The world has belatedly woken up to the strategic potential of rare earth metals and the leverage China’s dominance over this sector gives it. The Indo-Australian bilateral strategic partnership on rare earths could provide a template for cooperation between the Quad members, writes India Inc Founder and CEO Manoj Ladwa
Rare earths are a group of 17 rare minerals that can be called the bedrock of the high technology world we inhabit – they are essential inputs for rechargeable batteries, mobile phones, fighter jects, stealth technology, missiles, cars, computers and wind turbines, among a host of other advanced products.
Over a period of time, China, which produces about 60 per cent of the world’s rare earths, has attained a dominant position in these and has shown little hesitation in “weaponising” its dominance to try and blackmail others into toeing its line.
To counter this strategic blackmail, the leaders of the four-member Quad, which recently held its first Summit meeting virtually, have signalled their intent to cooperate on funding new production technologies for these minerals and also draft international rules that will help preclude future strategic blackmail by Beijing.
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Radioactive mix makes extraction environmentally harmful
One major problem for democratic countries is that veins of rare earth are often mixed with radioactive materials. This makes the refining process extremely messy and environmentally damaging – and very difficult to carry out in countries with strong civil societies.
China, which faces no such constraints, has, thus, been able to build up its domestic capacities and position itself on top of the global supply chain for these metals. In fact, the US, which has the world’s third-largest rare earth reserves, exports ores to China and then imports 80 per cent of its refined rare earth requirements from that country.
New funding and research have to be directed at finding a less harmful way of extracting and refining these metals.
Lax ecological standards gave China a head start
“China’s dominance in the rare earth industry is the result of decades of targeted industrial policies aimed at leapfrogging other nations. For years, Beijing exploited its relatively low-cost labour force and lax environmental laws to gain a competitive edge in the global market and become the leading supplier,” a report by the Centre for Strategic and International Studies (CSIS), a leading Washington DC-based think tank, says.
Beijing has brazenly used its near monopoly over rare earths to engage in trade and diplomatic blackmail. In 2010, when China controlled 90 per cent of the global market for rare earths, it partially halted exports of these minerals when Japan arrested a Chinese captain for ramming Coast Guard vessel off the coast of the Senkaku Islands in the East China Sea, which they both claim.
Mastery over rare earths gives China critical tech edge
“Many manufacturers in the US, Japan, and Europe were left struggling to afford supplies of rare earths, while China held a glut of supplies at home… Beijing has demonstrated a willingness to leverage its weight in the global rare earth industry in pursuit of its political objectives, raising alarm bells in several major countries,” the CSIS report adds. This also gives Chinese companies an advantage in the pursuit of the next breakthroughs in the high technology realm.
This opened the eyes of the world to the strategic potential of rare earths and prompted the US and Australia to renew their efforts to find alternative to China. The Quad initiative is an extension of that effort.
In my opinion, it has come not a day too soon. Australian media has reported that China’s Ministry of Industry & Information Technology is compiling a set of rules to tighten its control over the rare earths sector.
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These rules, party mouthpiece Global Times said, were a prerequisite to strike back when necessary at foreign companies which harm China’s national interests. To leave no one in any doubt about its intentions, the Chinese government is in the process of enacting an Export Control Law that will severely restrict exports of rare earths used in weapons technology.
Since these metals have both military and civilian applications, that means it could be planning to open a new front in the global battle for domination over the high technology sector.
Indo-Australian cooperation could show the way
At a session on “The next mining boom: Rise of Australia's 'critical' minerals” at last year’s India Global Week, held virtually because of the Covid-19 outbreak, Vanessa Guthrie, Non-Executive Director, Australia-India Council, said: “Australia’s strength is in mining and India’s is manufacturing. By combining these strengths, Australia can develop its manufacturing sector and India can improve its mining industry…”
And, perhaps, in an unintended anticipation of the Quad initiative, India and Australia have included critical minerals in their bilateral strategic partnership. Australia is rich in rare earth minerals such as lithium and cobalt.
“So, India and Australia have to work together to ensure critical mineral security. Diversifying sources of rare earths and critical minerals are of supply are of critical importance,” Rajesh Chadha, Programme Director, Natural Resources, Brookings India, had told the session.
So, the Quad initiative obviously hasn’t materialised out of the blue. Its building blocks were being put together by the likes of Indian Prime Minister Modi and his Australian counterpart Scott Morrison for months.
The future of technology in the free world could depend on the success of the four-nation initiative.