The new geography of power: minerals as the fault line of the 21st century
The devices that define modern life and increasingly the energy transition are built on a foundation of obscure minerals whose names rarely enter public debate. Smartphones, laptops, and electric cars all rely on elements such as neodymium and terbium, which have quietly become fulcrums of geopolitical power. China’s near‑monopoly on its extraction and processing has turned what once seemed like a technical supply‑chain issue into a strategic lever. When Beijing restricted exports of key rare earths last year, it demonstrated not only its dominance but also its willingness to use that dominance as an instrument of statecraft.
The episode exposed a deeper vulnerability: the West’s technological and military ecosystems depend on materials controlled by a rival power. Supply chains, once treated as neutral conduits of commerce, have become contested terrain. Rare earths are only the most visible example. Lithium, gallium, tungsten, and graphite follow the same pattern, mined globally but refined overwhelmingly in China, embedded in everything from drones to solar panels, and increasingly weaponized in moments of diplomatic tension.
The developed world’s scramble: industrial policy returns, but with old flaws
The US and European response has been energetic but uneven. Washington has launched a global hunt for alternative supplies, signing mineral agreements with more than twenty countries and pouring subsidies into domestic mining and processing. The logic is clear: diversify away from China, rebuild industrial capacity, and secure the raw materials needed for the energy transition and advanced manufacturing.
Europe’s approach has been more cautious, shaped by its regulatory instincts and internal political constraints. The EU’s Critical Raw Materials Act aims to reduce dependence on China by setting targets for domestic extraction, processing, and recycling. But permitting remains slow, environmental opposition is strong, and member states differ sharply on how far industrial policy should go. As a result, Europe risks falling behind both the US and China in securing long-term access to critical minerals.
But the execution on both sides of the Atlantic reveals the contradictions of this renewed industrial policy. Governments are offering loans, guarantees, and price floors, tools that distort markets and risk entrenching politically connected firms. The sums involved are vast, yet the strategy remains fragmented, and there is little to no coordination. Projects are scattered across continents, often in politically unstable regions, and the timelines for bringing new mines online stretch into decades. Meanwhile, the environmental and social costs of mining raise their own political obstacles at home.
The critique is that, while intervention is justified, it is poorly targeted. The West is rediscovering industrial policy without fully accepting its trade-offs. In trying to outmanoeuvre China, it risks replicating some of the inefficiencies that long plagued its commodity programmes in the 20th century.
The long game: alliances, secular trends and the economics of resilience
Behind the headlines lies a deeper secular trend: the world is entering an era in which materials, not markets, define strategic advantage. The energy transition requires unprecedented volumes of copper, nickel, lithium, and rare earths. Digitalization demands ever more specialized minerals. Defense systems depend on components that cannot easily be substituted. In this context, control over extraction and refining becomes a form of economic statecraft.
The West’s overlooked asset is not simply its capital or its technology, but its alliances. Canada, Australia, Japan, and several European countries possess both mineral reserves and regulatory systems compatible with Western standards. A coordinated strategy, pooling investment, sharing processing capacity, and aligning environmental rules, could create a counterweight to China’s dominance. Yet such cooperation requires political will and long-term commitment, qualities often in short supply.
The broader question is whether open economies can build resilient supply chains without sliding into protectionism or sacrificing innovation. Price signals remain essential for efficiency, but markets alone cannot manage geopolitical risk. The challenge is to design interventions that support diversification without ossifying the system. In this sense, the rare‑earth crisis is not merely a dispute between two powers; it is a test of whether open economies can adapt to a world where resources are once again instruments of power.