13 June 2024, NIICE Commentary 9222
Avani Akash
Russia reigned supreme as the world’s largest exporter of natural gas; its position was bolstered by vast reserves. European nations became particularly reliant on this resource, with some depending on Russia for a significant portion of their gas supply, creating a situation of immense vulnerability. This historical dependence highlighted the power imbalance between resource-rich and resource-dependent nations. China, meanwhile, wielded power differently. It controlled a significant share of the world’s rare earth elements (REEs), crucial for technologies like electric vehicles, Weapons, and wind turbines. China dominated not only extraction but also processing, establishing a near monopoly on these elements essential for the clean energy transition.
Control of a major share of natural gas exports has become a political weapon for Russia. The ability to manipulate gas prices or cut off supplies allowed them to exert pressure on European nations, influencing their political decisions. This vulnerability became starkly apparent. Similarly, China’s control over rare earths presented a potential weapon. The 2010 Japan-China rare earth crisis served as a prime example. During this period of rising tensions, China restricted REE exports to Japan, making it a strategic tool. Countries reliant on Russia or China may hesitate to criticize them, fearing repercussions that could jeopardize their resource security. This dynamic can stifle international relations and influence global decision-making. An alliance between resource-rich countries could further disrupt the equilibrium, potentially dictating terms to dependent nations.
Breaking Free from Dependence
The Ukraine war has emphasized the dangers of over-dependence. Europe actively seeks alternative gas suppliers and invests in renewable energy sources to reduce its reliance on Russia. Similarly, efforts are underway to diversify the rare earth supply chain. Countries like the United States, India, and Australia are exploring their REE reserves and investing in processing capabilities.
The European response highlights the importance of diversification. The world must proactively diversify its rare earth sources, not only by finding new suppliers but also by investing in substitutes and recycling technologies. Research into alternative materials for magnets and other applications should be a global priority. Efficient recycling methods for existing REEs can significantly reduce dependence on new extraction.
India’s Potential and Strategic Approaches
Recent discoveries of rich rare earth element (REE) deposits and lithium have positioned India as a potential future leader in this critical market. India’s existing technological capabilities and economic strength further bolster its prospects as a game-changer. To counter China’s current dominance, India is exploring several strategic approaches.
One approach involves friendshoring and nearshoring. Friendshoring involves partnering with like-minded countries like the US, Japan, and Australia to access crucial rare earths, expertise, and investment. This collaboration fosters a secure and reliable supply chain, reducing dependence on any single source. Nearshoring focuses on geographically close partners rich in rare earths, like Vietnam, Myanmar, and Thailand offering logistical advantages and potentially reducing environmental impact. This combined strategy strengthens India’s rare earth position and contributes to a more stable global supply chain.
Building domestic capabilities is another key strategy. India is boosting research and development in sustainable mining practices while encouraging private sector involvement. This focus aims to develop new extraction methods, explore recycling options, and ultimately achieve greater self-sufficiency in the REE market.
Bilateral agreements with REE-rich countries like Kazakhstan and Mongolia are also being pursued. These agreements can provide reliable alternative sources of REEs and pave the way for collaborative exploration and joint ventures, further strengthening India’s REE position.
However, sustainable mining practices prioritizing environmental protection and worker safety are essential for long-term success. India has a unique opportunity to differentiate itself from China’s history of environmentally destructive practices. By adopting responsible practices that minimize environmental damage and prioritize worker well-being, India can set itself apart as a leader in sustainable REE production. Learning from successful models and advancements in technologies like bio-leaching and closed-loop systems can further solidify India’s position as a responsible and ethical REE producer.
Future Implications
The future of resource dominance is uncertain. Alternative technologies and new sources of critical materials could diminish the power currently held by China. However, the demand for REEs is expected to remain high due to their role in emerging technologies. India’s proactive stance positions it well to capitalize on these trends.
Russia’s natural gas and China’s rare earth dominance highlight the complexities of resource-driven geopolitics. However, efforts to diversify resource supply chains and develop alternative technologies offer hope for a future where resource dependence does not dictate global politics. By learning from past mistakes and embracing a multi-pronged approach, the world can prevent a similar situation with rare earths. Diversifying supply chains, fostering innovation, and collaborating globally can build a future where technological progress doesn’t depend on a single nation. India’s potential as a sustainable alternative in the REE market highlights the importance of strategic planning and international cooperation in shaping a more secure and sustainable global landscape.
Avani Akash is a Research Intern at NIICE and she is currently pursuing her Master of Arts in International Relations and Political Science at Central University of Kerala, India.
