Elements of SecurityJ U N E2 0 1 1   Mitigating the Risks of U.S. Dependence          on Critical Minerals          By Chr...
AcknowledgmentsI would like to thank my colleagues at the Center for a New American Security (CNAS) for their valuable ins...
J U N E   2 0 1 1Elements of SecurityMitigating the Risks of U.S. Dependence on Critical MineralsBy Christine Parthemore
Elements of Security    J U N E   2 0 1 1                                             Mitigating the Risks of U.S. Depende...
ElEmENtS oF SECurity: mitigAtiNg thE riSkSoF u.S. DEPENDENCE oN CritiCAl miNErAlSBy Christine Parthemore
Elements of SecurityJ U N E   2 0 1 1                    Mitigating the Risks of U.S. Dependence on Critical Minerals
E l E m E N t S o F S E C u r i t y:   Executive Summarym i t i g At i N g t h E r i S k S     Reliable access to critical...
Elements of Security    J U N E     2 0 1 1                                             Mitigating the Risks of U.S. Depen...
rare earths from China amid rumors of an offi-           to find additional sources of supply for rare earthcial embargo. ...
Elements of Security    J U N E   2 0 1 1                                            Mitigating the Risks of U.S. Dependen...
MInERal                    BRIEf dESCRIPTIon                                       ExaMPlES                               ...
Elements of Security     J U N E     2 0 1 1                                               Mitigating the Risks of U.S. De...
The defense industrial base in the modern era dif-    Countries (OPEC) oil embargo and related oil cri-fers greatly from a...
Elements of Security     J U N E     2 0 1 1                                             Mitigating the Risks of U.S. Depe...
advanced energy storage units in Afghanistan.            in the South China Sea – areas seen as having greatSuch significa...
Elements of Security   J U N E      2 0 1 1                                                Mitigating the Risks of U.S. De...
may be shipped multiple times before they are            term availability, as eventually supplies will beready to use. Ma...
Elements of Security     J U N E     2 0 1 1                                            Mitigating the Risks of U.S. Depen...
An important factor is whether a given mineral has       States may become tolerable, making domesticunique properties tha...
Elements of Security     J U N E         2 0 1 1                                                              Mitigating t...
Known RESERVES of lIThIuM     Known reserves, in     metric tons of lithium     content.             1 million +          ...
Elements of Security     J U N E     2 0 1 1                                                Mitigating the Risks of U.S. D...
policy prescription aimed at a single geographic,          Since the United States                     economic or politic...
Elements of Security     J U N E            2 0 1 1                                                                Mitigat...
In making policy choices, policymakers should           The Department of Defense should conduct newembrace one key princi...
Elements of Security   J U N E      2 0 1 1                                             Mitigating the Risks of U.S. Depen...
Key u.S. government offices  the following offices and agen-         The department of Energy’s                identifying...
Elements of Security     J U N E     2 0 1 1                                                 Mitigating the Risks of U.S. ...
Elements of Security: Mitigating the Risks of US Dependence on Critical Minerals (June 2011)
Elements of Security: Mitigating the Risks of US Dependence on Critical Minerals (June 2011)
Elements of Security: Mitigating the Risks of US Dependence on Critical Minerals (June 2011)
Elements of Security: Mitigating the Risks of US Dependence on Critical Minerals (June 2011)
Elements of Security: Mitigating the Risks of US Dependence on Critical Minerals (June 2011)
Elements of Security: Mitigating the Risks of US Dependence on Critical Minerals (June 2011)
Elements of Security: Mitigating the Risks of US Dependence on Critical Minerals (June 2011)
Elements of Security: Mitigating the Risks of US Dependence on Critical Minerals (June 2011)
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Elements of Security: Mitigating the Risks of US Dependence on Critical Minerals (June 2011)

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Elements of Security: Mitigating the Risks of US Dependence on Critical Minerals (June 2011)

  1. 1. Elements of SecurityJ U N E2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals By Christine Parthemore
  2. 2. AcknowledgmentsI would like to thank my colleagues at the Center for a New American Security (CNAS) for their valuable insights and com-ments throughout the research and writing process for this report. John Nagl, kristin Lord, Will rogers, Nora Bensahel andmore than a dozen colleagues all provided invaluable feedback and critiques. Joseph S. Nye, Jr. National Security InternZachary keck contributed extensive research as well as assistance in developing the tables in this report.As always, Liz Fontaine, Ashley hoffman and Shannon o’reilly provided guidance and advice through the productionprocess. I am also grateful for reviews and advice from David Sullivan, David Abraham and other external reviewers, includ-ing several Georgetown graduate school classmates and professors who contributed to a thesis project that formed thefoundation of this research.this report also benefitted immensely from nearly two years of consulting with and learning from a range of experts fromthe Department of Defense, Department of energy, u.S. Geological Survey, several National Labs and private companies.Any errors or omissions, however, are mine alone.Cover Image(ShutterStoCk)
  3. 3. J U N E 2 0 1 1Elements of SecurityMitigating the Risks of U.S. Dependence on Critical MineralsBy Christine Parthemore
  4. 4. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals About the Author Christine Parthemore is a Fellow at the Center for a New American Security.2 |
  5. 5. ElEmENtS oF SECurity: mitigAtiNg thE riSkSoF u.S. DEPENDENCE oN CritiCAl miNErAlSBy Christine Parthemore
  6. 6. Elements of SecurityJ U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals
  7. 7. E l E m E N t S o F S E C u r i t y: Executive Summarym i t i g At i N g t h E r i S k S Reliable access to critical minerals is a matter ofo F u. S . D E P E N D E N C E both economic and geostrategic importance to theoN CritiCAl miNErAlS United States. Although concern about access to minerals waxes and wanes, it is rising now due to increasing demand, new competitors capturing large market shares and other trends that defy easy prediction. These same trends can interfere with foreign and defense policy goals and give mineral suppliers easy leverage over the United States and other countries reliant on global supply chains. Despite renewed attention to critical minerals, America’s dependence on these minerals is often misunderstood and miscast in the public debate. Recent tensions with China concerning the supply of rare earth elements, for instance, should chal- lenge U.S. policymakers not because the United States’ import dependence is inherently problem- atic (which it is not) or because rare earth minerals are scarce (which they are not). Rather, rare earths deserve attention because U.S. supply optionsBy Christine Parthemore are limited: Supplies are concentrated mostly in the hands of one supplier with its own rising demand, and the United States currently has no good options for recycling rare earth minerals or substituting more easily obtained minerals. While China is nearly the sole producer and exporter of rare earths today, it does not possess a permanent “corner” on this market. Indeed, China holds only about half of known world reserves – not a terri- bly high concentration.1 The loss of a single major supplier such as China may therefore increase the costs of rare earth minerals, but may not affect their long-term availability. The issue, then, is more appropriately understood in terms of managing short-term risks such as disruptions and ensuring that the U.S. government’s most important defense and energy needs can be met. To manage these risks, the U.S. government needs to alter government policy, ensure access to correct information about mineral markets and better assess which minerals are required for a |5
  8. 8. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals small number of strategic needs, such as defense and energy. It must also use existing mechanisms, Risks Involving Minerals such as stockpiling and research and development • leverage provided to sometimes-hostile suppliers. funding, to help mitigate risks. The Department of Defense (DOD) can also understand its unique • Persistent cost overruns in an era of budget cuts. supply needs better by including mineral problems in relevant war games involving regions such as the • lags in military equipment delivery. South China Sea and Latin America. • inability to fully develop clean energy technolo- gies domestically. U.S. policy should focus on: • New roadblocks for achieving u.S. foreign policy • Preventing supplier countries and companies goals around the world, especially in Asia. from wielding undue leverage over the United States. • trade disputes that entangle other u.S. security • Mitigating fiscal risk and cost overruns in an era interests. of budgetary strain. • unintentionally funding human rights atrocities • Reducing vulnerability to supply disruptions, and fueling black markets. especially for critical military assets. • Ensuring the ability of the United States to meet its economic growth goals in clean energy and A sober and informed analysis suggests there are other high-tech fields. real vulnerabilities, which place critical national security and foreign policy interests at risk. In The United States should not be complacent about worst-case scenarios, supplies of minerals that its access to critical minerals. Political and economic the United States does not produce domestically risks to critical mineral supplies are still visible may be disrupted, creating price spikes and lags on the horizon and the stakes are high. Growing in delivery. Even short of major supply disrup- global demand coupled with the mineral require- tions, supplier countries can exert leverage over the ments necessary for both managing military supply United States by threatening to cut off certain key chains and transitioning to a clean energy future mineral supplies. The United States may also lose will require not only clearer understanding, but also ground strategically if it continues to lag in man- pragmatic and realistic solutions. aging mineral issues, as countries that consider assured access to minerals as far more strategically Introduction important are increasingly setting the rules for Minerals are a subject of much contention. On one trade in this area. hand, the United States remains less prepared for supply disruptions, price spikes and trade dis- China’s rising dominance is at the heart of this agreements related to the global minerals trade growing public debate. Its 2010 cutoff of rare than most experts realize. On the other hand, earth elements2 – a unique set of minerals that public concern over reliable access to the miner- are difficult to process yet critical to many high- als required in key sectors of the U.S. economy, in tech applications – attracted particular attention. particular those needed to produce military equip- After Japan detained a Chinese trawler captain ment, is growing. Too frequently, however, such over a skirmish in the East China Sea, Japanese concerns are based on inaccurate assumptions. companies reported weeks of stalled shipments of6 |
  9. 9. rare earths from China amid rumors of an offi- to find additional sources of supply for rare earthcial embargo. This may sound like a minor trade minerals, and stated that China’s recent cuts todispute, but China currently controls production of rare earth exports “served as a wakeup call thatabout 95 percent of the world’s rare earths, which being so dependent on only one source, disruptionare critical to building laser-guidance systems for could occur for natural disaster reasons or otherweapons, refining petroleum and building wind kinds of events could intervene.”5 In January 2011,turbines. Coinciding with possessing this incred- Sen. Mark Begich, D-Alaska, Sen. Lisa Murkowski,ible leverage over the rest of the world, China has R-Alaska, and Rep. Mike Coffman, R-Colo., wrotealso reduced its export quotas for these minerals. a letter to Defense Secretary Robert Gates express-For its part, the Chinese government contended ing concern for minerals required for producingthat it did not put any formal export embargo in defense equipment such as Joint Direct Attackplace, and that its plans to reduce exports simply Munitions (JDAMs), which stated, “Clearly, rarereflect the need to meet growing domestic demand earth supply limitations present a serious vulnera-for rare earths. Japan-China relations experienced bility to our national security. Yet early indicationsfurther strain in their already tense relationship. In are that DOD has dismissed the severity of thethe United States, many reporters, policy analysts situation to date.”6 Additionally, the Departmentand decision makers did not foresee this challenge. of Energy (DOE) launched a multiyear effort toFeeling blindsided, some in the United States char- explore potential vulnerabilities in supply chainsacterized the situation in a manner that demonized for minerals that will be critical to four distinctChina rather than using the opportunity to better areas of energy technology innovation.understand the true nature of U.S. supply chainvulnerabilities. While concern is growing, the media and policy- makers often focus too narrowly on what may seemThe 2010 rare earths case and others are increasing the most compelling indicators – usually importinterest in critical minerals among U.S. policy- dependence or scarcity – in prescribing solutions tomakers. Congress held hearings on the strategic reduce U.S. vulnerabilities, in particular to supplyimportance of minerals between 2007 and 2010, disruptions in critical minerals such as rare earths.and the 2010 National Defense Authorization This focus is sparking protectionist attitudes, withAct required DOD to study and report on its some worrying that import dependence poses andependence on rare earth elements for weapons, inherent risk to the U.S. economy. Discussion ofcommunications and other systems.3 During a minerals also frequently focuses on supply scarcity2009 hearing on minerals and military readi- and resource depletion in absolute terms. However,ness, Republican Representative Randy Forbes of both the rhenium and rare earth minerals dis-Virginia called minerals, “one of those things that ruptions of the past five years were triggered byno one really talks about or worries about until deliberate decisions made by political leaders tosomething goes wrong. It’s at that point – the point leverage their positions of strength, not by marketwhere we don’t have the steel we need to build forces, disorder or scarcities of these minerals.MRAPs [Mine Resistant Ambush Protected vehi- Countries often revert to hoarding, pressuringcles] or the rhenium we need to build a JSF [Joint suppliers and otherwise behaving as if scarcitiesStrike Fighter] engine that the stockpile becomes are present even when they are not, based solely oncritically important.”4 In October 2010, Secretary of concerns that shortages are likely in the near term.State Hillary Rodham Clinton stated that it would In fact, neither scarcity nor import dependencebe “in our interests commercially and strategically” alone is sufficient to signal vulnerability, and a |7
  10. 10. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals TaBlE 1: SElECT CRITICal MInERalS and ThEIR uSES MInERal BRIEf dESCRIPTIon ExaMPlES SPECIfIC aSSETS of uSES A class of minerals that • Automotive catalytic • Joint Direct Attack share properties critical converters Munitions (JDAMs) for advanced technologies • Petroleum refining catalysts • BGM-109 Tomahawk and require extensive • Metallurgical additives and • Jet fighter engines processing. today, China alloys • Antimissile defense controls more than 90 • Glass polishing and systems Rare percent of global reserves. ceramics • AGM-84E Standoff Land Earths • Computer monitors Attack missile Elements • Radar • Smart bombs (REEs) • Permanent magnets • Night vision goggles7 • Lasers • Range finders on tanks and other equipment • Target designators gallium is an element with • Integrated circuits • Joint Land Attack Cruise unique properties useful in • Semiconductor chips missile Defense Elevated manufacturing. Because it is • Light-emitting diodes (LEDs) Netted Sensor (JLENS) found only in other mineral • Laser diodes system Gallium ores and does not exist • Solar cells • Satellites (Ga) alone in nature, reserves • Opto-electronic devices • Radar and high- are difficult to estimate, and (esp. in aerospace) power radio-frequency there are a limited number • Telecommunications applications and jammers8 of suppliers. equipment A particularly heat-resistant • Petroleum refining catalysts • F-16, F-18, F-22 Raptor, mineral, rhenium is critical • Superalloys used in high- F-35 Joint Strike Fighter in building many aerospace temperature turbine engine • C-40 Clipper components. Supplied by components • Divert and Attitude Rhenium few countries, its prices • Semi-conductors Control System (DACS)9 (Re) have seen dramatic spikes in times of supply uncertainty and demand growth.8 |
  11. 11. MInERal BRIEf dESCRIPTIon ExaMPlES SPECIfIC aSSETS of uSES used frequently in • Steel production • Divert and Attitude producing superalloys and • Alloys and metals used Control System (DACS) steel, known reserves are in aerospace production • Jet engines Niobium today primarily located in • Missiles10 (Nb) Brazil and Canada. tantalum is used in a wide • Tantalum capacitors used in • Missile defense systems array of applications for its automotive electronics • Unmanned aerial vehicles high resistance to heat and • Specialty steels • Smart phones11 wear, and other properties. • Personal computers Tantalum it is critical in several high- • Portable phones (Ta) tech components. the focus of much media • Energy storage and • Improved Target attention due to its advanced batteries Acquisition System (ITAS) increasing use in advanced • Alloys and metals for aircraft used in the toW missile batteries, lithium is a and space components • Non-Line-of-Sight commonly found mineral, • Medicinal uses Cannon (NLOS-C) Lithium but one that is often not • High-strength ceramics • Hybrid-electric Humvees (Li) economical to produce. • Reconnaissance, Surveillance, targeting Vehicle (RST-V) • Missile defense systems12Note: Given the challenges described in this report of tracing what minerals are used in assets important to the U.S. government – let alone quantities needed –this table is intended to convey the types of systems that require these minerals. While some of the assets listed are no longer in high production or may representfuture procurement, this table shows that policymakers should seek greater information on U.S. vulnerabilities to supply chain disruptions for a wide range of assets.Sources taken from those listed throughout this report’s endnotes, and others as specified. |9
  12. 12. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals combination of factors including concentration of for the United States given its purchasing power. In suppliers is most often required for mineral issues between these extremes, even staunch pragmatists to become security or foreign policy problems. will point to the 2010 China rare earths episode as proof of one basic tenet: The United States and This report, based on two years of research, site visits other market-based economies no longer deter- and discussions with stakeholders, explores how the mine all the rules of global trade. supply, demand and use of minerals can impair U.S. foreign relations, economic interests and defense Central to this narrative is a conundrum for readiness. It examines cases of five individual min- policymakers. Reserve estimates show that erals – lithium, gallium, rhenium, tantalum and global supplies of almost all minerals are ade- niobium – and rare earth elements, such as neo- quate to meet expected global demands over dymium, samarium and dysprosium, as a sixth group the long term, and for decades into the future in order to show the complexity of addressing these for most minerals. The U.S. Geological Survey concerns. Each of these minerals is critical for defense (USGS) indicates, for example, that world sup- technologies and U.S. economic growth plans. They plies of rare earths will be adequate for more share characteristics with minerals that have caused than 100 years.13 These estimates, however, important political or economic concerns for the can be meaningless in the near term if supplies United States in the past. Additionally, lithium is fre- are insufficient, or if suppliers reduce exports quently cited in the media and in discussions of how or otherwise manipulate trade. For example, clean energy supply chains are critical to meeting most experts project that global production of America’s future economic, energy and environmen- rare earths will likely be insufficient to meet tal goals. Within the past five years, two of these cases the world’s demand over the next two to three – rhenium and rare earth minerals – have involved years. The long-term sufficiency of supplies has supply disruptions or important threats of disrup- no practical effect because it takes years and tions for the United States and its allies. Each of these high capital costs to start up new mining and minerals will require federal government attention in processing businesses for rare earths. Thus, the the coming years. risks of inaction are high. A range of political, economic and geographic factors can disrupt assessing u.S. Vulnerability supplies and cause price spikes that can create Analysts vary widely in assessing the implications rifts in bilateral relations, trade disputes, accu- of U.S. dependence on critical minerals, despite sations of economic sabotage and instability in broad acceptance of the physical reality that min- countries that possess rare reserves of prized eral resources are finite and the economic realities minerals. They can also give supplier countries that requirements are ubiquitous and demand is extraordinary leverage that can alter geopoliti- growing. On one extreme, some analysts believe cal calculations, especially when single countries the 2010 incident between China and Japan sug- control most world supplies. gests an approaching Hobbesian world in which resource demands outstrip supplies for minerals, For U.S. policymakers, the risks fall into two rough nonrenewable energy sources and even food sup- categories: Disruptions, delivery lags and price plies. History indicates that conflict over absolute spikes that affect military assets and place unan- scarcities is unlikely. At the other end of the ticipated strains on defense procurement budgets; spectrum, many still believe that an open market and lack of affordable access to minerals and raw and its invisible hand will continue to determine materials preventing important national economic winners and losers with no serious repercussions growth goals.10 |
  13. 13. The defense industrial base in the modern era dif- Countries (OPEC) oil embargo and related oil cri-fers greatly from any previous time. Often, actual ses of the 1970s further brought into question thescarcity is not required for problems to arise, as assumption that the United States could dependconcerns about future scarcities often drive coun- on imports, as it became apparent that broadertries to behave as if shortages are occurring. The global conditions and political decisions by otherNational Academies recently reported, “The risk countries could dramatically hinder the U.S. abil-of supply interruption arguably has increased or, ity to openly purchase sufficient commodities atat the very least, has become different from the affordable costs. This conclusion was reinforcedmore traditional threats associated with the more when supply disruptions and threats of disruptionsfamiliar ideas of war and conflict.”14 During World by apartheid-era South Africa, the hostile SovietWar I and World War II, for example, governments Union and its satellites led to a wave of congressio-counted on domestic steel production – and even nal hearings, government reports and independentcivilian willingness to contribute scrap materi- analysis of the conditions contributing to U.S.als for reuse and recycling – for tanks and other vulnerability.15equipment. In contrast, modern warfare relies onglobalized and privatized supply chains rather than Following these Cold War-era events, policy-a primarily domestic (and often government-run) makers held hearings and commissioned studiesnetwork. Vulnerability to mineral supply disrup- in order to understand which specific factorstions is likewise far broader and more complicated were most important in signaling that U.S. eco-than it was in previous eras. nomic and security interests may be in jeopardy. American analysts generally agreed that the fol-Policymakers should also consider minerals that lowing factors were the most important to track:play uniquely important roles in the Americaneconomy. Rare earths, for example, are important • Level of substitutes and the uniqueness of spe-in petroleum refining, which today enables the cific minerals.smooth functioning of the economy. Looking to • Level of U.S. domestic supplies and dependencethe longer term, much concern is turning toward on foreign sources.minerals that may see booming demand as the • Geographic concentration of supplies.economy develops a greater reliance on energy • Stability of producing countries and their region.efficiency and renewable energy technologies,such as the lithium used in advanced batteries • Distances and routes of supply chains.and hybrid and electric vehicles. These minerals • Availability of technology to recover and processwill directly affect U.S. economic competitive- the minerals.ness, and plans for improving economic growth • Economic price of the resources themselves.and job development. • Inability of foreign governments to coordinateThis vulnerability is not a new concern. Since the minerals policies.early 1900s, U.S. defense analysts and national • Level of domestic demand in producingpolicymakers have worried about U.S. vulnerabili- countries.ties to supply disruptions of the minerals criticalto manufacturing defense systems, from tanks Some of these concerns remain today, but changesand munitions to communications equipment. in technology, economics and the internationalThese concerns were generally heightened in war- security environment will pose new challenges astime. The Organization of Petroleum Exporting well. Analysts often pinpoint China’s rising resource | 11
  14. 14. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals demand as the major new cause for concern, yet complicated by both often-long global supply chains limited transparency and the changing nature of and the nature of transactions. In some cases, natu- the defense industrial base and the broader econ- ral disasters or strikes halt production at specific omy will also affect U.S. mineral supplies in the mines that produce large proportions of global coming decades. Looking forward, major concerns supplies. In murkier cases, “disruptions” manifest for the U.S. government will include: Lack of suffi- as long contracting or legal delays (often intentional, cient information for policymakers; understanding for pricing or political reasons) or long lags in the evolving energy paradigm; increasing explora- delivery. Whether disruptions are abrupt and clear, tion of space and seabed territory; and a changing or long and uncertain, delivery times and prices of defense industrial base. important energy technologies and military equip- ment can rise significantly. Today’s global supply chains are incredibly efficient, as companies have Poor information is a major worked to reduce the slack in their transit routes and shipping plans. This efficiency can save energy obstacle to addressing critical and money, but as infrastructure, routes and people are taken out of service, it also reduces options when mineral vulnerabilities, and it things go wrong.17 is creating conditions in which Four other trends are changing the ways in which hype could drive policy debates. minerals affect U.S. security and foreign policy interests. a nEw EnERgy PaRadIgM Poor information is a major obstacle to address- Efforts to develop alternative energy sources ing critical mineral vulnerabilities, and it is will influence the global demand for minerals. creating conditions in which hype could drive Governments around the world are promoting a policy debates. For example, the media and oth- more sustainable, lower-carbon energy paradigm ers focused heavy attention throughout 2009 that includes increasing adoption of renewable and 2010 on Bolivia’s potentially large lithium energy sources, energy efficiency technologies, supplies, often noting the populist, and at times advanced batteries and other products. Just as erratic, behavior of the Bolivian president as rare earths and other minerals are critical to a reason for great concern over future lithium petroleum production, developing and manufac- availability. In reality, many independent experts turing wind turbines, solar energy systems and agree that reliable exporters such as Chile and efficient batteries on a large scale will drive new Argentina will prove to be the most important mineral demands. In particular, energy storage lithium suppliers for years, and supply gluts in will be critical in the coming decades for military- the lithium market will continue for the foresee- specific energy innovation, electric grid security, able future even in the face of rising demand. Yet clean energy development and much more. As the popular media focus on lithium rarely, if ever, a result, the Obama administration has already includes this market information.16 identified energy storage as a key technology area for research and development investment. The Identifying when and how mineral supply disrup- Department of Energy has increased loans and tions (or threats of disruptions) could affect U.S. grants related to energy storage, and DOD has defense industries or foreign relations is further begun fielding renewable energy generation and12 |
  15. 15. advanced energy storage units in Afghanistan. in the South China Sea – areas seen as having greatSuch significant investments in research and mineral supply potential – are already concerningdevelopment are likely to produce new technolo- U.S. military strategists and diplomats. The possibil-gies that trigger major changes in global mineral ity of seabed mining is already fueling a renewedrequirements over the decades ahead, making it debate about whether the United States should ratifycrucial for the U.S. government to monitor min- the U.N. Law of the Sea Convention (UNCLOS).eral supply chains. a gloBal dEfEnSE InduSTRIal BaSEa nEw SPaCE RaCE Given the state of the modern defense industrialDue to requirements for advanced technologies base, the National Academies of Science deter-and components that can withstand extreme mined in 2008, “The Department of Defenseconditions, the expansion of countries’ space appears not to fully understand its needs forcapabilities over the coming decades will influence specific materials or to have adequate informationdemand for critical minerals. A range of nations on their supply.”19 In the information age, the U.S.– from India to Iran – aim to bolster their reputa- military increasingly relies on dual-use equip-tions as space powers and develop more advanced ment and depends on globalized supply chains.satellite systems and launch capabilities. The Military equipment for the modern battlefieldU.S. government must therefore expect demand includes communications technologies, robotics,growth (and potentially growth that is not linear computer systems and space assets that are usedor predictable) for minerals like rare earths that by DOD, civilian government agencies and privateare critical in space technologies. On the supply enterprises alike. Indeed, a 2008 Defense Scienceside, many countries are considering the possibil- Board report noted, “Military-relevant technol-ity of mining space objects, and even the 2010 U.S. ogy will continue to change rapidly and will beNational Space Policy suggests that the United increasingly global.”20 Defense supply chains are,States should “identify potentially resource-rich therefore, less distinct from those in the broaderplanetary objects.”18 economy as they once were, and the dual-use nature of a broad range of assets also means thata REVoluTIon In SEaBEd ExPloRaTIon many supply chains are more globalized than ever.Seabed mineral exploration is high on the agenda Moreover, “higher risk of and uncertainty aboutfor a range of countries and companies and, if major supply disruptions owing to the fragmentationnew supplies are discovered, will substantially of global supply chains”21 can further threatenchange the global market for critical minerals. After assured access to critical minerals. Much ofdecades of major investments in seabed exploration today’s defense equipment is purchased directlyby scientists, petroleum producers and others, the from civilian vendors and designed to meet bothworld is experiencing great advances in the technical civilian and military needs. Consider modernand economic viability of undersea exploration and warfare’s dependence on computer systems,exploitation. Countries seeking to mine these poten- satellites, radar and Global Positioning System.tially important seabed mineral reserves may engage The National Academies study notes, “The glo-in territorial disputes as a result, even though doubt balization of materials production and supplyremains over whether, where and at what price has radically changed the ability of the Unitedseabed mineral supplies may become economical to States to produce and to procure materials vital toproduce. For example, territorial disputes over areas defense needs,” and that the stockpiling system isof the Arctic that are opening up to exploration and inadequate given today’s global supply systems.22 | 13
  16. 16. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals The Evolution of Stockpiling After experiencing several supply always shared with the government. the expert argued that assessing disruptions for minerals critical the lack of government-operated stockpiling needs should more to war efforts, the United States reserves can therefore prove wor- broadly “encompass a range of less established a stockpile of defense- risome in times of disruptions and than full-scale emergency condi- critical minerals and raw materials allow suppliers to leverage exports tions [to] plausibly include potential in 1939. this stockpile has mor- for political ends. material supply disruptions due to phed greatly over the past seven natural disasters, political instability decades, and its management is to address this challenge, the in key foreign countries and selec- under renewed scrutiny now that Department of Defense is in the tive terrorist attacks.”26 minerals are once again emerging process of changing its stockpil- as strategically important. ing system. in 2008, a National Despite Pentagon efforts to Academies report declared, “the improve u.S. stockpile manage- Since the 1990s, Congress has design, structure, and operation ment, many members of Congress instructed the Department of of the National Defense Stockpile still worry that DoD is not taking Defense (DOD) to sell off minerals render it ineffective in respond- threats of minerals supply disrup- from the National Defense Stockpile ing to modern needs and threats,” tions seriously enough, and that Center due to budgetary consider- and, “the Department of Defense it may be placing too much faith ations, and because the minerals appears not to fully understand its in the private sector to address critical to defense assets at the needs for specific materials or to the strategic threats posed by height of the Cold War are no longer have adequate information on their threats of supply disruptions to as relevant to modern military tech- supply.”24 the Pentagon responded critical minerals. to mitigate these nology. however, Congress did not to this critique in April 2009 by set- concerns, DoD should be more replace these stockpiles with miner- ting plans to establish a Strategic transparent about its mineral als necessary for today’s military materials Security management policies, including its process of and economy. For example, the u.S. System to evaluate DoD mineral reconfiguring the stockpile. Even if government appears to stockpile needs and develop stockpiling Pentagon officials believe that they tantalum and niobium, but it does strategies more comprehensively.25 can develop proper inventory strat- not stockpile rhenium, gallium, yet, at a hearing just a few months egies to hedge against challenges lithium or rare earths.23 While pri- later, one expert noted that this to military readiness, they will still vate companies may have reserves stockpiling approach focuses on require congressional support for of these minerals in their own mineral shortages during “a full- their efforts to continue modern- stockpiles, this information is not scale national security emergency.” izing the stockpiling system. These risks, coupled with long-enduring vulner- chains and can help analysts identify potential abilities, are heightening concerns about U.S. points of vulnerability. Once potentially profitable access to minerals. We can gain an even deeper reserves are discovered, companies must obtain the understanding of the security challenges involved technology, permits and capital needed for min- by examining specific minerals in detail. eral extraction. Since most minerals are not pure ores – extracted resources typically contain many Economic, geographic and Political Risks different materials in various concentrations – the Though supply chains differ for every mineral, sev- minerals must be processed and separated. Unless eral steps are common across most of these supply the deposits are processed on site, the minerals14 |
  17. 17. may be shipped multiple times before they are term availability, as eventually supplies will beready to use. Many minerals are sold in commodi- developed elsewhere.ties markets, which requires additional physicalshipment or financial steps. Finally, the minerals Similar to rare earths reserves, lithium is notare purchased, shipped to the consumer and used. highly concentrated despite its small number of current suppliers. Chile holds about 58 percentAnalyzing this supply chain prompts the ques- of currently known lithium reserves, but at leasttion: What factors should serve as warning signs seven other countries have identified signifi-to policymakers who want to better anticipate and cant reserves. Additionally, Bolivia, Afghanistanmitigate mineral supply disruptions, trade dis- and other countries possess significant lithiumputes and other challenges? Most headlines focus resources that are not yet quantified due to lackon import dependence and the concentration of of existing infrastructure and because prices aresupplies in the hands of a single country. As this not high enough to make their estimation andsection will show, however, additional geographic, production profitable.28 Gallium presents a diffi-economic and political factors also affect the cult case, as it is found only in other mineral ores;degree to which mineral supplies challenge U.S. deposits do not exist alone in nature. Accordinginterests. These factors include whether substitutes to the USGS, “Only part of the gallium present inare readily available, whether minerals can be bauxite and zinc ores is recoverable, and the factorsrecycled and reused, and whether the United States controlling the recovery are proprietary. Therefore,stockpiles them. an estimate of current reserves comparable to the definition of reserves of other minerals cannot begEogRaPhIC faCToRS made.”29 However, neither bauxite nor zinc (theThe geographic locations of mineral resources are two minerals most often found with gallium) ismostly static, since the composition of the earth highly concentrated geographically.30does not change dramatically on human times-cales. However, our understanding of geology does Other minerals important to the U.S. economychange, which affects supply estimates. Geographic appear to be more geographically concentrated.concentration of supplies is therefore a critical fac- Chile holds about 52 percent of quantified worldtor in determining vulnerability to disruptions. reserves of rhenium, followed by the United States (with about 15 percent of reserves) and many otherLooking at the minerals examined in this report, smaller-scale producing countries. Known tanta-in the past decade the most severe case of disrup- lum reserves are even more concentrated, mostlytions with national security implications involved in Australia and Brazil, and Brazil also possessesrare earth elements, which are not particularly between 80 percent and 90 percent of the world’sconcentrated geographically. At least eight coun- niobium deposits.31tries have known reserves, and unknown reservesare expected to be high. The media often refers Geography affects supply in ways that are notto China as dominating the rare earths market always intuitive. For instance, it seems logicalbecause it produces and exports almost all of cur- that vulnerability would correlate directly withrent world supplies, but it possesses only about distance: The further minerals must travel tohalf of known world reserves – not a terribly high their end user, the greater the risk that somethingconcentration.27 The loss of a single major supplier will go wrong. The globalization of supply chainssuch as China may therefore increase the costs of discussed above, however, has made the length ofrare earths. However, it may not affect their long- routes increasingly irrelevant. | 15
  18. 18. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals Today, chokepoints and routes through unstable problematic, but it can cause great problems for the locations are more important. In some cases, United States if suppliers refuse to meet demand air transit is more economical or practical than for political reasons or to ensure supplies for their maritime freight, which could reduce opportuni- own manufacturing sectors, as occurred with ties for disruptions despite long distances between China’s reduction of rare earths exports. exporter and importer. Likewise, supplies traveling through unstable or inefficient Latin American Though the economics of most every mineral are countries, or through the most violence-plagued unique, those examined in this report share several Mexican cities, could potentially be vulnerable to important dynamics. disruption despite their relatively short journey to United States demand for minerals changes over the United States. time as the government and industries develop new military platforms and invest in new tech- EConoMIC faCToRS nologies. As DOD makes acquisition decisions, When examining whether specific minerals will for example, it creates new dependencies and be available to meet U.S. government needs, it increases demand for specific minerals and raw can be tempting to look simply at whether world materials. Other countries often design interoper- supply is adequate to meet global demand over the able systems, similar capabilities or purchase from long term. This is an accessible metric, and one U.S. manufacturers, thereby amplifying global that USGS estimates regularly. According to USGS demand. Changes in domestic demand in mineral- calculations, the world’s supplies are adequate to producing countries can also affect export levels or meet long-term demand for each of the minerals prices if supplies do not increase commensurately. examined here – gallium, lithium, niobium, rare However, clear information on domestic demand earths, rhenium and tantalum – for decades in in foreign countries can be elusive, since many absolute terms. countries do not thoroughly collect or publicize This long-term picture is deceptive, however. this information. Translation and financial costs Policymakers should instead consider a range of can also present barriers.33 nuances in evaluating mineral-related vulner- The overlap between military and private sec- abilities. For instance, when production costs are tor needs can complicate tracking shifts in too high relative to prices, mines can shut down – demand and their implications given the mili- temporarily or for years – and supplies can decline tary’s dependence on dual-use technologies such in the short term regardless of long-term supply as communications equipment, computers and sufficiency. Many countries that hold large reserves satellites. This makes the defense-related supply also lack the technology, expertise or funding to of critical minerals vulnerable to the rise and fall develop these minerals on their own, which can of commercial demand. All minerals examined lead to greater concentration of suppliers. Today in this study are dual-use in U.S. consumption: this is of greatest concern for gallium, rare earth Niobium is used mostly in steel production and minerals and rhenium given their limited number aerospace applications; rare earth minerals are of suppliers.32 in everything from computer monitors to sat- Many economic factors can influence the sup- ellites; and rhenium is used in turbine engine ply of critical minerals to the United States, but components and in superalloys because of its heat they are often oversimplified or misinterpreted. resistance and other properties.34 Import dependence, for example, is not inherently16 |
  19. 19. An important factor is whether a given mineral has States may become tolerable, making domesticunique properties that make substitution difficult supplies economical. For example, although theor impossible. For many minerals and raw materi- United States has been 100 percent dependentals, consumers have options to substitute different on imports of rare earths for years, this was notminerals with similar properties if something is always the case. Several companies once extractedunavailable or too costly. Others possess proper- rare earths in California. The United States alsoties for which scientists and manufacturers have imports 100 percent of its gallium, and it has notyet to find substitutes. Rare earth minerals fall into produced niobium or tantalum for decades.37 Fromthis category. In many defense applications, for 2006 to 2010, import dependence for rhenium hov-example, certain rare earths retain magnetism at ered between 80 and 86 percent, and dependenceextreme temperatures to a degree not readily found on foreign suppliers for lithium is only about 43in other minerals. Niobium and tantalum can be percent as of early 2011.38 High import dependencereplaced in some applications but with reduced for some minerals also coincides with reducedeffectiveness. For rhenium and lithium, however, demand within the United States, given the dra-there are a variety of substitutes in use today, with matic changes in the American manufacturingadditional substitutes currently being tested and sector over the past several decades. At the samedeveloped. Gallium can be replaced for many of its time, the United States relies on imports to meetuses, although some substitutes are also vulnerable 100 percent of its needs for at least 17 commodi-to disruptions and price spikes.35 ties,39 and in most cases, this dependence has had no geopolitical or foreign policy repercussions.The ability to recover and recycle minerals eco-nomically can expand sources of supply. Minerals Finally, examining the concentration of suppli-can be removed from manufactured items that ers helps identify vulnerabilities to disruptions.are headed for the landfill, extracted and then Various economic conditions can lead to concen-recycled. Lithium, for example, has good recy- tration of suppliers, for example when low laborcling potential, and economical recycling and costs or environmental advantages in one countryreuse is being researched extensively. Gallium can price other potential producers out of the market.be recovered and reprocessed in some cases, as The United States has relied on China for an aver-can rhenium, niobium and tantalum. However, age of 92 percent of its rare earths supplies sincefor most rare earths, very little material can be 2006. It also relies on Brazil for 84 percent of itsrecycled or recovered economically given current niobium supplies, on Chile to meet 93 percent of itstechnologies and methods.36 rhenium metal powder demand and Kazakhstan for more than half of its supplies of ammoniumA lack of domestic supplies and the resulting perrhenate, a common form in which rheniumdependence on foreign sources is the economic is traded. In contrast, the United States importsfactor identified most frequently as an indicator tantalum from a far more dispersed network ofof U.S. vulnerability. This, however, is somewhat suppliers; it imports only 17 percent of suppliesmisleading. Many minerals are not (or are no from its top suppliers, Australia and China, andlonger) produced in the United States for environ- receives tantalum from more than a half dozenmental reasons or because U.S. production is more additional countries. Likewise, Germany, the topexpensive than in other countries – not necessarily single U.S. supplier of gallium, supplies only aboutbecause American deposits of the minerals can- 26 percent of U.S. demand.40 Lithium provides anot be found. As global demand growth generates mid-range case in this area. Chile supplies abouthigher prices, the costs of extraction in the United | 17
  20. 20. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals Known RESERVES of RaRE EaRTh MInERalS Known reserves, in metric tons of rare earth oxide content. 50 million + 25 - 49 million 1 - 24 million < 1 million Source: USGS Mineral Commodity Summary 2011 Known reserves worldwide totaled 110 million metric tons as of January 2011. The Commonwealth of Independent States combined hold 19 million metric tons. Additionally, other countries hold a combined 22 million in known reserves. IMPoRT SouRCES of RaRE EaRTh MInERalS Percentage of imports supplied to the United States, 2006-2009. 75% + 50 - 74% 25 - 49% 1 - 24% Source: USGS Mineral Commodity Summary 2011 Other countries produced 2 percent of supplies to the United States.18 |
  21. 21. Known RESERVES of lIThIuM Known reserves, in metric tons of lithium content. 1 million + 500,000 - 999,999 50,000 - 499,999 < 50,000Source: USGS Mineral Commodity Summary 2011Total known reserves worldwide totaled 13 million metric tons as of January 2011. Note that Bolivia and other resource holders are not listed by USGS until theirknown reserves are quantified. IMPoRT SouRCES of lIThIuM Percentage of imports supplied to the United States, 2006-2009. 75% + 50 - 74% 25 - 49% 1 - 24%Source: USGS Mineral Commodity Summary 2011Other countries produced 2 percent of supplies to the United States. | 19
  22. 22. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals 59 percent of U.S. lithium consumption, with 38 Potential rare earth minerals-producing countries, percent of the remaining demand being met by including the United States, Australia, Brazil and Argentina. Although global supplies of lithium Malaysia, all rank as even more stable. Rhenium- are not at all concentrated, Chile’s uniquely dry and lithium-producing countries generally rank as environment, high-quality resources and well- moderately or primarily stable, including the United developed infrastructure make it by far the most States, Canada, Australia and Chile, with Zimbabwe, economical place in the world to produce lithium.41 Russia and Kazakhstan among the less stable export- ers of these two minerals. For gallium, all but two PolITICal faCToRS important producers (China and Russia) are among Supply disruptions can result from political or pol- the most stable half of countries. The major produc- icy decisions, either by the United States or other ers of niobium (Brazil and Canada) and tantalum governments. Many political factors, however, are (Australia and Brazil) are also generally stable.43 difficult to quantify. Beyond regulations, important political factors include: instability in producing Though this index evaluates political conditions countries and their regions, labor strikes and insuf- only at the state level, political disruptions can occur ficient U.S. government stockpiles. at the local level as well, most notably in the form of labor strikes. The 2010 USGS minerals commodity Geopolitical calculations and domestic political summaries and other U.S. government assessments factors can both influence mineral supply availabil- highlight three cases of strikes disrupting minerals ity. In some cases, producers (whether companies supplies over the past five years (to bismuth, cobalt or countries) deliberately withhold supplies. Their and nickel), but do not indicate that strikes affected decisions to do so depend, in part, on their calcula- any of the minerals examined in this report.44 tion of the economic impact of disrupting supplies, and their ability to control the global market. The At the national level, leaders alter export quotas, 2010 Japan dispute with China over a skirmish in subsidize domestic production or increase the the East China Sea serves as an example. In this stockpiles of minerals critical to defense needs case, Chinese officials denied that the country had based on political considerations – including instituted an official embargo, but Japanese firms misperceptions. Overconfidence in or lack of atten- continued to report supply disruptions for several tion to minerals markets can also lead to political weeks.42 These types of bold geopolitical moves can complacency. In the United States, for example, generate sticky foreign policy problems in addition Congress has instructed DOD to sell off minerals to the direct effects of supply disruptions. from the National Defense Stockpile Center since the early 1990s due to budgetary considerations Interestingly, while political stability of producing but did not invest in increasing stocks of minerals countries and their regions has influenced the supply important to emerging technologies.45 of minerals historically, stability of supplier countries does not appear very important for the minerals Sometimes internal politics motivates foreign discussed in this report. Every year, Foreign Policy suppliers’ decisions about whether to export magazine and the Fund for Peace produce the Failed critical minerals. For example, in 2007, the U.S. States Index, an annual report on state stability that State Department was forced to intervene when ranks all the countries of the world. China, today’s China halted shipments of rare earths to a U.S. primary producer of rare earths, ranked as the 57th- petroleum refining and chemicals company for so least stable country in the world in 2010, though it is long that it drove concerns for nationwide refined not classified as being within the index’s “alert” zone. petroleum shortages.46 From China’s perspective,20 |
  23. 23. policy prescription aimed at a single geographic, Since the United States economic or political variable will reduce U.S. vulnerability to supply disruptions. Policymakers, depends on minerals for its nongovernmental analysts and the media must pay far less attention to singular factors like import defense and economic vitality, dependence and focus on the full range of eco- it is time to update American nomic, geographic and political factors. policies to reflect current In developing new policies related to minerals, policymakers must remember that substantial global conditions. government intervention already exists, includ- ing permitting exploitation on government lands and regulating environmental impacts. However,domestic demand was rising quickly, and rare policymakers must navigate a market that is notearths production was already creating major always easy to predict and in which the needenvironmental problems that could unleash local for federal government intervention (or nonin-unrest. The country’s political leaders therefore tervention) is not always obvious. In the recentbegan restricting exports and promoting efficient rare earths case, the private sector responded byconsumption. providing some capital for a domestic miningPolitical crises can also disrupt supplies. In 2005 operation to resume. This does not always solveand 2006, the United States experienced a supply the foreign policy and geopolitical challenges thedisruption in rhenium, triggered by a domestic U.S. government experiences. In particular, fordispute in Kazakhstan. Exports from Kazakhstan, minerals that private companies will not reliablywhich supplied 25 percent of the U.S. demand produce or more defense-specific applications,at that time, “were halted from the third quar- U.S. government interests may be at stake whileter of 2005 until the fourth quarter of 2006.”47 A private interests are not.supplier to Kazakhstan’s state-owned rhenium To manage circumstances where the federalproducer blocked trade over a financial dis- government must act to protect U.S. interestspute amid additional political tensions between against the threat of supply disruptions, variousgoverning officials who variously wanted to open federal agencies have existing mechanisms thatrhenium reserves for foreign investment and, on must be preserved and utilized. The Departmentsthe other side, expand the state’s monopoly.48 By of Defense and Energy already have mechanismsearly 2006, rhenium prices were rising precipi- for offering low-interest loan guarantees for busi-tously just as demand was increasing for use in nesses in a broad range of strategically importantpetroleum refining and, important for DOD, in fields, from semi-conductors to military assets tojet engine production.49 energy infrastructure. Similarly, these agenciesRecommendations for u.S. Policymakers can use loan guarantees to facilitate productionSince the United States depends on minerals for or advance research and development related toits defense and economic vitality, it is time to minerals, including lending funds to supportupdate American policies to reflect current global research on the more efficient use of rare earths,conditions. As policymakers address these issues, rhenium or lithium in defense or energy appli-they must understand the complexity of the chal- cations. Only a willingness to use these tools islenge and develop multifaceted solutions. No required. | 21
  24. 24. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals TaBlE 2: KEy VulnERaBIlITIES foR SElECTEd MInERalS TyPES of VulnERaBIlITIES REEs nb Ta Re ga li Lack of substitutes/uniqueness of specific yes yes/ yes/ yes No No minerals (esp. in defense applications) No No Importance of specific minerals for yes yes yes yes yes No producing defense equipment inability to recover and recycle economically No No No No No No Economic import dependence for more than yes yes yes No yes No 90 percent of supplies known supplies inadequate to meet yes, in No No No No No projected global demand 2011/2012 Concentration of suppliers to the united yes yes No yes yes yes States (fewer than three suppliers for 2/3 or more of supplies)50 geographic concentration of supplies No yes yes yes No No Geographic (more than 50 percent known reserves in single country’s possession) major natural disasters (that created No No No No No No major disruption to United States) instability of producing countries and No No No No No No their regions Political Strikes No No yes No No No lack of u.S. government stockpile yes No No yes yes yes Note: Table 2 lists the vulnerabilities identified through this report, and notes which minerals have exhibited each one between 2005 and the present. The “Yes/No” label in the first row indicates that substitutes may be available, but with a loss of characteristics that may be critical to defense assets. The only two minerals for which the United States experienced disruptions in the past five years, rhenium and rare earths, differ in whether reserves are geographically concentrated and in most economic factors. This indicates a need for policymakers to examine a wide range of factors specific to each critical mineral in order to best hedge against disruptions. Source: Compilation of sources listed in the endnotes; table compiled and created by the author.22 |
  25. 25. In making policy choices, policymakers should The Department of Defense should conduct newembrace one key principle: avoid blanket protec- assessments of defense supply chains. Developingtionism. While supporting domestic production a proactive and prioritized approach will requiremay be a useful remedial action for some specific serious consideration of the future of warfare,minerals, domestic production is not a panacea. drawing on expertise from other governmentOften, protectionist tendencies reflect a misdiag- agencies, academia, non-governmental orga-nosis of U.S. mineral problems as a result of import nizations, think tanks and private industries.dependence, which this report shows is not the While DOD is currently reviewing rare earthscore problem in most cases. Moreover, protection- in its supply chains and will deliver its report toism could be an overly narrow policy solution Congress in the summer of 2011, its efforts mustthat would not mitigate other serious risks. Since not end with consideration of rare earths. Theincreased domestic production is not always Defense Science Board should conduct a newpossible or economical for all minerals, some assessment building on its 1999 and 2008 stud-dependence on imports is unavoidable. ies examining the changing nature of defense supply chains, to include more extensive consid-To protect against the risks of dependence on eration of minerals and raw materials.52 Thesecritical minerals at an acceptable cost, the U.S. two studies outlined many of the key dynamicsgovernment should take the following steps: that are heightening mineral and raw materialAdministration officials and Congress should concerns today and described DOD’s increasingidentify the minerals most important to defense dependence on dual use technologies and globalacquisitions, energy innovation and other key supply chains. However, neither study focusedfunctions as they build tailored strategies to specifically on control of minerals or raw materi-mitigate potential supply disruptions. In other als, which could give suppliers strategic leveragewords, government officials should evaluate over the United States. Beyond these omissions,mineral issues proactively as a regular, ongo- the nature of minerals trade and the global supplying part of their operations. The Department of system have changed enough in the past five yearsDefense and Congress have been largely reactive, that an update is warranted. The Defense Scienceresponding to the recent rare earths disruptions Board would be sufficiently neutral and wouldand issuing one-off reports. By contrast, DOE has complement the DOE’s ongoing work by focusingadopted a proactive approach that prioritizes the specifically on defense needs.minerals most important to its missions. A major To protect the U.S. government’s ability to man-evaluation in December 2010 prioritized four age critical minerals appropriately, Congressdistinct areas of energy technology development should protect the government’s role in ana-and explored mineral supplies of high importance lyzing critical mineral vulnerabilities andto those particular categories, and DOE plans to producing its own data. As congressional leadersregularly analyze potential risks and supply chain in both political parties strive to reduce spend-vulnerabilities in these areas.51 The Department ing and seek efficiencies, they should maintainof Energy’s willingness to prioritize is particularly a strong U.S. government capacity for researchnoteworthy: Given that DOE’s work is global and and analysis – a public good that is both neces-involves more than 100 distinct minerals, seeking sary to protect U.S. interests and undersuppliedto address all contingencies could have negative by the private sector. Without vigilance, theside effects or be so broad as to lack effectiveness. United States risks being blindsided by regular | 23
  26. 26. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals trade disputes and supply disruptions, and by Major seabed mining sites should be included as countries exerting political leverage. Improving strategic locations in games focusing on the East how the U.S. government handles mineral issues and South China Seas and the Arctic, among other should not require major increases in manpower locations, just as energy resources and storage or spending. But the administration and Congress facilities are mapped in considering assets that must maintain the existing capacities and pre- countries may protect or target today. Appropriate serve the knowledge infrastructure that the scenarios would also include those involving great government has redeveloped in the past few years unrest or major, long-term strikes that halt exports (See Key U.S. Government Offices box). from Latin America or South Africa. In addition to continuing to produce good data, Congress and the executive branch should update the U.S. government can do more to leverage its stockpiling policies. Stockpiling critical miner- relationships with contractors. The private sector als (for example, those important to current and will continue to withhold important informa- future defense production, concentrated in the tion in order to keep information proprietary or hands of only a few suppliers and also experienc- because it could be harmful to the bottom line if ing high global demand growth) remains one of shared with the government. But when DOD, for the best policies for ensuring supplies, especially example, has billion-dollar contracts with suppliers for DOD. In a 2008 report, the National Academies for critical military assets, it should be able to have recommended that DOD develop a new inven- contractual requirements that these companies tory system (versus simply stockpiling) that would share information about major supply chain vul- “assess the risks in order to make better-informed nerabilities that can provide other countries with decisions on mitigating them (for example, decid- leverage over the United States or potentially cause ing if stocks need to be held),” “spot vulnerabilities major disruptions. The 2010 Dodd-Frank Wall in the supply chain and redesign it to eliminate or Street Reform and Consumer Protection Act is an mitigate them before events occur” and “design important model for requiring due diligence in and manage the supply chain to be more resilient understanding and reporting supply chain infor- to disruption.”54 DOD has been working to update mation among manufacturers that source minerals its stockpiling policies, and should fully embrace from the Democratic Republic of the Congo.53 the National Academies report’s recommenda- tions. Congress also has a role in supporting and The Department of Defense should integrate funding these changes. (See the Evolving Tool of conflicts over minerals and raw materials into Stockpiling box) However, DOD should be far relevant war games. One of the chief risks in more open with Congress and the public regarding ignoring access to critical minerals is the lever- how it intends to modernize its stockpiling policies age such negligence can provide to suppliers, than it has been to date. which alters the strategic context in which DOD operates. Exploring how disruptions or threats of The U.S. government should create incentives disruptions in mineral supplies could affect vari- to reduce consumption when its interests are ous American interests would provide valuable on the line. This report focuses primarily on the information for U.S. policymakers. Relevant games nature of current and potential supply challenges, should include a range of scenarios in which sup- but solutions must also include reducing demand plies of minerals critical to defense equipment are for minerals that see major disruptions or erratic cut off for extended periods of time and supplier prices. Policymakers can maximize the potential countries use embargoes for political leverage. of substitution and recycling by clearly identifying24 |
  27. 27. Key u.S. government offices the following offices and agen- The department of Energy’s identifying mineral supply chain cies have in recent years proven to office of Policy and International concerns related to energy innova- be among the most important in affairs has conducted the federal tion. it also funds unique research mitigating mineral-related risks to government’s most important and development that may help u.S. interests. work to date in analyzing how the reduce u.S. vulnerabilities, such changing global minerals trade as developing substitutes for rare The u.S. geological Survey’s and America’s goals for energy earths and permanent magnets (uSgS) work is critical for the intersect. the Department of that may help minimize the risks for government’s ability to make Energy (DOE) should maintain this defense-critical assets.56 sound policy given its unique capacity going forward, with sup- ability to provide free, public data port from the Congress. The white house office of on mineral trends. Beyond what Science and Technology Policy is provided by the uSgS, most the obama administration’s (oSTP) is coordinating an inter- data that policymakers need to fiscal year 2012 budget for DOE agency working group to prevent make decisions is prohibitively recommends creating an “Energy u.S. government agencies from expensive to purchase from pri- innovation hub” focused on miner- being blindsided by supply vate vendors, if it available at all. als critical to energy innovation, disruptions and minimize broad Without USGS efforts to provide modeled on existing hubs focused mineral-related vulnerabilities. the government and public with on alternative fuels and energy in this role, oStP should include neutral information and unbiased efficiency.55 Congress should representation from the State analysis, the united States would approve this budget request, and Department’s regional bureaus be forced into a persistent reac- take an active role in monitoring to improve u.S. government tionary state whenever concerns the effectiveness of this hub as it is coordination among relevant about minerals arise – and the u.S. established and begins operations. stakeholders. oStP could also play government will be far less well an important role in developing equipped to deal with episodes also at doE, the advanced accepted economy-wide defini- like the 2010 rare earths dispute Research Projects agency-Energy tions for “critical” and “strategic” with China. has played an important role in minerals.the minerals for which U.S. government inter- the rule of law and freedom of navigation aroundests are affected most directly, and then offering the world and also to participate in important dis-incentives to develop substitutes for these miner- cussions about critical minerals. Today, the Unitedals. Developing efficient solutions, however, will States cannot play a full role in the Arctic Councilrequire addressing the daunting information chal- because it has not ratified UNCLOS, and its positionlenges discussed earlier. of promoting the rules enshrined in this treaty rings hollow to international audiences. Since AmericanThe Senate should ratify the U.N. Convention concerns over seabed mining informed the initialon the Law of the Sea (UNCLOS). While today refusal to ratify this treaty, these issues are likely tothe United States recognizes UNCLOS as custom- resurface in any debates about UNCLOS. To date,ary international law, ratifying this treaty would efforts toward UNCLOS ratification have stalledincrease the ability of U.S. policymakers to promote out of a misguided notion that the treaty would | 25
  28. 28. Elements of Security J U N E 2 0 1 1 Mitigating the Risks of U.S. Dependence on Critical Minerals Minerals and Conflict in the democratic Republic of the Congo Black market and even legal stemming this problem, however, chain information among manu- trade in minerals can directly would prove ineffective. Many facturers that source minerals from fuel conflict, instability, corrup- minerals found in the DrC are pro- the DrC.58 the united Nations and tion, human rights atrocities duced in only a few mines globally other nongovernmental organi- and other broad foreign policy or can be purchased more cheaply zations are similarly working to and security concerns. the most from sellers in this war-torn require greater transparency and glaring current example is in the country than elsewhere, leaving source reporting in minerals sup- Democratic republic of the Congo no shortage of buyers. Due to cor- ply chains as a means of curtailing (DRC), where trade in minerals ruption and the informal nature of support for militant groups.59 the such as tin, copper and Columbite- much of the DrC’s economy, even executive branch should continue tantalite (coltan) funds militias that if Congolese officials wished to to enact the Dodd-Frank bill, and have killed, raped and robbed mil- provide greater transparency on maintain direct involvement in lions, and that perpetuate regional its minerals trade, they would have efforts by the United Nations, pri- instability. great difficulty doing so. vate companies and other groups that are working to establish cer- international concern had grown At the same time, the DrC tification processes, due diligence in recent years over the ways in example also highlights potential requirements and other transpar- which minerals contribute to con- solutions available to u.S. policy- ency measures. this movement flict in the DrC. During her August makers. to date there has been toward greater transparency can 2009 trip to the DrC, Secretary of little effort by manufacturers to make it easier to tell when money State hillary Clinton remarked, “i track where the minerals they use is being transferred to militants think the international community originate, providing little incen- and human rights violators, and must start looking at steps we can tive for any company or country therefore easier to find ways to cut take to try to prevent the mineral to cease purchasing minerals that off this minerals-related funding wealth from the DrC ending up fuel conflict in the DrC. this is of rogue groups. though these in the hands of those who fund beginning to change. the 2010 efforts are imperfect, they can the violence here … this is a very Dodd-Frank Wall Street reform assist in minimizing the ways in challenging problem but we’re and Consumer Protection Act which u.S. minerals procurement going to address it.”57 Embargoes requires due diligence in under- fuels other security challenges. and other traditional tools for standing and reporting supply negatively affect U.S. sovereignty, as it recognizes the South China Sea. Growing mineral concerns exclusive economic zones for countries around the will make ratification all the more pressing. world. Ratification, however, has strong support from the armed services, the private sector and a Finally, Congress and the executive branch should wide range of security and foreign policy experts. promote information sharing with the private Despite the lack of a strong political constituency for sector and internationally. Regular dialogues and ratification, there is widespread belief that the treaty information sharing among the U.S. Departments is integral to protecting U.S. economic and security of Energy, State and Defense, and industry and interests in U.S. coastal areas, and in serving as a international stakeholders can be a cost-effective neutral voice in territorial disputes in regions like means of helping the U.S. government prevent mineral disruptions and trade disputes from26 |

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