In the aftermath of the humiliating Yom Kippur War, the Arab nations decided the time was finally right to deploy its most powerful weapon: oil. In 1973, Saudi Arabia had just replaced the U.S. as the world’s oil producer of last resort, which meant that even at 100% production capacity, the U.S. would be powerless to replace Saudi Arabian supply in the event it was cut off. OPEC announced an oil embargo on supporters of Israel in the October of that year, and the energy world would never be the same again.
The ensuing shortages and rationing led Western nations, especially the U.S., to ramp up production. President Richard Nixon launched Project Independence, an initiative that called for the United States to achieve energy independence by developing alternative energy sources and building 1,000 nuclear power plants. The initiative failed as fears surrounding nuclear energy grew and renewable energy technology of the time proved inefficient. However, it led to the creation of the Department of Energy and funding the research that was essential to developing our modern renewable energy systems. Its fruits include electric vehicle batteries and the fracking technology that enabled the U.S. to beat OPEC, helping it reclaim its crown as the world's largest producer of oil and gas. Today, the US accounts for 20 percent of global output and is a net exporter. Oil is a valuable weapon that can backfire on those who use it.
The Ukraine War has resulted in the biggest global energy system shock since the 1973 crisis. Two changes are already evident: The first is that Russian gas is being replaced as quickly as possible with liquified natural gas (LNG), supplied primarily by the U.S., Australia, and Qatar. The second is an acceleration of the transition to clean energy, mainly wind and solar, as no Western country has reintroduced nuclear energy at scale.
These changes will permanently alter the map of our energy economy. But they suffer from one major limiting factor: the mineral inputs are increasingly expensive and increasingly unavailable. Solar and wind require a roughly tenfold increase in the tonnage of mineral inputs compared to a natural gas plant delivering the same amount of energy. Other parts of the electrification of our economy are similarly mineral-intensive; EVs require six times as many mineral inputs as a traditional car.
The green energy transition is, in reality, an electrification transition. Electrification requires hardware, and hardware requires mines. Some of the minerals critical for electrification include copper, nickel, cobalt, lithium, rare earth elements (REE), graphite, and polysilicon. Of these, copper and lithium are the most important. Copper has been called the “metal of electrification” because it is needed in everything associated with the transition to clean energy and electric vehicles. Lithium has earned the nickname “white gold” because it is needed for the lithium-ion batteries that are used for the grid-stabilizing energy storage, and to power Tesla cars and iPhones.
Commodity materials account for up to 70 percent of the cost to produce an EV battery. In turn, nearly one-third of an EV’s total cost is the cost of its battery. The same holds true for solar modules, with 70 percent of their cost coming from minerals. Wind turbines are in a similar situation. The IEA estimates that achieving net zero emissions globally by 2040 would require six times the amount of mineral inputs we currently use, and that the annual critical mineral demand from clean energy technologies will reach more than $400 billion by 2050.
But the chances of meeting those targets at all look slim. An analysis by the energy consulting firm Wood Mackenzie found that if EVs accounted for two-thirds of new car purchases by 2030, it would require dozens of new mines that are the size of the world’s largest in each key category. These mines are not currently being planned. And per the IEA, it takes an average of 16 years from initial discovery to open a mine. That’s a supply gap that doesn’t look good for meeting the official targets.
There is no escaping the fact that extracting and refining natural resources is going to remain the basis on which all industrial societies must be built. And control over these resources means political power; as Henry Kissinger once said, “Control oil and you control nations.” To the degree that governments embrace electrification, minerals become the new oil.
This is a problem for the U.S. Unlike oil and gas, the U.S. is currently at a disadvantage in trying to control these resources. The U.S. started the lithium industry and ranks among the top five in known reserves, but only produces about one percent of the world’s output. More than 80 percent of the world’s lithium is mined in Australia, China, and Chile. China also controls more than half the world’s lithium processing and 75 percent of its lithium-ion battery factories per the IEA. With copper demand expected to double by 2035, the U.S. is projected to need to import 70 percent of its supply. This will compound the U.S.’s energy dependence problem—80 percent of its rare earth metals are already sourced from China, and nearly 100 percent of them are processed there.
And so on down the line: there are 35 minerals that have been identified by the Department of Defense as being critical to national security. Of these, the U.S. had a 100 percent import reliance for 14 minerals and an additional 14 had a greater than 50 percent import reliance in 2020.
China, meanwhile, is dominating the minerals world on all fronts: mining, refining, and production of advanced technologies. China accounts for 80 percent of the global supply chain of solar technology and is projected to grow this share to 95 percent by 2025.
China’s Grand Prize
Chinese control over the metals that are set to power our future did not happen by accident. Under China’s “Military-Civil Fusion” concept, all businesses must tolerate interference in a way that would be illegal in the West. This allows China to execute long-term strategic plans combining state resources and capabilities combined with ostensibly private businesses.
China relied on numerous middlemen to facilitate relationships between Chinese and foreign companies to get to this point. One story from the oil business is a perfect example. Yang Quinlong, better known as “Crazy Yang,” was a businessman who founded the Zhuhai Zhenrong trading house in 1995. Yang was a heavy drinker with many personal quirks, including wearing a green army jacket everywhere he went. After greeting his guests with a powerful bear hug, lifting them off the ground, he would regale them with stories about his time in mental hospitals as a child. His eccentricities did not stop him from becoming a major player in the international oil trading business.
With the backing of military friends, Yang set out to formally import oil from Iran in defiance of U.S. sanctions. At one point Yang was importing one-sixth of the oil imported by China and was twice sanctioned by the White House. This was irrelevant to Yang because he had no assets in the U.S. and little need to use the its financial system.
Yang’s risk appetite and the irrelevance of U.S. sanctions made him and his peers different from all the other players in the commodities market. Bribes have been common in the commodities trading industry since its inception. Glencore, the world’s largest minerals trader, recently settled with authorities in the U.S., U.K., and Brazil for $1.5 billion dollars over a bribery scandal. Glencore traders used coded language such as “chocolates” and “newspapers” in emails to refer to widespread bribes in countries like Brazil, Cameroon, Nigeria, and Venezuela. But Glencore and its peers around the world have incentive to follow U.S. bribery laws because access to the U.S. financial system is of paramount importance. The same isn’t true for many of its Chinese peers.
Chinese miners and commodity traders act as extensions of the Chinese state, and the state’s strategic control of critical minerals overrides any financial goals. China is willing to prop up unprofitable businesses, enable predatory pricing, and leverage state power for the benefit of its mining sector. This approach is designed to enable China’s broader grand strategy.
The grand prize for China is control over the entire electrification supply chain, from mining minerals and refining them to building wind, solar, and battery technology. If China obtains a monopoly position in lithium-ion battery production, it would give it enormous leverage over the $2 trillion dollars-a-year automotive industry. A lack of batteries would mean an inability to produce EVs, which could mean bankruptcy for some of the largest companies in the world.
In a world where China dominates the electrification supply chain, its control over the clean energy and automotive sectors serves as a useful political weapon. Nowhere in the world has felt the effects of China’s disciplined strategy more than Africa.
America’s Exit From the Frontier Markets
In 1960, President Eisenhower was on vacation at a seaside resort in Newport Rhode Island when he decided that Patrice Lumumba—the newly-elected prime minister of the then-Republic of the Congo—needed to be killed. Lumumba, a charismatic, national liberation-preaching former prisoner, was viewed as a potential African Fidel Castro, and the Congo seemed ripe for Soviet takeover. The CIA dispatched Sidney Gottlieb—the top scientist who had previously researched mind control and given LSD to hundreds of unsuspecting test subjects—to the Congo. He delivered a poison that could be injected into Lumumba’s toothpaste. The plan failed, but Lumumba would ultimately be shot and killed by a Belgian mercenary with a submachine gun on the last day of Eisenhower’s presidency.
The animating fear of the Americans was that the Soviet Union would gain control of the Congo’s minerals, which are both abundant and of extraordinary purity. Of particular importance was uranium; the Congo was almost the sole source of uranium for the U.S. nuclear program from the 1940s through much of the Korean War. The U.S. disguised uranium imports to make it appear as if they originated from Canada, and the U.S. Joint Chiefs of Staff made plans to seize parts of the Congo if needed.
The U.S. provided hundreds of millions of dollars in development aid to the country, and covertly gave millions to Joseph Mobutu, who was president of the country from 1965 to 1997. He was also a repeat guest at the White House; during one evening boat ride on the Potomac River with President Nixon, he agreed to provide a concession of cobalt and nickel to an American firm.
U.S. miners maintained a leading position in the Congo long after the Soviet collapse. One of the most prominent firms was the Arizona-based Freeport-McMoRan, which owned Tenke Fungurume, a massive copper and cobalt mine. But the mine became an archetypal case of U.S. deals leading to a Chinese takeover of the Congo’s mineral wealth. In 2009, Freeport sold Tenke Fungurume to a Chinese state-backed group to fund its way out of the financial crisis. Freeport held on to another undeveloped site in the Congo that contained one of the world's largest potential sources of cobalt before selling it to a Chinese group in 2016.
None of these deals made waves among regulators. While the Committee on Foreign Investment reviews investments made by foreign companies in the U.S. for national security risks, there is no oversight of transactions made by American companies in foreign countries, particularly free-market ones. As their liquidity and ambitions grew, Chinese firms systematically bought out other U.S. and European miners. Chinese firms now control most of the Congo’s copper and cobalt production. The DRC produces 70 percent of the world’s cobalt, a critical material for EV batteries, and China processes two-thirds of the world’s supply.
Conditions in the Chinese-controlled mines are brutal, with one Western mining executive who visited a mine comparing it to an internment camp. A video shared with a journalist for the New Yorker showed an armed Congolese guard beating a semi-naked, tied-up man lying in the mud. The man recording mostly speaks in Mandarin, but orders the guard to beat the worker in Kiswahili.
Chinese miners also purchase cobalt from the independent “artisanal” mines in the Congo which produce 20 percent of the country’s cobalt. These mines are known for their unsafe conditions; roughly 40,000 children work in them, many of whom have been trafficked due to their ability to crawl into narrow mining shafts. Death and injuries are common, as well as dangerous superstitions that have led to abuse, like the belief that sex with a virgin provides safety to miners.
On a more systemic level, the Chinese strategy of gaining control over Congolese minerals involves bribing the DRC’s power structure to privilege its interests. In 2007, China signed a $9 billion dollar deal with the DRC to secure mineral rights in exchange for infrastructure. In 2021, 3.5 million documents from the private commercial bank BGFI were leaked in an event called the “Congo Hold-up,” revealing that Chinese companies moved millions of dollars into former DRC President Joseph Kabilia and his family’s accounts during the negotiations period. The deal left the Chinese with a nearly 70 percent share in a Chinese-DRC mining joint venture, even though the Congolese provided all the mining assets and nearly a third of the start-up capital.
Beyond bribes, China has created a vast spying apparatus throughout Africa. Chinese firms have built at least 186 government buildings in Africa and at least 14 sensitive intra-governmental telecommunications networks. It has also donated computers and smartphones to at least 35 African countries, which is akin to the NSA sending a foreign government a shipment of laptops as a gift.
The French newspaper Le Monde reported that servers installed by the Chinese company Huawei in the African Union headquarters were uploading daily content to servers based in China. An inspection of the building—which was built by a Chinese contractor—uncovered hidden listening devices throughout the building. Chinese construction companies have built or renovated at least 24 presidential offices or residences and dozens of other sensitive high-level government buildings. Western intelligence agencies believe the Chinese use their African spying apparatus to acquire information that provides an advantage in negotiating deals as well as embarrassing or politically harmful information that can be used as leverage against African countries’ leadership.
China has used the Congo as its template for securing mineral rights in other parts of Africa and elsewhere in what are known as “frontier markets.” A 2010 USGS study found that Afghanistan had at least $1 trillion in untapped mineral wealth, including some of the world's largest high-quality rare earth deposits. As soon as the U.S. left Afghanistan, numerous Chinese mining firms were in Kabul negotiating for mining access. The long Afghanistan war arguably ultimately ended with a Chinese strategic victory.
One of the beneficiaries of U.S. military spending during the Afghanistan War was Blackwater, the notorious private security company. Its founder, Erik Prince, has reemerged as the CEO of Frontier Services Group, which is based in Hong Kong and partly owned by a Chinese state-run investment firm. Employing numerous former U.S. special operations forces personnel who fought in Afghanistan, it focuses on providing security for Chinese infrastructure projects abroad, including African mines. In a dark twist, the imperial spoils taken by China while the U.S. was engaged in futile wars are now being secured by some of the same Americans who fought in those wars.
How America Lost the Rare Earth Battle
While China has been systematically locking down the mineral supply worldwide, the U.S. has surrendered some of its most important domestic production capacity. A fundamental problem is that, unlike during the Cold War, it has not developed a coherent state-level strategy that enables it to act in a systematic way to advance its interests like the Chinese. Instead, it falls back on the markets.
The most salient example of the U.S. surrendering its lead is with rare-earth elements (REE). REE aren’t rare, just difficult and costly to extract. They must be purified through a harsh process that involves numerous separation steps. Although abundant, REE are not often found in concentrated deposits. They have a range of unusual properties, making them a critical component in producing advanced technology. Perhaps most importantly, some REE have super-magnetic properties which are needed to create the permanent magnets required to manufacture everything from fighter planes to iPhones to wind turbines.
From 1952 to 1990, the only major source of REE worldwide was the Mountain Pass Mine, located in California’s Mojave Desert. This monopoly was broken by China, which also had high-quality REE deposits. Unlike the U.S., it also had low labor costs and nonexistent environmental regulations. The Chinese then used predatory pricing to flood the global market until its U.S. competitors could no longer compete.
The last U.S. company making rare-earth super magnets was Magnequench, which was sold in 1995 to a consortium with ties to the Chinese government; a few years later it closed its U.S. operations and moved production to China. Slowly and methodically, the Chinese turned a U.S. monopoly into a Chinese monopoly with no U.S. government resistance.
The Mountain Pass Mine was ultimately forced to shut down after its owner declared bankruptcy. It was bought out of bankruptcy by MP Materials, which was founded by a hedge fund manager in 2017. The mine now supplies 15 percent of the REE consumed globally each year and can meet all the U.S. military’s rare-earth requirements. However, the mine is partially owned by Chinese investors and ships its concentrate to China for refinement.
The U.S maintains a National Defense Stockpile of REE, but it mostly consists of unprocessed ore that would likewise require refining in China. In the event of a war with China, the U.S. could also find itself unable to make many of its own advanced weapon systems without access to Chinese REE refiners.
The Trump administration began to try and reverse course, with Trump signing an executive order directing the government to adopt a strategy for critical minerals. As a result, the Department of Defense has provided tens of millions of dollars in grants to bring processing capacity back to the U.S. This year, MP Materials began construction on a $750 million dollar magnet manufacturing facility in Fort Worth. The DOD is also investing $120 million dollars into a new plant for heavy earths separation, and is working on a complementary light rare-earths separation facility. These American upstarts and their peers are still dwarfed in size and scale by the Chinese, who control the global price for REE through export quotas.
It’s a similar story for other minerals. Twenty years ago, the U.S. produced nearly a quarter of the world’s polysilicon, a key component of solar panels. In 2006, a Chinese firm signed a technology transfer agreement to obtain access to the Siemen process, the dominant technology used for producing polysilicon. By 2012, China had overtaken the U.S. lead with a 30 percent share, which has now grown to 76 percent. Today less than one percent of the world’s polysilicon is produced in the U.S., while China is projected to control more than 90 percent of the market. Over half the world’s polysilicon is produced in the Xinjiang region, and many Uyghur “re-education” facilities are suspected of working in polysilicon factories.
Polysilicon and other critical metals such as aluminum are formed through a highly energy-intensive process. Aluminum, which China is the largest producer of, requires so much energy to produce that commodity traders call it “congealed electricity.” China uses cheap coal power to supply the energy that is needed to produce these metals, which ultimately end up in nearly all major Western green energy infrastructure. Ultimately, Chinese coal power makes our green energy transition possible.
Operation Dragonbridge
The outlines of a coordinated U.S. strategy are starting to appear. In June 2022, the U.S. formed the Minerals Security Partnership (MSP) as a kind of “NATO for minerals” along with Canada, Australia, the UK, France, Germany, Japan, and South Korea. Many of these countries lack internal mining capacity, but some exceptions exist.
Australia, in particular, is a minerals superpower and the second-largest mining nation in the world. It possesses a wide array of minerals in large quantities, including copper, nickel, aluminum, REE, and uranium, and is by far the world’s largest producer of lithium. Canada is one of the largest minerals producers as well, with reserves of lithium, copper, nickel, graphite, aluminum, and manganese. It also has substantial REE potential reserves. Canada’s Northwest Territories, if made accessible, could provide a near-unlimited source of untapped mineral resources.
And then there is the U.S., which possesses up to $150 trillion worth of largely untapped mineral resources on federal lands alone. There are multiple reasons for this lack of relative development, but chief among them is it is the long and expensive process required to open a mine in the U.S. It takes seven to ten years on average, which is tied with Papua Guinea for the longest approval time among the top 25 mining countries due to a politicized regulatory process and ubiquitous litigation. This adds enormous costs and risks, and the potential prize must be extraordinary to make it worth it for mining companies. For example, Rio Tinto and BHP, the two largest mining companies in the world, have spent years and over $2 billion in capital attempting to open the Resolution Copper mine in Arizona without producing any copper. Given the costs, even U.S. miners have preferred to look overseas, where it is much easier and cheaper to develop assets.
A prime example of the challenges of opening a mine in the U.S. is the Thacker Pass Mine in Nevada, one of the largest lithium resources in the U.S. After years of development, the Trump administration pushed through permits for the project ahead of President Biden taking office. Opposing the mine has been a coalition of activists typical for mining projects: Native American tribes and environmental activists. The investment firm MSCI estimates that 97% of nickel, 89% of copper, 79% of lithium, and 68% of cobalt reserves in the United States are within 35 miles of Native American reservations.
China has sought to exploit this vulnerability in the U.S. system. Earlier this year, China launched an information operation known to researchers as Dragonbridge, which flooded social media platforms with posts raising environmental concerns about rare-earth mining and processing. In July 2022, the FBI issued warnings about Chinese influence operations aimed at tribal, business, and political leaders.
The tribe involved in the Thacker Pass dispute was the Paiute tribe. Tribal lore holds that the proposed $1.6 billion mining project is located where 31 members of its tribe were killed by U.S. cavalrymen. Joining the Paiute was the Deep Green Resistance, a self-described “radical environmental movement” that wants to “dismantle industrial civilization by any means necessary.” However, the alliance between the group fractured because Deep Green Resistance also opposes initiatives like transgender access to womens’ bathrooms. The perceived anti-trans stance of Deep Green Resistance was a step too far for the other activist groups, splintering the alliance.
A U.S. federal judge ruled that the mine’s owner could begin excavation to determine if the land holds historical importance to the tribe, denying a request from environmental groups who claimed the project would negatively affect sage grouse, a non-endangered species, in the area. A decision on the final appeal to the lawsuit is anticipated for August 2022.
Thacker Pass isn’t the only potential critical minerals motherlode in the U.S. Lithium can potentially be extracted from the hot brine beneath the Salton Sea area of California. If fully developed, the area could supply up to 40 percent of the world’s lithium, turning California into the Saudi Arabia of lithium. However, the method for extracting this lithium is unproven at scale and California has already introduced a flat tax on lithium production, which has caused numerous interested producers to delay or kill planned projects. There are plenty of other examples: a 34-mile geological formation in Idaho that contains one of the largest cobalt deposits in the world; potential REE mining sites in Arizona, Texas, Wyoming, and Alaska; and so on.
Despite the difficulty in opening mines, the U.S. is still the third-largest mining nation in the world. Were the U.S. and Australia jointly committed to developing their natural resources sectors, an alliance like the MSP would be a powerhouse. Were the AUKUS countries—Australia, the UK, and the U.S.—jointly powered by their natural gas resources, exporting LNG, and undergirded by U.S. technological and economic strength, they would wield far more power than China alone.
With such a large-scale initiative far off in the future for now, companies are trying to engineer their way out of the upcoming minerals shortage. Tesla’s induction motor, for example, uses electromagnets instead of permanent magnets, which means they do not require REE. Tesla has also confirmed that nearly half of the vehicles sold in recent months use cobalt and nickel-free iron-phosphate batteries. The company is exploring manganese batteries which could potentially offer higher energy density than iron-phosphate batteries and lower prices than nickel-rich batteries.
Tesla has also sought to secure its own supply chain, signing multiple supply megadeals in Brazil and Indonesia, and has discussed mining and refining lithium directly. It has also signed deals to obtain cobalt and lithium from Chinese firms, increasing the potential leverage of China over Tesla—leverage which the Shanghai Gigafactory, for example, already provides.
J.B. Straubel, the cofounder of Tesla and its former chief technical officer, is pursuing another approach with his new startup, Redwood Materials. Redwood Materials recently committed to spending $3.5 billion developing a plant in Nevada where it plans to recover over 95 percent of the lithium, copper, nickel, and cobalt from EV batteries. The ability to recover minerals at a cost that is competitive with mining them presents an enormous economic opportunity. But for now, technical barriers persist.
There are limits to what can be done with recycling and engineering. Impacting materials demand in a net zero world would require more than small efficiency gains. Researchers estimate that a tenfold increase in solar and wind technology efficiency is needed to achieve a meaningful reduction on mineral requirements—a goal that doesn’t even seem theoretically possible.
These cumulative pressures have even brought nuclear power back into the game. In August 2022, the U.S. Nuclear Commission did something it hasn’t done in decades: certify the design of a completely new reactor. The design by Portland-based NuScale Power is for a small modular reactor. Up to 12 reactors can be placed on NuScale’s VOYGR plant design, generating 924 MWe of power, enough to power over 700,000 homes. A hypothetical project to repower the dozens of coal plants scheduled to be shut down over the next decade with SMR nuclear reactors would provide for a significant chunk of the nation’s power needs using clean energy. Unlike wind and solar, it would not require a massive electrical grid expansion because the plants are already connected. No such plan is under discussion.
Another option is building what are called Allam cycle natural gas plants. This novel U.S.-developed technology uses the oxidation of hydrocarbon fuels in a high-pressure transcritical CO2 working fluid. The recuperated cycle allows the capture of all CO2 emissions. A demonstration plant is operating in Texas, and multiple power plants in the 280–300 MWe class range are in the planning stage. This is enough capacity to power 250,000 homes and is perhaps the only option for producing clean energy without increasing the cost of power generation.
The Coming Mineral Conflict
As the world’s energy economies become more electrified and by extension more mineral intensive, minerals will become a major part of the U.S.-China contest for power. This contest will play out across multiple dimensions. For example, espionage or military questions inevitably play into mineral disputes. The Congo Hold-up leak operation required a sophisticated hack or insider source that suggests state-level involvement.
The U.S. Joint Special Operations Command (JSOC) is likewise active in Africa, with forces seeing combat in at least 13 African countries over the last decade. Among JSOC forces is a little-known unit commonly referred to as “The Activity,” which specializes in planting electronic spying devices that link up to the NSA’s larger spying infrastructure. The CIA has always been active in Africa and has gone to great lengths to gain access to insider information throughout the global financial system. There is no hard evidence of U.S. intelligence involvement in the Congo Hold-up leak, but it is noteworthy how this information appeared over a decade later right when the U.S. was refocusing its attention on critical minerals.
Regardless of who leaked the data, the result was a scandal in the Congo that resulted in a Congolese court giving the DRC direct control of one of the world’s largest sources of cobalt while allegations against the mine’s Chinese owners were investigated.
Both covert and overt methods will be in play in the battle for the world’s minerals, just as they were for the world’s oil. But as energy sovereignty becomes more crucial to great power competition, drastic outcomes become possible. Project Independence wasn’t the only plan on the table during the 1973 oil crisis; the Pentagon discussed an airborne military operation to seize the oil fields throughout the Gulf Arab states and hold them for ten years or longer. Fortunately, it didn’t have to happen. But as the stakes of today’s mineral conflict keep rising, so do the dangers inherent to great power competition. Just as in 1973, only a philosophy of energy sovereignty can prevent escalation.
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