Mongolia, wealthy in minerals particularly copper and uncommon earths, however sandwiched between China and Russia, is making a pivotal shift towards a “third neighbor” – the USA. Throughout a current visit to Washington, Prime Minister Oyun-Erdene Luvsannamsrai aimed to fortify U.S. ties regarding vital minerals and significantly to boost cooperation in uncommon earth mining. Moreover, Mongolia and the U.S. brokered an “Open Skies” aviation settlement, meant to bolster direct commerce.
Ought to these agreements be realized and uncommon earths air-shipped from Mongolia to the USA, what are the implications for China-U.S. strategic competitors?
“Chokepoint” Technique
The China-U.S. relationship has been the world’s most pivotal bilateral dynamic for the reason that finish of the Chilly Warfare. Lately, competitors has taken priority over cooperation between these two superpowers, with Beijing and Washington jockeying for benefit from commerce and know-how to regulate over vital mineral provide chains.
World provide chains have advanced as a consequence of two intertwined elements: developments in ICT and cross-border logistics, together with the discount in institutional limitations facilitated by organizations just like the WTO. In consequence, provide chain administration has grow to be essential for optimizing effectivity, cost-effectiveness, and uninterrupted capital and data flows for each companies and nationwide economies.
Nonetheless, provide chains current a paradox: As they develop extra advanced, weaving in multilayered arrays of suppliers every chosen for his or her aggressive benefits, additionally they grow to be extra weak to exterior shocks. This consists of pure disasters, pandemics, and unpredictable geopolitical shifts. Latest occasions just like the China-U.S. tech struggle and the financial sanctions on Russia following its invasion of Ukraine spotlight the fragility of right now’s international provide chains.
Within the context of a unstable geopolitical surroundings, sure chokepoints inside provide chains are thought to be potential vulnerabilities. A “chokepoint” denotes a vital and irreplaceable part or hyperlink inside a provide chain, inclined to regulate by doubtlessly adversarial entities. At its core, a chokepoint is characterised by a type of monopoly. Whereas companies could wield monopolies to realize heightened financial features, nations usually domesticate them for political aims. Past the institution of monopolies to create strategic chokepoints, another and extra aggressive technique additionally exists: concentrating on an opponent’s chokepoint to deliberately disrupt their essential provide.
Within the competitors between the USA and China, each nations are using chokepoint methods. To start out, the U.S. utilized its dominant place inside semiconductor provide chains to exert intensive technological and geopolitical affect. This maneuver successfully curbs China’s progress in superior chipmaking. China, in response, has applied its personal countermeasures, together with export controls of vital metals. These reciprocal actions have transcended the realm of financial sanctions, signifying a broader type of financial warfare between the 2 powers.
Within the midst of those varied measures and countermeasures, China holds a wild card: its management over the separation and refinement of uncommon earths. Presently, China is the sole provider of a steady, uninterrupted provide of high-energy everlasting magnets appropriate for high-temperature functions similar to electrical motors utilized in EVs.
The Geopolitics of Uncommon Earths
Uncommon earths play an important position in quite a few trendy applied sciences. Particularly, the fast progress of renewable vitality and associated applied sciences, similar to electrical automobiles, wind and photo voltaic vitality, spurred a 37 percent increase in uncommon earths demand in 2022, a pattern anticipated to proceed for at the very least the following 5 years. But, the provision chains for uncommon earths are mired in geopolitical vulnerability. Notably, China boasts probably the most substantial pure reserves of all 17 uncommon earth components and has cultivated a singular capability to refine and separate each.
Furthermore, since 2012, China has intensified its efforts to maneuver up the worth chain. Notably, it has consolidated uncommon earth mining and processing beneath state-owned enterprises and established pivotal analysis facilities. Regardless of commencing patent filings practically 20 years after the USA and Japan, China held greater than 80 percent of all uncommon earth-related patents by 2020.
China is now the most important importer and exporter of uncommon earths, which means it controls the majority of uncommon earth processing together with refinement, separation, and fabricating magnet supplies. In the course of the first half of 2023, China imported 90,920 tons of uncommon earth ores and metals, a considerable portion from the USA, and exported 26,236 tons of refined uncommon earths, primarily magnet supplies. Whereas theoretically possible, decoupling from China’s uncommon earth provide chains would contain substantial prices and doubtlessly disruptive provide chain stability.
Past simply uncommon earths, China is the main and most cost-effective provider of many critical minerals important for clear vitality transition. Given the geopolitical and environmental dangers tied to mining and processing minerals, issues about uncommon earth provide safety have intensified. Recognizing their potential vulnerability to Chinese language restrictions, Western governments are actively in search of to degree the taking part in subject. This consists of in search of to diversify mining sources and constructing services impartial of China’s enter.
Within the face of geopolitical competitors between the U.S.-led West and China, extra nations, together with Mongolia, are gravitating towards the democratic bloc to mitigate dangers from China’s dominance in vital provide chains. Reacting to a collection of export controls and know-how sanctions on semiconductors imposed in opposition to it, China has felt compelled to make use of reciprocal actions.
For instance, Beijing, with precision and deliberation, initially curtailed exports of gallium and germanium – two uncommon metals integral to the manufacturing of a number of strategically vital merchandise, together with army weapons programs. This transfer got here within the wake of China’s new Foreign Relations Law enacted on July 1, which asserts that the nation could make use of countermeasures when going through exterior restrictions. Furthermore, the current introduction of China’s drone export control policy signifies a possible escalation in these tit-for-tat measures.
In mild of China’s countermeasures, the Pentagon is investigating partnerships with U.S. and Canadian corporations to recycle uncommon metals from waste and refine each gallium and germanium. Moreover, the USA has declared limitations on American investments in China’s tech sector.
Given this backdrop, the Mongolian prime minister’s go to to Washington to debate potential uncommon earth collaborations will be seen as bolstering the USA’ place, doubtlessly tipping the stability of energy on this geopolitical tug-of-war.
Can Mongolia’s Uncommon Earths Diplomacy Shift the Energy Steadiness?
The potential uncommon earth partnership between the USA and Mongolia holds promise for mutual features. For the U.S., the collaboration may serve to diversify its sources of uncommon earths. In the meantime, Mongolia stands to learn from expanded diplomatic ties and potential U.S. investments that might gas its financial progress. Nonetheless, as with every worldwide relationship, the satan is within the particulars.
A number of vital limitations forged shadows over the potential partnership. First, the financial viability of mining uncommon earths, which are available in oxide concentrations starting from 1 percent to 70 percent, is way from assured. Uncertainties persist concerning the standard of Mongolia’s uncommon earth reserves and the requisite funding for extraction and processing.
Second, Mongolia could face home opposition to uncommon earths mining operations, which include a heavy environmental price. Throughout its complete value chain, this course of consumes substantial vitality and water assets whereas producing varied wastes and pollution, together with poisonous mining residues, wastewater laden with heavy metals, radioactive waste, and air pollution similar to carbon dioxide and sulfur dioxide. China realized this lesson the exhausting manner: Reports point out that it may take wherever from 50 to 100 years for the surroundings to totally get better in a county in Jiangxi Province the place heavy uncommon earth deposits are wealthy. The estimated price ticket for this restoration is roughly 38 billion yuan, equal to round $5.5 billion.
Third, the absence of vital infrastructure in Mongolia, together with ample roads for transporting heavy equipment and dependable electrical energy, compounds the challenges. Sarcastically, Mongolia’s greatest hope for addressing this case is China. The 2 international locations have agreed to cooperate on quite a lot of infrastructure tasks, together with cross-border railways, commerce ports, and roads and highways.
Lastly, Mongolia’s landlocked standing leaves it reliant on street transport to succeed in the closest Chinese language ports for international commerce. Whereas the “Open Skies” aviation settlement affords another, the price of air transport minerals can simply negate any financial advantages. Moreover, the settlement’s implementation will depend on the consent of both China or Russia, as their airspace have to be crossed for flights to proceed.
Subsequently, although bolstered ties between the USA and Mongolia might be disadvantageous for China geopolitically, Mongolia’s pivot appears extra symbolic than rooted in financial pragmatism. The potential downside of this shift is that it may jeopardize the present cooperation between China and Mongolia. China stays the most significant destination for Mongolia’s mineral exports, together with copper and coal. Ought to Mongolia decisively tilt towards the West, Mongolia’s exports may face constraints.
Conclusion
As China-U.S. tensions escalate, different international locations usually really feel pressured to align with certainly one of these superpowers. Smaller international locations have much less weight in shifting the China-U.S. dynamic than bigger ones, and however their selections mirror shared geopolitical anxieties. As identified by Oyun-Erdene, international locations like his personal may endure enormously if superpower competitors boiled over.
Within the race in opposition to time to fight local weather change, international unity reasonably than fragmentation is the necessity of the hour.
