks from critical mineral exploitation in Ukraine

Economic interests commonly trump environmental considerations during and after conflicts, and this rush to exploit Ukraine’s critical mineral deposits has triggered fears that the country’s ecosystems may suffer as a result. This in the context of historical degradation from industry and intensive agriculture, as well as the more recent damage linked to the ongoing conflict.

The environmental impacts of mining are extensive and diverse. They can include land degradation and soil erosion,⁹ subsidence,¹⁰ polluting mine drainage into aquifers,¹¹ landform destruction,¹² and the contamination of soils, surface and ground waters from mine tailings.¹³

The threat of water pollution by acid mine drainage from the inadequate management of mine tailings is already of particular concern in Ukraine; a threat being exacerbated by the conflict. Tailings management will also be a key challenge for the mining industry and Ukrainian state if new critical mineral deposits are exploited as part of rebuilding efforts.¹⁴

The environmental legacy of mining in Ukraine is already substantial and the exploitation of new deposits risks damaging environmentally sensitive areas. Of the 37 critical mineral sites we examined:¹⁵

• 19 deposits are within 1 km of an Ecologically Important Area (EIA);
• 7 deposits are within 100 m of an EIA;
• 18 deposits are within 1 km of a surface water body (river, stream or lake);
• 5 deposits are within 100 m of a surface water body.

Development of these prospective sites has the potential to impact wetlands and rivers, old-growth forest and steppe. Where mining instead occurs in agricultural areas, this can encourage the conversion of unprotected land to agricultural uses to compensate. The authorities have already stated their intention to convert such ‘rear’ regions to make up the shortfall.

We analysed the potential environmental impacts of mining at three representative sites.

Kruta Balka deposit – deposit 3

Kruta Balka is a complex REE deposit in an area that has been occupied by Russia since 2022. In addition to lithium, the deposit contains tantalum, niobium, beryllium, tin, caesium and rubidium; this makes it a lucrative mining prospect. The proposed mining would occur within an Emerald Network site and would cross a close tributary of the River Berda.¹⁶ Mineral extraction would therefore likely result in the destruction of multiple threatened and valuable ecosystems.¹⁷ It would also damage unique Precambrian geoheritage,¹⁸ and exacerbate existing water stress in the area.¹⁹

Malyshivske deposit – deposit 6

The Malyshivske titanium and zirconium deposit has been developed since 1961. In 2019 plans were published for a new ore refinement facility, transport terminal and two tailings ponds.²⁰ Extraction was proposed to be expanded by up to 2.7 million m³ of ore-rich sands per year over the next 60 years.

This would vastly increase the volume of mine waste to be managed in the vicinity of several surface watercourses in what is a highly productive agricultural area.²¹ It would also exploit and disturb aquifers that are likely to become important sources of water in the future.²²

Perzhanske deposit – deposit 32

The Perzhanske deposit contains beryllium and REEs. It was discovered in the early 1950s and mined historically until 1977.²³ Renewed mining at this site would endanger a rich and varied network of ecosystems at the confluence of several designated EIAs within the wider Polissya wilderness, which is often referred to as ‘Europe’s Amazon’.

Part of the proposed mining area is located within the Polissya Nature Reserve, where mining is still prohibited; however, other adjacent areas are not equally protected.²⁴ The forests and wetlands are rich in biodiversity. Animal species include mammals such as beavers, moose and wolves, and birds like the great grey owl and the arctic loon, along with threatened species such as the European lynx, the European stag beetle and the European pond turtle. The wetlands are important carbon sinks, and beryllium mining poses severe risks to these aquatic ecosystems.²⁵ The proximity of Polissya to the Belarusian border has also highlighted the effects of war on wildlife and conservation work in the reserve.

Safeguards or sacrifice? Tensions in environmental protection

The accelerating onshoring of critical mineral extraction in the EU is resulting in conflicts and confrontations that have parallels to those in countries where critical mineral exploitation has been ongoing for many years. There is concern that this onshoring will further entrench existing environmental inequities, in some cases by exploiting weaker regulative structures than those that exist within the EU;²⁶ in effect ‘offshoring’ the environmental harms whilst securing EU access to critical minerals.

For Ukraine, it is now a question of whether it can balance effective mining governance with the levels of responsible mining necessary to support its economic recovery as part of the global energy transition.

Ukraine already has legislative safeguards intended to limit the environmental impact of mining. Provisions of its Land Code bind legal entities or individuals to rehabilitate land damaged by their activities.²⁷ The Law on Land Protection imposes requirements to protect fertile topsoil.²⁸ Article 50 of the Subsoil Code establishes that environmental safety measures and land rehabilitation must be a part of projects to develop deposits or to build processing facilities. The law on Product Distribution Agreements envisages land rehabilitation projects, while permits for subsoil use contain requirements to protect the natural and built environments.

Prior to February 2022, compliance with environmental legislation and the state’s ability to enforce it were poor. This was attracting new legal instruments, including laws seeking to limit industrial activities in Emerald Network sites, which had been debated in parliament but repeatedly blocked. Some questioned whether such laws would be effective. Others opposed them because they feared they would be used to exert political pressure, a reminder that official oversight and enforcement must be transparent and explicit.

Since the full-scale invasion, mining legislation has been overhauled to attract investors. Their environmental protections have been rolled back, even as corporations involved in some of the new critical mineral mining projects have sought to enhance their public image by selling their ESG credentials.²⁹

In July 2023, amendments were made to the law on environmental impact assessments, whose procedures broadly match those of the EU. The law covers most types of mining projects and was amended to shorten the timeframe for public consultation, while introducing additional consultations with relevant state and local authorities.³⁰ At present, other restrictions associated with martial law further limit public participation in environmental decision-making.³¹

This gives local authorities a greater say over the final decision than the public. In Ukraine, local authorities collect 5% of the subsoil use fee for the mining of ‘mineral resources of national importance’, which include non-ferrous ores and REEs.³² They also receive 25% of all environmental taxes levied as compensation for soil, air and water pollution. Ukraine’s local authorities face huge financial shortfalls as a result of the conflict and may be motivated to agree to potentially harmful projects to weather economic difficulties or raise money for restoration.

Given the environmental destruction that licensed mining activities have already caused in Ukraine, and the growing international thirst for critical minerals, increased public scrutiny and pressure will be required to protect its environment, both now and once peace returns. As the ultimate market for many of Ukraine’s critical minerals, the EU also has an obligation to ensure that its thirst for them does not contribute further to Ukraine’s environmental problems.

Rob Watson and Iryna Babanina are Junior Researchers at CEOBS. We acknowledge Dariia Borovyk and Denys Vynokurov for kindly providing photos of plant communities in the Berda River valley, and Oleg Rozhko, Oleksii Vasyliuk, Igor Balashov and Viktor Parahomenko for making their photos publicly available on iNaturalist. 

Further reading

Exploration and mining perspectives of the critical elements for green technologies in Ukraine | Mykhailov et al., 2022

Prospects of development of lithium resource base in Ukraine | Vasylenko and Naumenko, 2022

Ukraine Recovery Conference Presentations, 21 – 22 June 2023, London | EU–UA Strategic Partnership on Raw Materials

Reform of the Ukrainian Raw Materials Sector | Ukraine Geological Survey

Why Did Ukraine Score Lowest in European Environmental Compliance? | Vox Ukraine

Guide to rebuilding Ukraine — Mining and extraction | Aequo

Five key trends in the development of Ukraine’s mining industry in 2023 | GMK Center

Sacrifice zones for sustainability? Green extractivism and the struggle for a just transition | European Environmental Bureau