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We know that he ranks his dealmaking ability highly – that was the big message from his bestselling book The Art of the Deal, ghostwritten by Tony Schwartz and published in 1987. We know too that Ukraine is in an extremely weak negotiating position, so it should be a rollover for him. But is it? And why is America so intent on getting access to Ukraine’s raw materials?
Quite what Ukraine gets in return in security guarantees is up for negotiation, but at least it gives the US a very strong incentive to see that Ukraine retains control of the territory in which the minerals and other natural resources are located.
But why does the US want so much to get access to Ukraine’s resources? There is an obvious explanation.
One is that if you look at the detail, while Ukraine’s resources are important in a European context, they are not that huge in a global one. The other is that the market for primary products is just that: a market. If a country has the money, it can buy whatever it needs – as Russia has demonstrated despite the sanctions imposed on it.
It also has a lot of coal, and until the war was the sixth-largest producer of wheat globally. If you look at reserves, rather than production, then the ranking may be higher, but it does not dominate anything. Just before Russia launched its full-scale invasion in February 2022, the country’s deputy minister of environmental protection and natural resources, Svetlana Grinchuk, said that Ukraine had “about 5 per cent of all the world’s critical raw materials”.
Dig, baby, dig – but where?
Further, no one really knows what resources are there, or where. There has been no modern assessment of rare-earth reserves; existing data relies on Soviet-era mapping of more than 30 years ago.
And as for the political risk of China controlling too much of the global supply of some much-needed commodity, one of the lessons of the sanctions put on Russia is that resources are fungible – they can be exchanged for each other because no matter where they come from, they are more or less identical.
True, Russia got a slightly lower price from its new buyers than it would have got from its established markets, and Europe, as we are very well aware, had to pay a lot more to replace Russian gas thanks to its limited ability to import gas in liquid form. But the oil and gas kept flowing and oil prices are now lower than they were three years ago.
Need to know
I really hate the idea that successful business is about doing down the other people you are dealing with. It is true that some companies do that and, for a while at least, can do well. And it is certainly true that this is the way Donald Trump has operated. What’s more, he is proud of it.
Of course there are apparently successful businesspeople who behave in a similar way, particularly early in their careers. But any economic relationship has to be based on outcomes where both parties win if that relationship is to last. So once a company, or an individual, gets the reputation of overplaying their hand, they will find opportunities dry up.
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Wu writes: “The pugnacious tone also points to a big missing piece in The Art of the Deal as a primer for negotiation: the lack of any discussion about the role of relationships in negotiation and the process of discovering joint gains. Relationships are critically important in negotiations, because in most important business situations, the final agreement or contract just defines the potential value of a deal. The ultimate value requires implementing the deal, and that depends on people’s ability to work together.”
So why did people continue to do business with Donald Trump, knowing how he behaved? The only answer I can give comes from a friend who had dinner with him about 30 years ago. He was running an investment company and Trump wanted to get finance.
“Exactly as he is now,” my friend replied.
“Er, no,” was the answer.
This is Armchair Economics with Hamish McRae, a subscriber-only newsletter from The i Paper. If you’d like to get this direct to your inbox, every single week, you can sign up here.
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