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Jen Alic

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China Plays Politics with Rare Earth Elements

The race to control and discover rare earth (RRE) minerals whose production plays a significant role in modern warfare equipment and consumer electronics is on as the US, EU and Japan take on China, which controls 95% of RRE production.

RREs such as tungsten, niobium, dysprosium, yttrium and neodymium are used in the production of defense technology, from guided missiles and drones to fighter jets and night vision equipment, and a recent report by the US Government Accountability Office (GAO) says that its supply of RREs is not secure and that it could take over a decade and a half to overcome foreign dependency on rare earth elements.

RREs are also increasingly used in the production of a wide range of commercial electronics, including mobile phones, televisions, hybrid cars, as well as green energy technologies. In total, there are 17 RREs necessary for the production of the world’s defense technology and consumer electronics.

As it stands right now, US defense technology would halt without a steady supply of RREs, and the future of safer defense technologies, such as electromagnetic weapons designed to minimize human casualties, would not be possible.

The US, Japan and the EU are pursuing a three-track approach to RRE supply security: attacking China, developing RRE supplies closer to home, and reducing the reliance of technologies on RREs.

Exploration and production efforts are being pursued across the US, as well as in Japan, Canada, Australia, Sweden, Austria and Malawi, but some analysts are concerned that these efforts are too slow off the starting blocks.  While there have been significant discoveries, production is a complicated and very painstaking process. There are also environmental concerns that will slow the process further, as the mining and processing of RREs is associated with toxic and radioactive by-products.

In the US, the most recent progress in exploration of RREs was announced on 2 April with the discovery in Nebraska of perhaps more than 100 million tons of niobium, which is used to harden steel and render it heat-resistant for industrial uses. The US imported an estimated $330 million worth of niobium in 2011, and has not produced anything of significance since the 1950s, according to a reported by the US Geologic Survey.

The production and use of RREs took center stage in mid-March when the US, EU and Japan filed a complaint with the World Trade Organization (WTO) against China’s stingy export quotas.

The complaint against China at the WTO is a response to Beijing’s increasingly blatant attempts to control RREs through export quotas. China added Iron alloys that contain more than 10% of RREs to the official RRE category in mid-2011, effectively assigning iron alloys the same reduced export quota as RREs. The previous year, the issue of RREs intensified to the diplomatic level with Tokyo, when Beijing halted RRE shipments to Japan for two months.

Projecting Power and Playing the Green Card

China is playing the environmental card in this game, requiring companies who export RREs to pass environmental standards before being given the green light to ship abroad. The use of the environmental clauses to regulate exports will make it more difficult for the WTO to rule against China. In the meantime, China’s refusal to let up on export quotas is forcing prices up and foreign companies to set up shop in China rather than wait for external progress.

That said, the US can also play environmental cards of its own, by attempting to demonstrate that China’s export quotas will dangerously slow other green gains. According to the US Department of Energy, RRE supply challenges would slow the deployment of clean energy technology in the coming years.

China is using its RRE control to project power globally, while the rest of the world scrambles to make up for lost time and initiative – all of which represents a clear failure of strategic forecasting. RREs are fast becoming recognized as a potential national security risk in the US, though the fixation on oil and the war on terror renders this subject too complicated for the mainstream media, and not exactly a career-building opportunity for intelligence officials for whom promotion depends on pinpointing immediate risks.

By Jen Alic of Oilprice.com

Jen Alic is a geopolitical analyst, co-founder of ISA Intel in Sarajevo and Tel Aviv, and the former editor-in-chief of ISN Security Watch in Zurich.




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