From Ukraine To Central Asia, The Broad Impact Of China's Latest Rare Earth Restrictions

Summary

China has imposed new export controls on rare earth minerals, escalating tensions with the US and impacting global supply chains.
Rare earths are crucial for advanced technologies, including defense systems, and the restrictions could affect military support for Ukraine.
Governments are exploring alternatives, such as Central Asia’s mineral reserves, but challenges like infrastructure and investment risks remain.

China’s latest export controls on rare-earth minerals risk not only reigniting a trade war with the United States, they could also come with far-reaching implications for efforts to rearm Ukraine and infrastructure development in Central Asia.

Tensions between Beijing and Washington flared again over rare earths -- an essential group of 17 elements that find themselves in everything from electric vehicle batteries to smartphones to vital defense technology == on October 9 when China added new export controls for five rare-earth metals on top of seven that were already restricted in April.

That was then followed by US President Donald Trump vowing on October 10 to tack on an additional 100 percent tariff on Chinese imports.

“The move by Beijing refocuses attention on how China uses its influence as the world’s biggest trading nation and its dominance of manufacturing supply chains to project its power in international affairs,” James Kynge, a senior research fellow at the London-based Chatham House think tank, wrote in an analysis of the new measures.

The move comes just weeks before a potential meeting between Trump and Chinese leader Xi Jinping and is seen by analysts as a sharp escalation in Beijing’s long-running strategy to weaponize its dominance in rare earths. China accounts for more than 70 percent of global rare-earth mining, 90 percent of their separation and processing, and 93 percent of magnet manufacturing.

The restrictions mean that foreign companies will need to obtain special approvals from Beijing if they wish to export rare-earth magnets and certain semiconductor materials that have at least 0.1 percent rare-earth metals from China.

Under the new rules, companies with any affiliation to foreign militaries -- including those of the United States -- will be largely denied export licenses.

“The newly announced restrictions represent China’s most consequential measures to date targeting the defense sector,” said Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic and International Studies (CSIS) in Washington.

“In effect, the policy seeks to prevent direct or indirect contributions of Chinese-origin rare earths or related technologies to foreign defense supply chains.”

What Does This Mean For Europe And The War In Ukraine?

This has sparked concerns in Europe that this could impede efforts to provide military support to Ukraine.

Currently, the United States has agreed to sell advanced weapons to its NATO allies in Europe who will then supply the arms to Kyiv to help repel Russia’s invasion. European governments are also supplying domestically made weapons to Ukraine.

Many advanced weapons and military equipment rely on rare-earth elements., including F-35 fighter jets, Virginia- and Columbia-class submarines, radar systems, Predator unmanned aerial vehicles, the Joint Direct Attack Munition series of smart bombs, and Tomahawk missiles, which Trump has said he is considering sending to Ukraine.

While many importers, including the Pentagon, maintain stockpiled reserves of rare earths, the new measures could have effects further down the road in terms of supplying Ukraine, especially given that the United States is struggling to keep pace in the production of many advanced weapons systems, according to CSIS.

The European Chamber of Commerce in China has already said that the new restrictions “add further complexity to the global supply chains of rare earth elements,” with officials saying after the announcement that they are already navigating a backlog of export license applications awaiting approval from Beijing due to earlier restrictions brought in by China in April that restricted the flow of seven rare earths.

Setting up a new system to address rare-earth “bottlenecks” was a key announcement from European Commission President Ursula von der Leyen at an EU-China summit in July, but many European firms say that the licensing approval process from Beijing is slow and already delaying production.

Could Central And South Asia Help Offset China’s Rare Earths Dominance?

The latest round of export controls won’t come into effect until December and Trump’s call for additional tariffs is set to be applied on November 1.

But China’s near monopoly over mining and refining rare earths is already leading governments to explore alternatives to offset their dependence.

Pakistan signed a $500 million memorandum of understanding in September with US Strategic Metals, a private American mineral company, with the first batch of rare-earth minerals arriving in early October.

Elsewhere, the United States and the EU have eyed access to resource-rich Central Asia, which has a wealth of critical minerals and rare earths.

Washington has set up the C5+1 Critical Minerals Dialogue, the Group of Seven’s (G7’s) Partnership for Global Infrastructure and Investment (PGII), and bilateral memoranda of understanding signed with Central Asia.

Meanwhile, critical minerals and rare earths were a key part of a landmark summit in April in Samarkand between the bloc and the leaders of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.

Kazakhstan also announced in April that it discovered massive deposits of more than 20 million metric tons of rare earths. The claim is still being confirmed by international firms, but if proven it would give the Central Asian country the world’s third largest reserves of rare earth metals, behind only China and Brazil.

But as Kazakhstan draws international attention, there are several factors holding Central Asia back from becoming a rare earths and critical minerals powerhouse.

A report from the Atlantic Council, a Washington-based think tank, released earlier this year said that the region is hindered by high transit costs, a lack of infrastructure for exports, and “a high-risk investment environment that significantly reduces the region’s commercial viability.”

The report concluded by stating that the United States should look to countries with better developed export sectors for their mineral wealth, such as Canada and Chile, in the short and medium terms.

“Quickly securing critical mineral partnerships is vital to US efforts to reduce dependence on China. However, the United States should be wary of unrealistic expectations for what Central Asia can provide,” the report said.