Critical minerals and the new geopolitics

ABU DHABI — The climate crisis and the Fourth Industrial Revolution — with its breakthrough technologies such as artificial intelligence and 5G networks — are setting the world on a geopolitical collision course. Both the drive to decarbonize and the battle for global technological supremacy depend on critical minerals like rare earths, lithium, and cobalt—all of which are highly concentrated in a few locations, including China.

The scramble to control these elements’ supply chains is intensifying. For example, the electric vehicles made by Tesla and other automotive firms run on lithium-ion batteries, but just a handful of countries produce most of the world’s lithium. The tension between the geographic concentration of critical resources and the increasing global competition for supply will further unsettle geopolitics in the 21st century.

China’s global rise underpins the competition-concentration tension. Industrial innovation and production are no longer the exclusive purview of the OECD economies, especially the United States, European Union member states, and Japan. These major powers previously secured critical inputs through colonial expansion and resource carve-ups, but China’s export ambitions, and its control of key supply chains, have changed the game. Moreover, China’s Belt and Road Initiative (BRI)—a transnational infrastructure investment scheme with participating countries across Africa, Eurasia, and South America—openly challenges earlier models of access and cooperation.

Governments in the Global South, where many critical resources are located, are frequently willing to strike exclusive deals. They have welcomed China’s one-stop-shop financing schemes, increased engagement, and narrative of “win-win partnerships” that offer a reliable alternative to Western funding and norm-setting.

China’s resource domination is reshaping geopolitics. In 2010, China halved its export quotas for rare earths, and also reportedly banned their sale to Japan following a trawler incident near Japan’s Senkaku Islands, which China calls the Diaoyu Islands and claims as its own. The episode awakened other leading economies to the fact that a major competitor and rival controlled 97 percent of the global supply of these vital inputs for magnets, glass, electronics, defense systems, wind turbines, and hybrid and electric vehicles.

The United States, the European Union, and Japan reacted in a piecemeal manner at best, and 10 years later still haven’t produced effective strategies to free themselves from China’s resource grip. Rare earths made headlines again in 2019, when China indicated that it might “weaponize” them in its trade dispute with the United States. Meanwhile, breathless media reports of rare-earth discoveries in Afghanistan, Greenland’s melting glaciers, the abyssal sea, asteroids, and planets demonstrate that magical thinking continues to trump effective policymaking.

Likewise, decarbonization places a premium on further breakthroughs in battery technology and storage, which is why global lithium production skyrocketed from 32,500 tons in 2015 to 95,000 tons in 2018. Two of the three politically and economically volatile countries in the so-called “lithium triangle”—Chile, and Bolivia—are all BRI participants and receive substantial Chinese investment; the third, Argentina, is considering joining. Because none has the capacity for vertical integration, China controls more than 60 percent of global manufacturing capacity for lithium-ion batteries. Even Australia, which has substantial rare-earth and lithium reserves, has so far failed to become an “independent” alternative supplier.

Cobalt, another key battery input, is overwhelmingly mined in the Democratic Republic of the Congo. The DRC has the world’s largest cobalt reserves—three times those of Australia, which ranks second—and produces 60 percent of global mined cobalt. The country remains the most cost-competitive producer, with China the dominant investor, although an outcry over labor practices has raised questions about ethical mining.

China has demonstrated its increasing economic power by systematically forging a global network of partners. The powers of old must now build new avenues of trust and cooperation with developing countries, not only to secure the critical minerals vital to powering the world in the Anthropocene era, but also because a perilous planet is a threat to everyone. Project Syndicate

——————

Sophia Kalantzakos is professor of environmental studies and public policy at New York University/NYU Abu Dhabi, a fellow at the Research Institute for the History of Science and Technology at Caltech and The Huntington, and a former Fung Global Fellow at Princeton University. She is the author of “China and the Geopolitics of Rare Earths.”