Geopolitical dependencies
Critical raw material (CRM) or critical mineral supply chains are characterised by high levels of geographic concentration at one or more stages of the value chain, creating exposure to political risk, trade disruption, and strategic leverage. These dependencies do not arise solely from where resources are located. They reflect historical investment patterns, industrial policy choices, technological specialisation, and the cumulative effects of regulation and market dynamics over decades.
As a result, geopolitical risk in CRM is often structural rather than episodic. It cannot be managed solely through conventional risk mitigation strategies such as diversification of suppliers or hedging instruments. It requires coordinated policy intervention, sustained investment in alternative supply chains, and strategic partnerships that align economic interests with security objectives. This section examines how geopolitical dependencies have emerged, how they shape strategic competition between major economies, and how the European Union and the United States are responding through policy frameworks designed to reduce vulnerability and secure access to CRM.
The origins of concentration: industrial policy and comparative advantage
Geographic concentration in CRM supply chains is frequently attributed to natural resource endowment, but this explanation is incomplete. For many CRM, resources are geologically distributed across multiple continents, yet production remains concentrated in a limited number of jurisdictions. This pattern reflects deliberate industrial policy choices, sustained public investment, and the creation of comparative advantages through regulatory environments that internalised economic benefits whilst externalising environmental and social costs.
China's dominance across multiple CRM value chains is the most consequential example. Over the past three decades, China has pursued an explicit strategy of securing control over CRM supply chains as part of broader industrial policy objectives. This strategy has encompassed domestic mining development, acquisition of foreign mining assets, construction of processing and refining capacity, vertical integration into downstream manufacturing, and strategic use of export restrictions to support domestic industries.
For rare earth elements, China's ascent began in the 1980s and accelerated through the 1990s and 2000s. Chinese state-owned enterprises and private firms invested heavily in rare earth mining, particularly in Inner Mongolia's Bayan Obo deposit and in southern China's ion-adsorption clay deposits. Environmental regulations were weakly enforced, allowing production costs to remain low even as environmental damage accumulated. As Chinese production expanded and global prices fell, mines in other jurisdictions, including the US Mountain Pass facility, became economically unviable and closed. By the early 2010s, China accounted for over 95% of global rare earth production.
China did not stop at extraction. Recognising that strategic value lies further down the value chain, Chinese industrial policy prioritised processing, refining, and manufacturing capacity. China now processes over 85% of global rare earths, refines the majority of separated rare earth oxides and metals, and manufactures the majority of rare earth permanent magnets used in electric vehicles, wind turbines, and defence applications. This vertical integration creates layered dependencies that cannot be easily unwound, even as alternative upstream mining projects are developed outside China.
Similar patterns are evident for lithium, cobalt, graphite, and other battery materials. China does not dominate lithium mining; Australia, Chile, and Argentina are the largest producers of lithium-bearing minerals and brines. However, China processes approximately 60% of global lithium into battery-grade lithium hydroxide and lithium carbonate. For cobalt, the Democratic Republic of the Congo (DRC) produces over 70% of global mine supply, but China refines over 70% of cobalt into the chemicals required for battery manufacturing. For graphite, China both mines and processes the majority of the global supply, and Chinese firms have invested in graphite processing capacity in other regions to secure feedstock for domestic manufacturing.
These dynamics did not emerge by accident. They reflect long-term strategic planning, tolerance for environmental and social externalities during the growth phase, access to low-cost capital through state-directed financial institutions, and coordination between central government policy and provincial or local implementation. Other jurisdictions did not prioritise CRM during the same period, viewing them as niche industrial inputs rather than strategic assets. As a result, by the time CRM became recognised as strategically significant in the late 2010s, China had already established structural advantages that are difficult to replicate or offset.
Strategic leverage and the geopolitics of supply
High levels of concentration translate into strategic leverage, whether exercised explicitly through trade policy or implicitly through market behaviour influenced by state objectives. China has demonstrated willingness to use CRM access as a tool of geopolitical influence, most notably through export restrictions imposed on rare earths in 2010 following a territorial dispute with Japan. These restrictions, which included export quotas and licensing requirements, disrupted global supply and raised prices significantly. Although the World Trade Organization (WTO) subsequently ruled that China's export restrictions violated WTO commitments, the episode demonstrated that concentrated supply creates vulnerability to politically motivated disruption.
Since 2023, China has escalated its use of export controls on critical minerals in a pattern that has been incremental, escalating, and increasingly targeted at Western defence industrial capacity. In July 2023, China imposed export controls on gallium and germanium in direct response to US semiconductor export restrictions. Graphite controls followed in December 2023. In December 2024, Beijing announced a complete ban on exports of gallium, germanium, and antimony to the United States and imposed heightened scrutiny on graphite exports. February 2025 brought controls on tungsten, tellurium, bismuth, indium, and molybdenum, a grouping characterised by the International Energy Agency as materials primarily used in defence and high-tech applications.
The most significant escalation came in two waves during 2025. In April, China announced with immediate effect export controls on seven medium and heavy rare earth elements: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. Exporters became required to obtain individual licences from China's Ministry of Commerce. In October 2025, a second package extended controls to five additional rare earths, as well as to refining and magnet-manufacturing equipment, including, crucially, foreign-made products that had used Chinese materials or processing technology at any stage of their production. This extraterritorial dimension, extending Chinese law to products manufactured outside China, is unprecedented in scope. Most significantly, the October package introduced categorical denials for defence-related end use. For the first time, China codified in regulatory form that materials subject to its export controls would not be licensed for applications in defence manufacturing. Implementation was suspended for one year, until November 2026, following diplomatic signals from Beijing. The suspension is not a retraction; the architecture of exclusion has been constructed, and only its activation has been deferred.
The European Central Bank assessed in this period that over 80% of large European firms were no more than three intermediaries away from a Chinese rare earth producer. European manufacturers of defence systems, electronics, and automotive components were identified as particularly exposed. The IEA separately reported that rare earth prices had risen to up to six times their pre-restriction levels in some cases, with downstream effects on input costs across the broader manufacturing sector.
The geopolitical significance of CRM extends beyond bilateral disputes. Control over CRM supply chains provides leverage in broader strategic competition, particularly in sectors central to economic competitiveness and military capability. Permanent magnets made from rare earths are essential for advanced military systems, including precision-guided munitions, aircraft, and submarines. Semiconductors, which rely on multiple critical materials including gallium, germanium, and rare earths, underpin modern defence systems and are central to technological leadership. Batteries, which depend on lithium, cobalt, nickel, and graphite, are critical for electric vehicles, grid-scale energy storage, and military mobility.
For the EU and the US, dependence on Chinese CRM supply creates vulnerability not only to trade disruption but also to broader strategic constraints. If access to critical materials can be restricted or made conditional on political behaviour, the autonomy of Western economies and their ability to pursue independent foreign, trade, and security policies is compromised. This recognition has driven CRM to the centre of strategic competition between major powers and has elevated supply chain resilience from an economic concern to a national security priority.
Diversification as a strategic imperative
Diversification is a central objective of CRM policy in both the EU and the US, but it is not cost-free or easily achieved. Developing alternative supply chains requires significant capital, long lead times, and sustained policy support. It may also involve higher costs, stricter environmental and social standards, or greater technical complexity than existing supply arrangements. Where exploration activity has been limited or geographically concentrated, diversification efforts may be constrained long before downstream capacity or policy support can be mobilised.
The European Commission's RESourceEU explicitly frames diversification as a strategic necessity. The Communication establishes that no more than 65% of the EU's annual consumption of each strategic raw material at any relevant stage of processing should come from a single third country by 2030. This target is deliberately ambitious and reflects recognition that current concentration levels create unacceptable vulnerability. However, achieving the target will require substantial investment in mining, processing, and refining capacity both within the EU and in partner countries, as well as credible policy mechanisms to de-risk these investments and ensure long-term viability.
The Critical Raw Materials Act translates these objectives into legal obligations and institutional mechanisms. The Act establishes benchmarks for domestic capacity, with targets that at least 10% of the EU's annual consumption of strategic raw materials should be extracted within the EU, at least 40% should be processed in the EU, and at least 25% should come from recycling by 2030. These benchmarks are not binding quotas but rather policy targets designed to guide public investment, regulatory streamlining, and strategic partnerships. The Act also establishes a framework for designating strategic projects, which are eligible for accelerated permitting, access to EU financing instruments, and coordination support from the European Critical Raw Materials Board.
In the US, diversification efforts are similarly driven by strategic considerations but are implemented through a more fragmented institutional landscape. The Biden Administration's 2021 supply chain review (Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth) identified CRM as one of four priority supply chain vulnerabilities and recommended a comprehensive set of policy responses, including domestic production incentives, stockpiling, international partnerships, and regulatory reform to accelerate permitting.
Subsequent legislation has provided substantial funding for diversification initiatives. The Bipartisan Infrastructure Law includes over $6 billion for battery supply chains and critical minerals processing. The Inflation Reduction Act provides tax credits for domestic production of critical minerals and battery components, as well as incentives for sourcing from the US or free trade agreement partners. The CHIPS and Science Act, whilst primarily focused on semiconductors, includes provisions for securing the supply of materials essential to semiconductor manufacturing.
The Defence Production Act has been invoked to support specific critical mineral projects, providing grants and loan guarantees for mining and processing facilities deemed essential to national security.
The Trump Administration has maintained and intensified its focus on CRM diversification whilst shifting policy instruments. Executive Order 14241 (Immediate Measures to Increase American Mineral Production), issued in March 2025, declared a national energy emergency to accelerate domestic production, activated Defence Production Act authorities, and established the National Energy Dominance Council to coordinate policy. The Administration has set a target that 90% of supply for 25 core critical minerals should come from domestic or allied sources by 2030, a more ambitious and explicitly security-framed target than previous diversification goals. Implementation centres on permitting acceleration, direct federal investment through equity stakes, bilateral mineral agreements, and trade measures, including Section 232 investigations into processed critical minerals.
Despite these policy efforts, diversification faces structural constraints. Developing a mine from exploration through permitting to production typically requires 10 to 15 years in the US and the EU, compared to shorter timelines in jurisdictions with less stringent environmental review or more centralised decision-making. Processing and refining facilities require access to reliable feedstock, which creates interdependencies between upstream and downstream investments. Technical expertise in CRM processing is concentrated in firms and institutions with decades of operational experience, most of which are located in China or allied Asian economies. Labour markets in Western economies have limited depth in mining and metallurgical engineering, reflecting decades of underinvestment in these sectors. China's pricing power compounds these constraints: the Payne Institute for Public Policy at Colorado School of Mines noted in its 2025 report that lithium, cobalt, and nickel prices have all fallen below the thresholds required to support new capacity outside China, and that current NdPr oxide pricing stands at roughly half of what US mining companies say they need to be profitable, even at scale.
As a result, diversification strategies often face trade-offs between speed, cost, sustainability, and scale. Accelerating project timelines may require regulatory compromises that conflict with environmental or social objectives. Achieving cost competitiveness with Chinese supply may require subsidies or trade protection that distort markets and create long-term dependencies on public support. Maintaining high environmental and social standards may increase costs and extend timelines, making projects less attractive to private investors. Scaling capacity to levels that meaningfully reduce dependence on China requires investment far beyond what has been committed to date, even under the substantial programmes enacted in the US and planned in the EU.
Strategic partnerships and the geopolitics of alignment
Recognising that complete self-sufficiency is neither feasible nor desirable, both the EU and the US have pursued strategic partnerships with third countries to diversify supply sources and reduce dependence on China. These partnerships reflect an understanding that geopolitical risk is best managed through alignment with jurisdictions that share values, regulatory standards, and security interests, rather than through purely commercial diversification that may reproduce vulnerabilities with different suppliers.
The EU's Global Gateway strategy provides a framework for mobilising public and private investment in infrastructure, including mining and processing projects, in partner countries. The strategy is positioned as a values-based alternative to China's Belt and Road Initiative, emphasising transparency, environmental sustainability, good governance, and alignment with EU standards. In practice, Global Gateway has supported feasibility studies, technical assistance, and co-financing for CRM projects in Africa, Latin America, and Asia, often in coordination with European development finance institutions and multilateral banks.
The EU has also pursued formal partnerships focused specifically on CRM. The European Commission has signed 14 strategic partnerships on raw materials over the past five years, including with Canada, Chile, Ukraine, Kazakhstan, Zambia, and several other countries. These partnerships typically include commitments to facilitate investment in mining and processing, alignment of regulatory standards, support for skills development and technology transfer, and preferential access to EU markets under sustainability and due diligence frameworks. However, the European Court of Auditors' Special Report 04/2026 found that these efforts have yet to produce tangible results on import diversification. Imports from partner countries fell between 2020 and 2024 for approximately half of the critical raw materials examined. Some partnerships have missing or delayed implementation roadmaps and lack concrete supply projects, limiting their operational impact.
In the US, strategic partnerships have been substantially scaled since early 2025. The Forum on Resource Geostrategic Engagement (FORGE), launched at the Critical Minerals Ministerial in Washington on 4 February 2026, succeeded the Biden-era Minerals Security Partnership as the primary multilateral coordination framework. FORGE, chaired initially by South Korea, brings together over 50 countries to coordinate supply chain development independent of China. The Ministerial also announced joint Action Plans with the European Commission, Japan, and Mexico, including the prospect of coordinated price floors and a binding plurilateral trade framework for critical minerals.
The Trump Administration has expanded bilateral mineral agreements significantly, signing cooperation frameworks with Argentina, Australia, Cambodia, Japan, Malaysia, Thailand, Ukraine (including market-based offtake rights), Mexico, the EU, and the United Kingdom. These agreements, totalling over $10 billion in identified projects, establish cooperation on exploration, processing investment, and supply chain integration.
These partnerships serve multiple objectives. They provide alternative sources of supply that reduce dependence on China. They create opportunities for Western firms and financial institutions to participate in CRM value chains on terms that align with their governance and sustainability commitments. They support broader geopolitical objectives by deepening economic and strategic ties with allied and partner countries. However, they also create new dependencies and complexities. Partner countries have their own strategic interests, regulatory priorities, and political dynamics, which may not always align with those of the EU or the US. Projects developed in partner countries remain subject to permitting delays, political risk, and social opposition, and there is no guarantee that they will achieve the scale, cost competitiveness, or timeline required to meet diversification targets.
The EU-US dimension: cooperation and competition
The transatlantic relationship is central to Western efforts to diversify CRM supply chains and reduce dependence on China, but it is characterised by both cooperation and tension. The EU and the US share strategic objectives related to supply security, alignment with allies and partners, and maintenance of high environmental and social standards. However, they also compete for access to the same resources, processing capacity, and downstream manufacturing investments, and their policy approaches reflect different industrial structures, regulatory traditions, and strategic priorities.
The EU-US Trade and Technology Council (TTC), established in 2021, includes a dedicated Working Group on Secure Supply Chains that focuses on CRM among other strategic sectors. Joint statements from TTC ministerial meetings have emphasised the importance of coordinating investment, aligning regulatory approaches, and avoiding beggar-thy-neighbour policies that undermine collective resilience. The Action Plans announced at the February 2026 Critical Minerals Ministerial represent a chance to deepen this coordination, with a memorandum of understanding between the US, the European Commission, and Japan expected within 30 days of the Ministerial.
However, tensions have persisted and in some respects intensified. The Inflation Reduction Act's domestic content requirements and restrictions on sourcing from "foreign entities of concern" target Chinese supply chains but also create challenges for European manufacturers that rely on Asian suppliers or that have operations in China. The paused EU-US critical minerals agreement of 2023 to 2024 was an early casualty of this misalignment. The Trump Administration has maintained domestic content requirements whilst adding new trade measures: Section 232 investigations into processed critical minerals, semiconductors, and copper were initiated in January 2026, and a 50% tariff on semifinished copper products was imposed in summer 2025. European policymakers have expressed concern that these measures, combined with direct federal equity investments in US producers, create unfair competitive advantages and undermine transatlantic cooperation.
A further dimension of transatlantic tension concerns the risk that US offtake commitments crowd out European access to scarce non-Chinese processing capacity. US offtake agreements, backed by government guarantees, offer project developers a degree of revenue certainty that European buyers cannot currently match. Solvay, having opened a rare earth processing facility in France in April 2025, earmarked large volumes of output to US magnet manufacturers rather than European ones, citing stronger commercial commitment from US counterparts. US Rare Earth simultaneously acquired the UK-based processor Less Common Metals. These are not isolated cases; they reflect the structural logic of a US industrial policy designed to absorb available non-Chinese capacity as rapidly as possible. Replacing dependency on Beijing with exclusive dependency on Washington is not a strategic upgrade for Europe's critical mineral posture.
Similar tensions exist around subsidies and state aid. The EU has traditionally maintained stricter discipline on state aid than the US, reflecting concerns about market distortions and level playing fields within the Single Market. However, the scale of US subsidies and direct investments has created pressure within the EU to relax state aid rules and match US support levels in order to retain and attract investment. The EU's Green Deal Industrial Plan and the Net-Zero Industry Act represent partial responses to these pressures, but they fall short of the fiscal commitments made by the US, reflecting both budgetary constraints in many Member States and ongoing debates about the appropriate role of industrial policy within the EU framework.
Despite these tensions, cooperation remains the dominant mode of EU-US engagement on CRM. Both sides recognise that strategic competition with China requires alignment rather than fragmentation and that collective bargaining power with third countries is greater when the EU and US act jointly. The shared emphasis on high environmental, social, and governance standards, transparent supply chains, and alignment with democratic values creates a basis for cooperation that transcends commercial competition. Whether the Action Plans announced at the February 2026 Ministerial can move beyond diplomatic signalling toward concrete operational alignment on processing, trade instruments, and market infrastructure will be the decisive test. The FORGE framework offers a forum; its effectiveness depends on whether its members are willing to treat allied supply allocation as a joint problem.
Geopolitics beyond China: risks in resource-rich regions
Whilst China dominates discussions of geopolitical risk in CRM supply chains, other sources of vulnerability exist. Many resource-rich countries have governance challenges, political instability, or regulatory unpredictability that create risks for long-term investments. Projects in these jurisdictions may face nationalisation risk, arbitrary changes to fiscal terms, corruption, inadequate infrastructure, or social conflict.
The DRC illustrates these challenges. The DRC produces over 70% of global cobalt, making it indispensable to battery supply chains, yet it ranks poorly on governance indicators and has a history of conflict, corruption, and human rights abuses, including child labour in artisanal mining. International efforts to improve traceability, support responsible sourcing, and develop large-scale industrial mining have had limited impact. Companies sourcing cobalt from the DRC face reputational risks, supply chain due diligence obligations under regulations such as the EU's Conflict Minerals Regulation and the Corporate Sustainability Due Diligence Directive, and uncertainty about the long-term stability of supply.
Similar risks exist in other resource-rich regions. Zimbabwe has significant lithium resources but faces governance challenges, inconsistent regulatory enforcement, and limited infrastructure. Political instability in parts of Latin America, including Peru and Bolivia, creates uncertainty for mining investments despite favourable geology. Russia's invasion of Ukraine in 2022 demonstrated that geopolitical risks can materialise rapidly and unpredictably, disrupting supply chains and forcing companies and governments to reassess dependencies. Russia is a significant supplier of palladium, nickel, and aerospace-grade titanium; in late 2024, President Putin explicitly threatened to limit Russia's export of strategic materials, referencing uranium, nickel, and titanium. The prospect of simultaneous supply pressure from both China and Russia is not a theoretical risk scenario; it is a live one.
These risks underscore that diversification is not simply a matter of reducing dependence on China. It requires careful assessment of governance, political risk, and social acceptance in alternative supply regions and recognition that shifting dependencies from one high-risk jurisdiction to another may not meaningfully improve resilience. This is why strategic partnerships increasingly emphasise alignment on values and governance alongside resource availability, and why due diligence frameworks and supply chain transparency have become integral to CRM policy.
Geopolitical dependencies as a system-level challenge
Geopolitical dependencies are best understood as a system-wide characteristic rather than a problem confined to specific countries or materials. Their impact depends on how concentration intersects with value chain structures, policy choices, environmental and social constraints, and financing conditions. A jurisdiction that reduces dependence at one stage of the value chain but remains dependent at another may not achieve meaningful resilience. A project that diversifies supply geographically but fails to meet environmental or social standards may create new vulnerabilities even as it addresses old ones.
For this reason, addressing geopolitical dependencies requires coordinated approaches that recognise the limits of unilateral action and the need for alignment across the CRM system. Strategic partnerships must be structured to support entire value chains, not just extraction. Industrial policy must balance domestic capacity building with integration into allied and partner supply networks. Regulatory frameworks must create incentives for responsible sourcing without imposing requirements so stringent that they drive investment to jurisdictions with weaker standards. Financing mechanisms must be designed to attract private capital whilst de-risking investments in jurisdictions where political and regulatory uncertainty is high.
The following sections examine how environmental and social constraints and project finance considerations further shape supply outcomes and interact with the geopolitical and value chain dynamics outlined above. Together, these dimensions form a coherent framework for understanding why geopolitical dependencies persist and where interventions are most likely to succeed in building resilient, sustainable, and strategically secure CRM supply chains.