NATO Needs to Align on Supply of Critical Raw Materials

commentary

Jun 25, 2024

Workers load lithium concentrate at Prospect Lithium Zimbabwe mine in Goromonzi, Zimbabwe, January 9, 2024, photo by Philimon Bulawayo/Reuters

Workers load lithium concentrate at Prospect Lithium Zimbabwe mine in Goromonzi, Zimbabwe, January 9, 2024

Photo by Philimon Bulawayo/Reuters

This piece is part of a commentary series on the upcoming NATO summit in Washington in which RAND researchers explore important strategic questions for the alliance as NATO confronts a historic moment, navigating both promise and peril.

Leaders at NATO's 75th anniversary summit have pressing topics to address, prominently including supply chain resilience and economic security. Of particular concern are mounting threats to the critical raw materials (CRM) that NATO members need to sustain their militaries, defense industries, and wider economies in peacetime and crisis.

While the United States and the European Union have taken steps to ensure these supplies, NATO has been less proactive. In part, this reflects the alliance's focus on military rather than economic levers of power. But securing CRM supplies demands cooperation, resources, and global networks—and NATO is a forum where a more forward-leaning policy could enable fruitful collaboration.

Materials such as cobalt, silicon metals, lithium, and rare earth elements are the fundamental building blocks for diverse products, including renewable energy, telecommunications, infrastructure, and defense equipment. The complex global supply chains for these raw materials are fraught with vulnerabilities and dependencies—not only in mining, but also in necessary processing. As CRMs become more important, the global supply chain is beset with chokepoints and bottlenecks, as well as the possibility of coercion.

As critical raw materials become more important, the global supply chain is beset with chokepoints and bottlenecks, as well as the possibility of coercion.

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Such challenges are inherent to geographically limited and rare natural resources. But recent geopolitical tensions have exacerbated the problem. China has spent thirty years coalescing a global network for mining and processing many CRMs, most notably rare earths. Russia, too, plays a key role in many CRM supply chains.

China's control often extends into lower tiers of the supply chain, as well as adjacent sectors, giving it sources of geopolitical influence. For example, China owns roughly two-thirds of cobalt mines in the Democratic Republic of the Congo and 60 percent of global cobalt processing capability. It also owns the majority of the world's copper and nickel mines (PDF), which can also impact the stability of cobalt markets and prices.

China is already trying to exploit its control of key supply chains to achieve political ends. In July 2023, for example, it imposed export controls on gallium and germanium. In December, it imposed export restrictions on technologies for rare-earth magnets and compounds. Russia's invasion of Ukraine similarly interrupted the global supply of gallium and titanium.

Many NATO members no longer regard the supply of these critical materials as reliable, particularly in times of global conflict. This dependence has not escaped the West's adversaries and competitors. Allies, including the United States and EU member states, are concerned that their CRM dependence might be exploited to extract concessions or influence the outcome of global debates.

NATO member countries already are working at national and regional levels to secure CRM supply chains. The United States has been stepping up efforts to mitigate its own vulnerabilities. Significant resources have been invested in reinvigorating and sustaining (PDF) domestic mining and processing capabilities and investing in key areas of research, as well as stockpiling, through-life management (PDF), and material recycling. The U.S. Department of Defense has been pivotal to these efforts, managing stockpiling through its Defense Logistic Agency Strategic Materials (DLA-SM). It has also used the Defense Production Act to support CRM extraction and processing. The European Union turned its attention to this challenge recently as well, adopting the Critical Raw Materials Act and provisions within the 2024 Defence Industrial Strategy (PDF). These set ambitious goals for bolstering domestic supply and reducing dependence on non-EU sources by 2030.

However, there is skepticism about whether these efforts are enough. It's unclear whether the European Union can meet the goals of the Critical Raw Materials Act, particularly at a time of political shifts and pushback against green transition policies. Equally, U.S. plans to enhance stockpiles and reintroduce domestic mining capabilities will take a long time to come to fruition, notwithstanding any uncertainties presented by the 2024 presidential election. But perhaps more importantly, both efforts are being undertaken in relative isolation, without folding in other important economies such as the United Kingdom, Canada, or Turkey.

By aligning policy agendas across the Atlantic and widening procurement networks, NATO allies can better hope to match what China, and to a lesser extent, Russia, have spent decades building.

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NATO is an organization that provides a forum where allies can address short-term gaps in their collective defense capabilities and create coherent solutions to their long-term security problems. Critical minerals supplies are both. NATO's Strategic Concept, as well as its existing focus on resilience, carves out a clear space for this within its mandate. Similarly, the new NATO Defence Production Action Plan has catalyzed activity to bolster the capacity and resilience of allies' defense industries amidst the war in Ukraine; Securing the CRM supply is vital to those goals.

By aligning policy agendas across the Atlantic and widening procurement networks, NATO allies can better hope to match what China, and to a lesser extent, Russia, have spent decades building. Countries could communicate what their resources, dependencies, and advantages are. They could allocate resources toward shared policy objectives. They could fund relevant research and development through agencies such as the Defence Innovation Accelerator for the North Atlantic (DIANA), the new NATO Investment Fund, and the numerous NATO Centers of Excellence.

As leaders prepare to gather in Washington, D.C. in July, none of the tasks they face are small. But given an uncertain geopolitical future ahead, NATO should move now to ensure the supply of critical materials.


Daniel Hill is a junior analyst and Rebecca Lucas is a senior analyst in defense and security at RAND Europe.