London Politica 4/6/25 London Politica 4/6/25

Colonialism, Coups, and Commodities: Emerging Risks in the Sahel’s Former French Colonies

The Sahel region has significant energy and critical mineral deposits. While Mali and Burkina Faso possess gold, Niger is one of the world’s foremost suppliers of uranium and Guinea boasts large reserves of bauxite. Other critical minerals in the region include copper, phosphate, manganese, and lithium, with notable deposits of gold and iron ore. Given the demand for these commodities, with rising use of green technology and electric vehicles, the Sahel’s resource wealth should have acted as a catalyst for economic development. However, exploitation and corruption have prevented this from materialising and the region continues to suffer from “political instability, conflict, violence, and food insecurity. The Sahel’s abundance of commodities can thus be seen as a resource curse rather than a blessing.

Even within the context of Africa’s long history of instability, conflict, and violent regime changes, events in the Sahel over recent years stand out. The broader Sahel has seen a steady rise in the influence of violent domestic terrorist organisations – including groups with Al Qaeda, ISIS, and Wagner affiliations. In 2023, approximately 47 percent of all deaths related to terrorist activity globally came from this region, making the Sahel the global epicentre of terrorism.

In a vicious cycle of instability, escalating violence has both triggered and been exacerbated by a string of military takeovers in recent years within an area labelled the “coup belt”, stretching from the Atlantic Ocean to the Red Sea. Of the countries to experience coups, Mali (August 2020 and May 2021), Guinea (September 2021), Burkina Faso (January 2022 and September 2022), Niger (July 2023), and Gabon (August 2023) were all former French colonies. Questions have been raised concerning the legacy of French occupation in the region. While the litany of risks in these countries is exhaustive, ranging from terrorism to humanitarian crises, those related to the shifting control of critical commodities merit greater examination.

The Post-Colonial Period: End of an Era, or More of the Same?

While the applications for Sahelian resources have evolved, the desire to control them has remained consistent. In adherence with colonial-era power dynamics, France’s African policy centred around resource exploitation. Despite decolonisation in the mid-20th century (see image below), France continued to protect its interests by shifting its strategy from direct colonial governance to indirect neocolonial influence. Spearheaded by French President Charles de Gaulle, the strategy was known as La Françafrique, “characterised by decades of political meddling”. The drafting of new military and economic agreements enforced France’s authority by securing bases and guaranteeing access to strategically important resources, including uranium and oil. By influencing and selecting the governments to succeed French rule, Paris secured the approval needed to continue mining and military operations in its former colonies. Strategies were even implemented to expand La Françafrique to nearby countries that were considered strategically useful. For instance, during the 1960s, De Gaulle, who was interested in the Democratic Republic of the Congo’s (DRC) copper, cobalt, and other minerals, supported secessionist forces fighting for their own state in the Katanga Province. Supported by the United States (US), their efforts instigated the downfall of DRC Prime Minister Patrice Lumumba and the installation of Joseph Mobutu, who acted as a proxy for French and US interests.

Map of Former French Colonies in the Sahel Region

Source:Deutsche Welle

Over time, France became increasingly unpopular with Sahelian countries, which strived for genuine independence. Guinea was the first French territory to reject continued subjugation in favour of immediate independence during de Gaulle’s 1958 referendum. Growing anti-French sentiment in the decolonisation period (1940s to the 1960s) created momentum for challenges in the late 20th and early 21st centuries. Notable grievances included military interventions, the persistence of the CFA franc as the local currency, restrictive visa policies, and resource extraction. The exploitation of Sahelian commodities was one of the most contentious and blatant illustrations of French neocolonialism.

The Nail in the Coffin

Despite French President François Hollande announcing the end of Françafrique in October 2012, French influence remained. This was encapsulated by a 2014 parliamentary report that outlined the need for France to “maintain a military apparatus” in the region to “defend its interests”. Three months after Hollande’s proclamation, French troops were deployed to Mali to fight rebel forces as part of Operation Serval. This later expanded into Operation Barkhane, which sought to eradicate jihadism across five Sahelian countries, aligning with the broader US-led War on Terror. This endeavour failed its primary objective of curbing the spread of terrorism, and lent credibility to jihadist allegations of Western imperialism, contributing to political instability. Investigations have also revealed severe war crime accusations against French forces that collaborated with local units, including the slaughtering of civilians from the Peul ethnic group in Mali, Burkina Faso, and Niger.

In light of the country’s waning popularity, France withdrew its troops from Mali, Burkina Faso, and Niger in 2022 after the severing of defence contracts by the military juntas. The trio have also pulled out of the French-backed G5 anti-terrorism Sahel defence pact and expelled Western media entities, including Radio France International and France 24. The Central African Republic (CAR), Chad, Senegal, and the Ivory Coast have each made similar requests for French troops to leave. Demonstrating a broader Western retreat from the region, in April 2024, the US agreed to withdraw 1,000 soldiers from Niger and hand over its last military base in the country following a request from the country’s regime.

Western Grip on Sahelian Critical Commodities Weakens

The West has maintained its interest in the Sahel’s commodities since the colonial period. However, with anti-Western grievances concerning corruption and instability rising, the region’s former colonial rulers are losing their grip. A cogent example is how Western access to uranium and gold has become increasingly threatened in recent years.

Uranium

France has historically relied on Sahelian uranium to support its energy infrastructure. Proportionally, France is the most heavily reliant country in the world on nuclear power, with approximately 70 percent of its electricity produced from this energy source. Although a shift in French energy policy was announced in 2014 to reduce reliance on nuclear power by 2025, in 2022, French President Emmanuel Macron announced plans for six new reactors, underscoring a long-term commitment to the power source. Furthermore, France has sourced a notable portion of their required uranium from Niger. In the last decade, 20 percent of imported uranium was sourced from Niger – making the nation its second largest importer, only behind Kazakhstan.

Although unpopular amongst the Nigerien population, French companies have maintained significant operations in the Nigerien uranium industry following the end of colonial rule. Despite French state company Orano (formerly Areva) mining uranium in Niger for over half a century through its subsidiaries, the country remains one of the poorest in the world, only benefitting from 12 percent of the market value of the uranium produced. In addition to the exploitative nature of the relationship, Orano’s activities have also caused an “ecological and health disaster”, with radioactive pollution and mining waste contaminating local soil and water sources.

In recent years, French influence has come under increasing scrutiny. After overthrowing Niger's President Mohamed Bazoum in 2023, coup leaders demanded France withdraw its remaining troops and expel its ambassador. The junta also seized operational control of Orano’s local mining firm Somaïr. Relations between the Nigerien junta and Orano have been on a downward trend ever since. In June 2024, Orano was stripped of its mining permit for the Imouraren project – one of the largest uranium deposits on earth. Subsequently, in October 2024, Orano announced that it would immediately halt all uranium production in the nation, citing the “highly deteriorated” situation.

Gold

The mining industry in Mali is dominated by gold production, with the commodity being a significant driver for the country’s economy in recent decades. As the nation’s most important export, gold accounted for more than 80 percent of the country’s total exports in 2023. The recent string of coups in Mali has made gold mining operations significantly more difficult for Western entities. For example, although not from a former colonial nation, Canadian firm Barrick Gold – one of the largest gold mining companies in the world – has found itself engaged in an intense legal battle with the Malian junta. Following the implementation of Mali’s new mining code in 2023, the situation escalated to a point in which Mali’s military government seized gold stocks from the Loulo-Gounkoto mine, stopped operations, and detained Barrick employees. In February 2025, Barrick signed a deal to end the multi-year dispute.

With the Barrick legal disaster, Western companies with projects in these nations will likely continue to leave the region as pervasive risks threaten operations and profitability. The Sahelian military governments have continuously tightened restrictions on mining operations for Western companies. In Mali, these restrictions have involved suspending all artisanal mining permits for foreign operators.

Out with the Old, in with the New

With the Sahel shifting away from the West, opportunities have arisen for rival powers to step in. Countries that did not experience a change in leadership, such as the Ivory Coast, Senegal, and Chad, have remained broadly friendly to France. However, states that experienced successful coups, including Mali, Burkina Faso, and Niger, have shifted towards other, non-Western nations. This implies that the greater the level of instability in the country, the higher the likelihood for foreign actors to take advantage.

Russia

As relations between the two deteriorated, Mali’s junta terminated relations with France, turning to Russian private military company Wagner to “shore up its domestic political position”. Exerting control over the mines is a priority for Wagner, which was reconstituted as Russia’s Africa Corps in 2023. While it would be an error to divert responsibility away from France for cultivating an environment that enabled this to occur, Russian propaganda and disinformation campaigns have played a key role in tipping the scale by effectively galvanising anti-Western support.

Mali is not an isolated example. By offering military assistance to Sahelian governments interested in strengthening their positions in the face of growing security threats, Moscow has gained a foothold elsewhere and signed contracts for commodities and trade route development. One example was in 2017, when the Kremlin exploited Paris’ decision to withdraw its forces from CAR by sending weapons and deploying military trainers from Wagner. The move paid off with Wagner’s front companies, such as Midas Resources SARLU, Lobaye Invest, and Diamville SAU, being granted permits by the CAR government to mine and export gold and diamonds. These companies have amassed profits over $2 billion, financing Russia’s wider regional efforts as well as the military campaign in Ukraine.

China

As China has continued to expand its Belt and Road Initiative (BRI), the Sahel has fallen into the sights of Beijing, which, much like its Russian ally, has moved to capitalise on declining Western influence. For instance, Chinese company Ganfeng Lithium has invested heavily in Goulamina, a lithium production plant in Mali, while others have begun to exploit gold mines. China has also completed a 2,000km oil pipeline linking Niger to its southwestern neighbour Benin. Although China has involved itself in regional security affairs through arms sales, for Beijing, political and economic dominance trump military and security concerns. However, with a struggling property market, demographic issues, geopolitical confrontations, and a trade war causing an economic slowdown, China’s operations in the Sahel will likely depend upon the country’s ability to manage such issues.

UAE

Since the 2010s, the United Arab Emirates (UAE) has established defence and military relations with Sahelian states. This has included training and arms provision to counter jihadi terrorism in a range of countries. Simultaneously, the UAE is going toe to toe with Chinese investment in Africa. Between 2019 and 2023, the UAE invested approximately $110 billion USD in new projects in Africa across sectors including mining, oil, infrastructure and manufacturing. The UAE’s growing role in the Sahel primarily stems from an interest in “bolstering its influence in areas of competition with its Gulf rivals”. After Chad terminated its defence pact with France in November 2024, the country forged alliances with the UAE and Russia. However, the UAE has demonstrated greater interest in the Horn of Africa and countries along Africa’s eastern coast compared with former French Sahelian countries, which are predominantly located to the West. Abu Dhabi’s strategy of port diplomacy (see image below) provided a clear illustration of this emphasis.

Map of Ports and Logistics Platforms in Africa

Source: Defence 24

What’s Next?

The Sahel’s substantial resource wealth, which could have promoted economic prosperity, has instead been a critical factor in the instability, violence, and corruption that has plagued the region. Western influence in the area is poised to further diminish as the Sahelian juntas continue to push the West out in favour of Russia and China. While these shifts signal steps away from the lingering neocolonial structures that have existed in the post-colonial era, with exploitation set to continue at the hands of different parties, economic and social prosperity are by no means a likely outcome. For as long as authoritarian military regimes remain in power and suppress democracy, the Sahelian people will continue to suffer from an indefinite cycle of instability, corruption and violence.

London Politica 2/2/24 London Politica 2/2/24

2024 Elections Report: Risks & Opportunities for Commodities Sector

In the ever-evolving landscape of global commodities, the year 2024 stands as a pivotal juncture marked by transformative elections across diverse regions. As nations prepare to cast their ballots, the outcomes hold the power to shape policies and strategies that will significantly influence energy, trade relations, and resource management worldwide.
This report encapsulates the intricate intersections between political shifts and their repercussions on the commodities sector. London Politica’s Global Commodities Watch has made a selection of the most significant countries, and analysed the potential impact of elections based on election programmes, past policies, and scenario planning.

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London Politica 7/26/23 London Politica 7/26/23

Examining the rise of Resource Nationalism

Recently, China’s Zhejiang Huayou Cobalt company approved plans for a new $300m lithium processing plant in Zimbabwe. The company is aggressively expanding operations in line with CCP foreign policy, consolidating rare earth resources and the infrastructure needed to process them. The investment comes after the China-based firm purchased the Arcadia hard rock deposit from Australian Prospect Resources for $422m last year. It now brings total investment by Chinese firms in Zimbabwe to over $1 billion since 2021. However, it also raises the potential benefits that resource nationalism may bring to nations, particularly those in Africa.

That is because the investment comes on the heels of recent Zimbabwean export bans on lower grades of lithium and raw lithium ores in an effort to nationalise its lithium production. In December of 2022, Zimbabwean mining minister Winston Chitando stated that ‘no lithium-bearing ores or un-fabricated lithium shall be exported from Zimbabwe to another country except under the written permission of the minister’. This move was further galvanised by the incorporation of a larger group of ‘Approved Processing Plants’ by the government, which means that any firms looking to invest in lithium operations will have to invest in Zimbabwean infrastructure in order to do business. Furthermore,in addition to relying on government approved facilities, the mining firms will have to follow the prices set by the MMCZ when selling their raw ore to processing plants.

This twofold measure not only confines the entire lithium extraction and refinement process to Zimbabwe, but also pressures foreign firms to have more vested stakes in the development of Zimbabwe. These measures have had no negative impact in Zimbabwe, as foreign investments have shown no signs of slowing. Zimbabwe is quickly reaching its target of $12 billion in production, with future plans to surpass that target in the coming years. This move by Zimbabwe, which is the 6th largest lithium miner globally,further cements the growing wave of resource bans that have become a popular way of raising revenue and encouraging passive investment in infrastructure at little cost.

Zimbabwe is an example in a growing group of nations who are racing to nationalise and control their natural resources. In the Americas, Mexico and Chile recently nationalised their lithium resources and now have total control over the extraction and refinement of the metal, which has allowed them to enjoy considerable economic benefits, in addition to increased infrastructure and employment. Whilst African and South American countries are consolidating their mineral deposits, Asian countries have also joined the fray. In 2020, Indonesia instituted a nickel ore export ban after a six-year debate. Since doing so, it has increased its smelting facilities from 2 to 13 and increased the value of Indonesia’s nickel exports from $57m in 2020, to $750m in just three years.These

By looking at these cases, there seems to be an ironclad case for resource nationalism, which has seen a resurgence owing to the rise of China as a key economic player. Both Chile and Mexico are relying on Chinese investment and demand, whilst Indonesia’s key infrastructure was developed as a part of the ‘Belt and Road’ initiative.

The role of Covid-19, however, cannot be ignored either, as the pandemic persuaded many countries to nationalise their resources. Additionally, in the case of Chile and Mexico, there is a strong nationalist presence that demands the state have more control over mineral resources. Issues around resource policy became more prevalent during the pandemic, where resource and capital uncertainty pushed some nations to pursue more nationalistic agendas in regards to their resources.

The overall picture of resource nationalism seems to be a positive one, with countries that nationalised seeing a rise in revenue and infrastructure, with the latter being more important to allow for future economic expansion. Other nations have also moved to introduce resource bans. The move to curb artisanal mining has proven to be a positive one, but it could potentially fuel a rise in global prices and lead to more intense resource competition.

There also are other potential complications that arise from resource nationalisation. In particular, the example of the DRC is one to be cautious of for prospective nations. After implementing their new Mining Code in 2018, the government gained more power to tax and intervene in the mining industry. This led to increased taxation, intervention and corruption as the government became more involved in the mining industry. This was seen when the Congolese government suddenly began revoking permits for mining projects, which resulted in a drop in activity and even legal action in the case of Sundance Resources.However, it should be noted that this did little to slow the creation of new mining ventures or operations, with the government granting 3053 different mining-related permits. In addition, the value of exports have risen since the law was implemented, showing that despite the challenges faced by the law, companies are still willing to engage in activity in the region.

Resource nationalism is gaining more popularity and continues to be a tested source of revenue generation for nations that are already invested in mining and metal industries. With current trends, it would stand to reason that resource nationalism could spread to soft commodities, as states look for ways they can expand their revenue and infrastructure more passively through legislation and private market action.

London Politica 7/22/23 London Politica 7/22/23

Gallium and Germanium: Pioneers in China's Export Ban

From August 1, 2023, China has announced a ban on the export of gallium and germanium along with their chemical compounds. As per the Critical Raw Materials Alliance, China produces 60% of the world’s germanium and 80% of gallium. Both these metals in question have heavy industrial uses such as in defence, semiconductors and communication equipment. Gallium and germanium, however, are extracted as by-products of aluminium and zinc - metals of which China is largest global exporter - which means that alternative sourcing and supply chain diversification becomes difficult.

China’s export ban stems from the US-led restrictions on the export of semiconductors and related equipment to China. It also comes in the wake of restrictions heralded by Japan and Netherlands against the export of of chip making equipment to China. Given the momentum to diversify supply chains from the world’s largest manufacturer, countries such as Belgium, Canada, Germany, Japan, Ukraine, South Korea, Russia and Germany have been identified as potential sources to produce gallium and germanium. India on the other hand has been identified as a potential destination to take over China’s sway in manufacturing of semiconductors. Such developments present a cue from Kaname Akamatsu’s ‘Flying Geese Model’ that promotes diversification of supply chains. With Taiwan Semiconductor Manufacturing Co allocating resources to develop semiconductor plants in Japan and the USA, plans to cut China’s dominance in chip making have already been rolled out. However, hiccups exist as despite the passage of the CHIPS and Science Act in the US, suppliers based in South Korea and Taiwan remain reluctant to shift their manufacturing bases outside of China given their large-escale investments in the country. Also, the recent protectionist measures unleashed by the US have accentuated concerns about the stability in supply chains as trade and military tensions rise between the globe’s two major economies.

Although considered a ban, experts opine that China’s ban is more limited in scope as it requires exporters to apply for licences and report details of overseas buyers and their applications. The ban has been identified as a means of retaliation that the Chinese government is willing to take to secure its national interests. China has previously used trade restrictions to sustain its downstream industries and has also faced legal hurdles at the WTO. In the wake of such rising trade restrictions announced by several countries, an examination of Article XI of the General Agreement on Tariffs and Trade (GATT) under the WTO allows for the temporary application of export controls to relieve critical shortage of the commodity in question. In the realm of politics, nation-states tend to manipulate this concept of ‘temporary application’ by laying claim to Article XXI. Article XXI gives WTO members absolute sway in implementing their respective trade restrictions by justifying their policies as crucial to ‘essential security interests’.

As legislative enactments promoting export control gathers stream across economies, the concept of balancing stakeholder interests both upstream and downstream becomes challenging due to geopolitical issues. Contingency planning, diversification in sourcing and procurement, establishing manufacturing plants outside traditional locations, etc. may become the norm in the future as businesses swim through the ripple effects of deglobalisation policies.

London Politica 5/11/23 London Politica 5/11/23

Powering the future: Cobalt in the EV battery value chain

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London Politica 2/28/23 London Politica 2/28/23

Powering the future: Lithium in the EV battery value chain

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London Politica 12/7/22 London Politica 12/7/22

Critical Raw Materials - The Geopolitical risk of supply chain dependencies

The Covid-19 pandemic coupled with the war in Ukraine have led to major structural changes and shifts in the global economy, leading to debates about the possible end of globalisation. These major changes in geoeconomics have shaken the international liberal order, enhancing pre existing challenges such as dependencies with strategic rivals for critical raw materials and rare earth elements. This article highlights the geopolitical risks of supply chain dependencies for rare earth elements in three steps. It will investigate which elements and materials are considered to be strategic and why. It will then analyse the interdependencies between extraction and mining countries, with a specific focus on China. It will conclude with a reflection on the main risks and trade-offs of these geopolitical supply chain dependencies.

Critical Raw Materials (CRMs), Rare Earth elements (REEs) – a group of seventeen metallic elements – and critical minerals – non-fuel mineral or mineral material – are considered crucial for strategic industries, such as technologies used in the digitisation process, the energy transition and the defence industry. They are used in the construction of wind turbines and solar panels, advanced electronics, batteries for electric storage, cars, the development of technologies and components of fighter jets. Geopolitical shifts, such as the acceleration in the digitisation process, the energy transition, coupled with the war in Ukraine may cause supply shortages or additional vulnerabilities to supply chains. These shifts pose challenges such as finding alternative suppliers and alleviating dangerous dependencies.

To better understand the importance of these supply chains, it is worth investigating two examples of strategic sectors that require critical raw materials: the energy sector and the defence industry.

The energy transition

Climate change is at the top of the agenda for several international organisations and countries around the world. The dangers we face due to increasing temperatures and the consequences of this phenomenon for the environment, human beings, and the cascade social, political and economic effects, has increased the urgency for alternatives. Population growth over the past decades has led to the increase in the demand for energy and consequently to the rise of oil, natural gas and electricity prices, together with a further depletion of natural resources and raw materials. Higher energy prices, exacerbated even more by the current war in Ukraine and the politicisation of natural resources by Russia, urges new alternatives such as renewables and an acceleration in the transition towards the so-called green sources of energy. However, in order to produce renewables such as wind turbines, solar panels, or electric batteries for cars, CRM’s such as lithium, cobalt, tungsten, nickel or platinum are needed. These critical raw materials are scarce in supply, unevenly distributed, expensive to extract, and paradoxically even toxic for the environment. Moreover, in most cases the majority of these sources are located in countries whose political situation may be defined as unstable, characterised by autocratic governments or both: 50% of the world’s supply of cobalt, for example, is located in the Democratic Republic of Congo and 40% of manganese in South Africa. China, moreover, will be analysed deeper in the subsequent section and is by far the country that controls most of the world’s extraction and processing capacities for raw materials.

Defence Industry

In the defence industry there are multiple critical raw and rare earth materials used in the production of satellites communications, aeronautics, military surveillance systems and fighter jets’ components, such as lithium for batteries. Due to their significant roles for national security, they are listed among the 50 critical and strategic materials and minerals for the United States. As for the energy transition, the risk for the defence industry lies in the dependency of the supply chain from countries that are either unstable or strategic rivals: countries that because of their domestic political and social situations may increase the market volatility, soar prices, or simply use their leverage for supply cut-offs or hybrid attacks on domestic production lines. Niger, for example, is an important exporter of uranium, however, its domestic and neighbouring unstable political context makes it an unreliable partner. A disruption in the supply chain of a critical raw or mineral material may, indeed, undermine the production, reparation or modernisation of military equipment, as it already happened with the interruption of F-35 fighter jets deliveries due to cobalt sourcing problems. Fighter jets, like the F-35, require around 417 kg of rare earth materials for critical components such as electrical power systems and magnets. F-35s deliveries were suspended as the company’s producer, Lockheed Martin, realised the magnet used in the Honeywell-made turbomachine — an engine component that provides power to its engine-mounted generator — was made with cobalt and samarium alloy coming from China.

China

Critical rare earth, minerals and raw materials are unevenly distributed, which makes powers such as the United States and Europe obliged to rely on foreign and overseas countries — China, Australia, Canada, Russia, Africa or Central Asia. Yet, there is one country above all others, that has the most power and control over extraction, processing, export and with an almost monopoly of the refining process of CRM (90%), this is China. One of the biggest Chinese rare earth extraction, mining and refining companies, for example, is the China Northern Rare Earth Group High-Tech Co Ltd (Northern Rare Earth), whose headquarter is in Inner Mongolia Baotou, and is specialised in rare oxide and magnetic materials. The almost Chinese monopoly over the refining capacities of rare earth materials is of crucial strategic importance. The bottleneck on rare earths is, in fact, the concentration and purity of natural deposits and the need to refine mined minerals with energy-intensive processes. A recent study by Benchmark Mineral Intelligence shows, indeed, how China’s power and control over the production of lithium ion batteries for electric vehicles, for example, relies for 80% just on the refining process (Figure 1).

Figure 1: “Where does China’s dominance lie in the lithium ion battery to EV supply chain?”

Source: Benchmark Mineral Intelligence

In 2010 a European Commission sponsored study group identified 41 critical raw materials, of which 14 were considered of high supply risk and high economic importance, among which there were antimony, beryllium, cobalt, fluorspar, gallium, germanium, graphite, indium, magnesium, niobium, Platinum Group Metals (PGMs), Rare Earth Elements (REs), tantalum, and tungsten.

To assess the concentration in commodity markets the index used is the one developed by the economists O. C. Herfindahl and Albert O. Hirschman. The Herfindahl-Hirschman Index (HHI) is defined as the sum of the squares of the fraction of market share controlled by the 50 largest entities producing a particular product. The maximum value of this index is unity, and the US department of Justice established that between 0.15 and 0.25 the concentration is considered as moderate; above 0.25 it is, instead, highly concentrated. China’s global market position with regards to these critical materials is of particular importance as it produces more than 12 of the 41 critical materials identified by the European Commission, 9 of which of high supply risk.

China’s rise in market share of critical materials’ global production has sharply increased in the past few decades, leading the country to acquire a dominant strategic position. This outcome is the result of three main factors: the country’s large resource base; the Chinese government's long-term emphasis on strategic raw materials, rare earth, minerals and magnets for the “Made in China 2025” strategy; and finally, China’s ability to produce raw materials at a lower cost. China is the largest battery producer: dominating battery material separation and processing, component manufacturing, and controlling the downstream end of mineral processing and rare earth magnets, all critical elements necessary for the energy transition. This is a part of the global strategy adopted by China and best exemplified in the Belt and Road Initiative (BRI): gaining control of material production outside of China, imposing production quotas or restrictions to exports, leading to higher prices and volatility. To further consolidate its dominant role and power in the CRM’s domain, China has, moreover, recently established the China Rare Earth Group Co. Ltd: merging three state-owned rare earths entities. This megafirm, based in South China, accounts for around 62% of the country’s heavy rare earths supplies and it will enable the country to increase its competitiveness and pricing power, triggering dangerous consequences for the world supply chain.

The geopolitical risk of this dependency is twofold. On one hand, there is the confrontational nature of China, who as a power, could potentially restrict exports during a dispute or simply due to domestic production needs, thus causing a spike in prices. On the other hand, the risk is determined by the deep interdependence between Western powers and China for scarce, rare and critical materials. Indeed, between 2017 and 2020 the USA has imported around 76% of rare elements from China (Figure 1), whereas Europe 98%.

Figure 2: Major import sources of nonfuel mineral commodities for which the United States was greater than 50% net import reliant in 2021

Source: US Department of the Interior, US Geological Survey, Mineral Commodities Summary 2022

Furthermore, a report presented by the Government Accountability Office in 2010 shed light on the dominant role of China at all levels of the supply chain for Rare Earth Elements (REE). China produces 95% of raw materials, 97% of oxides, and 90% of metal alloys, and holds 37% of REE world reserves. From a military perspective, the high concentration of raw materials production by a strategic rival is incredibly threatening in case of a military confrontation due to the potential disruption to weapons systems production.

Risks and trade-offs

It is noticeable from the previous analysis how the concentration of CRM’s supply in the hands of just one global actor immediately increases the risks of interdependence. Countries with large market shares in the supply of one critical material can distort its production, increase market vulnerability and the volatility of prices, causing strategic disruptions.

Two possible solutions could limit the supply chain risks for critical raw materials and rare earth resources: on one hand finding new suppliers, on the other increasing controls of market shares. The first one is diversification: many resource-rich countries have been neglected in the recent multinational Minerals Security Partnership in June 2022 agreement, such as Vietnam, Chile, Argentina, Indonesia, the Philippines, Brazil, Cuba, Papua New Guinea, Madagascar and Mozambique could all be candidates for critical mineral production. However, despite trying to diversify and finding possible alternative suppliers, some rare earth materials are scarce and finite in nature. The second alternative, therefore, may be to increase partnerships and international cooperation, rather than isolationism, through multinational systems and controls over excessive market shares of a single commodity by one country. The United States, for example, has already released joint statements and signed agreements with multiple countries on critical material supply chains, security of dual-use technology, and mutual supply of defence goods and services. In this direction goes also the recent establishment of a transatlantic supply chain for rare earth metals spanning from Canada to Norway and Sweden. The mining will be performed in Canada’s Northwest territory, by the company Vital Metals, the only one in North America not selling to China. The long-term and strategic goal, therefore, is to avoid China or any dependence on it for the supply chain.

In conclusion, there is a double trade-off for policymakers. On one hand, the pervasiveness of Chinese presence and control of so many critical raw materials, rare earth, mineral and magnet sources, makes it difficult to tackle a politically strategic and rising rival power, while depending on it for critical supply chains. On the other hand, but also interconnected, the trade-off is between China and climate change. The energy transition, necessary to defeat climate change, requires technology and CRM that comes from China’s production. Therefore, is it possible for Western countries, such as the United States and the European Union, to counter the Chinese rise while having such risky supply chain dependencies?