The Geopolitics of Critical Minerals: The New “Oil” of the 21st Century

The transition to a green, digital economy has created unprecedented demand for a specific group of minerals deemed “critical” due to their economic importance and supply risk. The International Energy Agency projects that demand for critical minerals could increase by up to 600% by 2040, depending on the pace of climate action. This surge is driven by the clean energy transition, which requires significantly more mineral resources than fossil fuel-based energy systems.

Unlike oil, which is relatively abundant and geographically dispersed, critical minerals are concentrated in a handful of countries, creating strategic vulnerabilities for importing nations. The Democratic Republic of Congo produces approximately 70% of the world’s cobalt, China dominates rare earth element processing with 85% of global capacity, and just three countries—Australia, Chile, and China—account for over 90% of global lithium production. This concentration creates what economists call “supply chain monocultures” that are vulnerable to disruption.

The Strategic Importance of Processing Capacity

While much attention focuses on mining, the real geopolitical leverage lies in processing capacity. Raw minerals typically require complex, capital-intensive processing to become usable in high-tech applications. China recognized this strategic reality decades ago and invested heavily in building dominant positions in mineral processing, particularly for rare earth elements where it controls approximately 85% of global refining capacity. This gives Beijing significant influence over global supply chains, even for minerals mined in other countries.

The competition for control of critical mineral supply chains represents a new “Great Game”, a 21st-century replay of the 19th-century struggle for control of Central Asia, but with higher stakes encompassing the entire global technological and economic future. Nations are employing diverse strategies—from direct investment and trade agreements to development aid and security partnerships—to secure access to these essential resources.

This geopolitical competition is unfolding across multiple theaters: Africa’s mineral-rich regions, particularly the Copper Belt spanning Zambia and the DRC; South America’s Lithium Triangle of Argentina, Bolivia, and Chile; Australia’s vast resources of lithium, rare earths, and other critical minerals; and the deep-sea mining prospects in international waters. Each region presents unique geopolitical challenges and opportunities for the major powers competing for influence.

China: The Established Dominant Player

China has spent decades systematically building dominance across critical mineral value chains. Through strategic investments in mining operations worldwide and massive investment in domestic processing capacity, China has positioned itself as the indispensable link in global critical mineral supply chains. This dominance provides Beijing with significant geopolitical leverage, demonstrated during the 2010 rare earth crisis when China restricted exports to Japan during a territorial dispute, causing global prices to spike and forcing manufacturers to scramble for alternatives.

China’s strategy extends beyond ownership of resources to control of the entire value chain from mine to manufactured product. Chinese companies have made substantial investments in mining operations in the Democratic Republic of Congo (the world’s largest cobalt producer), Chile and Argentina (key lithium producers), and Australia (major producer of lithium and rare earth elements). Combined with domestic processing dominance, this integrated approach makes China the pivotal player in critical mineral markets.

The United States and European Union have recognized their strategic vulnerability and are implementing comprehensive strategies to diversify critical mineral supply chains. The US Inflation Reduction Act of 2022 includes substantial incentives for domestic production and processing of critical minerals, particularly requiring increasing percentages of North American or free trade agreement partner sourcing for electric vehicle batteries to qualify for tax credits. Similarly, the European Union’s Critical Raw Materials Act sets ambitious targets for domestic extraction, processing, and recycling of strategic minerals.

These Western initiatives focus on three parallel strategies: developing domestic resources where feasible, such as the Lithium Americas project in Nevada; strengthening partnerships with allied nations like Australia and Canada through initiatives like the Minerals Security Partnership; and advancing recycling technologies to create circular economies for critical minerals. The challenge is that building new supply chains requires massive investment and time, while demand is accelerating rapidly.

The Role of Middle Powers and Resource-Rich Nations

While the US-China competition dominates headlines, resource-rich middle powers are increasingly asserting their agency in the critical minerals landscape. Countries like Indonesia (nickel), the Democratic Republic of Congo (cobalt), and Chile (lithium) are moving beyond simply exporting raw materials to developing domestic processing capacity and capturing more value from their resources. Indonesia’s ban on raw nickel ore exports, for example, has forced investment in domestic processing facilities and positioned the country as a major player in the nickel supply chain.

This trend toward “resource nationalism” presents both challenges and opportunities for major consuming nations. While it complicates supply chain planning, it also creates potential partners for diversifying away from Chinese dominance. The Democratic Republic of Congo, for instance, has signed agreements with both Chinese and Western companies, carefully balancing relationships to maximize benefits from its immense mineral wealth.

Technological innovation offers potential pathways to reduce critical mineral dependencies. Research into alternative battery chemistries that use more abundant materials is advancing rapidly. Sodium-ion batteries, which replace lithium with more widely available sodium, are reaching commercial viability for stationary storage and some transportation applications. Similarly, developments in lithium-iron-phosphate (LFP) batteries have reduced cobalt dependency for many electric vehicle applications.

Beyond battery technology, material science innovations are creating substitutes for rare earth elements in various applications. Advanced permanent magnets that use less or no rare earths are being developed for wind turbines and electric vehicles. Recycling technologies are also improving, with several companies developing processes to efficiently recover high-purity critical minerals from end-of-life products and manufacturing waste.

The Circular Economy Imperative

Building circular economies for critical minerals is essential for long-term supply security. Currently, recycling rates for many critical minerals remain low—less than 1% for some rare earth elements. However, as the first generation of electric vehicles and renewable energy infrastructure reaches end-of-life, significant volumes of critical minerals will become available for recovery. Developing efficient collection and recycling systems is becoming a strategic priority for governments and industry.

The European Union’s battery regulation, which mandates minimum recycled content and collection targets, is driving investment in recycling infrastructure. Similarly, several US states have implemented extended producer responsibility laws for batteries and electronics. These policies are creating economic incentives for recycling while simultaneously addressing supply security concerns.

The geopolitics of critical minerals will increasingly shape international relations and economic competitiveness throughout the 21st century. Nations that secure reliable access to these resources, develop resilient supply chains, and lead in extraction and processing technologies will hold significant advantages in the emerging green economy. This competition is creating new alliances, such as the Minerals Security Partnership, and reshaping existing relationships between resource-rich and technology-leading nations.

Looking toward 2030 and beyond, several trends will define the critical minerals landscape: increased resource nationalism as producing countries seek to capture more value from their resources; greater integration of environmental and social standards in mineral supply chains; technological breakthroughs that alter demand patterns for specific minerals; and deep-sea mining emerging as a controversial but potentially significant source of critical minerals.

The concentration of critical mineral supply chains represents a fundamental strategic vulnerability for the United States, European Union, and other major economies. Addressing this vulnerability requires a comprehensive approach combining domestic resource development, international partnerships, technological innovation, and stockpiling. The US National Blueprint for Lithium Batteries and the EU’s Critical Raw Materials Act represent important steps, but implementation and scaling remain challenges.

For businesses, the critical minerals landscape creates both risks and opportunities. Supply chain resilience is becoming a competitive advantage, with companies that secure long-term mineral access and develop circular business models positioned for success. Automotive manufacturers, technology companies, and renewable energy developers are increasingly vertically integrating into mineral supply chains or forming strategic partnerships with mining companies.

Conclusion: The New Resource Paradigm

The geopolitics of critical minerals represents a fundamental shift in global power dynamics, creating a new resource paradigm that will shape international relations, economic competitiveness, and technological leadership throughout the 21st century. Unlike the oil-based economy of the 20th century, which was defined by relative abundance and fung