Center for a New American Security

On Monday, Quartz published a story about China’s growing foothold in Greenland and the mounting concerns about its quest to produce the semi-autonomous island’s rare earth metals. (See “China’s creep into Greenland is setting off alarm bells.”)

The New York Times reported last September that the retreating Greenland ice sheet is giving way to new opportunities for the 57,000 people living on the once sparse island. In particular, the melting ice is leading to new discoveries of mineral deposits, including rare earths. According to the report, the small Greenland town of Narsaq sits near one of the world’s largest deposits of rare earth elements – which are critical in the manufacturing of advanced technologies, from smart phones and smart bombs to wind turbines and high-end batteries. According to Greenland Minerals and Energy Ltd, the deposit could contain about 10.3 million metric tons of rare earth metals, equivalent to about 10 percent of the known global reserves (which total about 110 million metric tons, according to the U.S. Geological Survey).

Quartz reports that Western officials are particularly concerned about potential Chinese control of Greenland’s rare earth elements given that they are critical to advanced technologies and have few – if any – reliable manufacturing substitutes. (Some technologies can substitute rare earths, but they do not have the same effective properties.) Adding to the angst is the fact that China today produces about 97 percent of the world’s rare earth elements – even though it only holds 50 percent of the world’s known reserves, and that China has been limiting exports in order to satisfy its own domestic demand.

But how worried should Western officials be about China’s potential control of Greenland’s rare earths? A couple of points are worth mentioning that should help allay concerns.

First, China’s share of the rare earth market is in relative decline. Sure, China produces 97 percent of the world’s rare earth resources. But the United States has ample reserves as well; they are just not being produced – yet. According to the U.S. Geological Survey, the United States holds about 13 million metric tons of rare earths, or about 12 percent of the known global reserves. One of the largest mines is in California. While the United States used to produce these minerals, more rigorous environmental standards made it difficult for U.S. producers to compete with cheaper Chinese metals, and so U.S. producers stopped extracting them. But that is starting to change as prices rise. The market appears to be doing its thing, and the United States is ramping up U.S. rare earth production to compete with Chinese metals. Naturally this will help diversify the market. Moreover, Australia and Malaysia are also planning to increase production of their known reserves as well. Other countries are likely to follow suit, including India and other states in Central Asia.

Natural resource and environmental issues have gained more attention from the national security and foreign policy communities in recent years– from concerns related to the U.S. rare earth supply chain to opportunities that might accrue from America’s growing abundance of natural gas. Which ones might get pressing attention in 2013? Here’s a list of the top U.S. policy trends I’ll be watching in 2013, in no particular order.  

1. Growing interest in understanding water security at the regional and state level in U.S. intelligence and security assessments. Water security took on a more prominent role in national security and foreign policy discussions in 2012. Some of this is owed to Secretary of State Hillary Clinton, who has helped elevate water security issues during President Obama’s first term. After all, it was the State Department that commissioned an intelligence community assessment on water security that was released in March 2012 (Global Water Security). And Secretary Clinton elevated the issue at the 2012 UN General Assembly meeting last September when she participated in a roundtable discussion on water security.
   
   But I suspect that water security will continue to gain attention from the administration, even as Secretary Clinton steps down from the State Department. The National Intelligence Council’s recent Global Trends 2030 report specifically pointed to water scarcity as a part of a broader megatrend referred to as the “food, water and energy nexus” that will impact U.S. security interests – a good indicator that the intelligence community is examining the issue closely. And if he’s confirmed as Secretary of State, Senator John Kerry would likely bring a fresh perspective on water security, which has received some attention from the Senate Foreign Relations Committee under his leadership as chairman. 

On Sunday, Afghanistan’s Mining Minister Wahidullah Shahrani took steps to improve transparency in the country’s extractive resources industry by disclosing roughly 200 mining contracts that had previously been kept secret.

According to The New York Times, the move is “likely to please his supporters in the West, including the United States, who made greater openness in the Afghan government’s financial dealings a condition of billions of dollars in development assistance and aid money pledged earlier this year.”

Just two years ago, Afghanistan’s mineral wealth – estimated to be worth potentially a trillion dollars –promised hope to a torpid economy plagued by generations of war. “The previously unknown deposits — including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium — are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world,” The New York Times reported in June 2010.

But corruption and a lack of transparency has plagued the country’s mining industry. Reports say that there are ongoing disputes within the government over contracts to Afghans with ties to the Karzai family, including accusations that the government is steering lucrative deals to companies with ties to the Karzai family to develop the countries oil and natural gas reserves. Last month, The New York Times claimed that the country’s mineral sector had been “increasingly imperiled by corruption, violence and intrigue, and has put the Afghan government’s vulnerabilities on display,” and may even be helping fund Afghan insurgents.  “A recent Defense Department analysis said criminal mining syndicates were smuggling chromite over the border, paying protection money to the Pakistani Taliban and the Haqqani insurgent network,” The New York Times reported.  

The New York Times reported on Sunday that Afghanistan’s mineral wealth could be contributing to instability in some parts of the country, particularly areas beyond Kabul’s control.

Just two years ago, Afghanistan’s mineral wealth – estimated to be worth potentially a trillion dollars –promised hope to a torpid economy plagued by generations of war. “The previously unknown deposits — including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium — are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world,” The New York Times reported in June 2010.

“But the wealth has inspired darker dreams as well,” The New York Times reported yesterday. “Officials and industry experts say the potential resource boom seems increasingly imperiled by corruption, violence and intrigue, and has put the Afghan government’s vulnerabilities on display.”  

This morning, the Senate Foreign Relations Committee will hold its third hearing on the Law of the Sea Convention that will focus exclusively on the economic benefits of ratifying the treaty. The hearing will include testimony from business representatives from the U.S. Chamber of Commerce, the American Petroleum Institute, the National Association of Manufacturers and Verizon Communications. (Watch the hearing live here beginning at 9 AM).

Although the hearing will focus mostly on the economic benefits of ratifying the treaty, including securing rights to offshore energy and mineral resources, it is important to remember that securing rights to these resources has attendant benefits for U.S. national security as well. Increased production of domestic energy resources bolsters U.S. assured access to energy, which helps reduce the vulnerability from energy choke points in the Middle East and elsewhere. Meanwhile, ratifying the convention and putting U.S. companies in a position to secure recognized claims to offshore mineral resources such as rare earth metals that are used in a variety of high-tech applications, including defense platforms, helps reduce the U.S. vulnerability to relying heavily on Chinese exports of rare earths. (China produces 95 percent of the global supply of rare earths but only has 50 percent of the global reserves.)

On a related note, the American Security Project has published a short primer on the Law of the Sea that separates fact from fiction. (Check it out here.) And the Department of Defense has launched a new webpage on the Law of the Sea Convention akin to the State Department’s website. The DOD page includes speeches and testimony from the Secretary of Defense and senior military officials on the national security benefits of ratifying the Law of the Sea Convention. 

 
Later this morning CNAS will release a new policy brief that explores the national security and foreign policy benefits of ratifying the Law of the Sea Convention.

Download Security at Sea: The Case for Ratifying the Law of the Sea Convention here.

While the United States has to date protected its maritime interests without ratifying the Law of the Sea Convention (LOSC) – relying instead on the protections afforded by customary international law – the rise of modern navies and unconventional security threats are making this approach increasingly risky and will imperil U.S. national security interests. LOSC is the only global maritime regime that codifies longstanding maritime norms that are consistent with U.S. interests and protects the status quo. By failing to ratify LOSC, the United States forfeits its ability to shape the interpretation and execution of the convention and protect the provisions that support the existing international order, with consequences that will last for decades. Ratifying the treaty would demonstrate that the United States is serious about upholding international norms on maritime issues at a time when rising powers are challenging existing rules at sea and, as a result, American interests.

But what are those interests? How will LOSC specifically help the United States secure its access to the maritime domain, and achieve broader foreign policy and national security goals? That is the subject of Security at Sea. And while the list of benefits is extensive - and my effort to explore the benefits is by no means exhaustive - there are some specific security issues that I think will resonate with U.S. policymakers. As I argue in the policy brief, ratifying the treaty will:

• Strengthen U.S. counterpiracy and counter weapons of mass destruction proliferation missions;
• Increase America's ability to protect its interests in the Arctic, the South China Sea and the Caribbean Sea; and
• Protect and enhance U.S. sovereignty by allowing the United States to make internationally recognized sovereign claims to its extended continental shelf and the natural resources lying beneath the seabed, including oil and natural gas reserves that will bolster U.S. domestic energy production.

While LOSC is no silver bullet – it won’t help address every challenge that the United States will confront at sea – ratifying the treaty will improve America’s ability to protect many of its global interests by providing a stronger legal foundation for its own maritime activities and helping to shape and enforce international norms and legal authorities. It is time for the U.S. Senate to ratifying LOSC and allow the United States to take advantage of the benefits that will accrue to American interests.

Last Tuesday, President Obama announced that the United States, the European Union and Japan filed a complaint with the World Trade Organization against China for its export restrictions on rare earth metals – materials used in a wide range of high-end technologies, including smart phones, clean energy technologies and even some weapons systems.

On Friday, President Obama followed up the announcement with an Executive Order (EO) on National Defense Resources Preparedness with the broad purpose of identifying the resources and services critical to U.S. national security. Production of non-Chinese rare earth metals is expected to increase over the next several years as mines in Australia, the United States, Malaysia and elsewhere come online. However, one of the greatest hurdles for U.S. defense planners and others in the U.S. government trying to address resource-related challenges is a lack of fidelity in the supply chains for defense systems, energy technologies and other products that undergird the national defense and economy.

President Obama’s EO is a first step in helping provide better clarity into supply chain issues. Specifically, the EO states that:

Executive departments and agencies (agencies) responsible for plans and programs relating to national defense (as defined in section 801(j) of this order), or for resources and services needed to support such plans and programs, shall:

(a)  identify requirements for the full spectrum of emergencies, including essential military and civilian demand;

(b)  assess on an ongoing basis the capability of the domestic industrial and technological base to satisfy requirements in peacetime and times of national emergency, specifically evaluating the availability of the most critical resource and production sources, including subcontractors and suppliers, materials, skilled labor, and professional and technical personnel;

On Tuesday, President Obama announced a World Trade Organization (WTO) complaint against China for its export restrictions on rare earth metals, which are used in high-end electronic equipment, including smartphones, green technologies and even some weapons systems. The United States joined with the European Union and Japan in bringing the case before the WTO. Experts suggest the case will be ruled on near the end of 2012. 

China currently produces about 95 percent of the world's supply of rare earth metals, but holds only 50 percent of global reserves. Several mining projects are expected to come online in the next several years to help diversify the global supply away from Chinese dominance. However, experts say many companies that rely on these materials have and are continuing to move manufacturing to China in order to take advantage of its domestic supply, which could have implications for domestic growth in clean tech and other high-end technology manufacturing. 

Photo:  A screen grab of the president’s announcement of the WTO complaint. Courtesy of the White House. 

Yesterday, the United States, the European Union and Japan filed a formal complaint with the World Trade Organization (WTO) challenging China’s export restrictions on rare earth metals. Rare earth metals are critical components to advanced technologies like solar voltaic cells, hybrid electric batteries, smartphones as well as some defense systems. “We want our companies building those products right here in America. But to do that, American manufacturers need to have access to rare earth materials – which China supplies,” President Obama said of the formal complaint. “Now, if China would simply let the market work on its own, we’d have no objections. But their policies currently are preventing that from happening.  And they go against the very rules that China agreed to follow.” Beijing fired back against the WTO complaint. According to The Wall Street Journal, China’s Ministry of Commerce said that the export restrictions are intended “‘to protect resources and the environment,’ not distort industry.”

The WTO complaint comes on the heels of several years of angst with respect to China’s monopoly on rare earth metals. China currently produces about 95 percent of the world’s rare earths supply, but holds only about 50 percent of global reserves. In 2010, China suspended exports of rare earth metals to Japan following a months-long diplomatic row over a territorial dispute in the East China Sea. Meanwhile, Europe is dependent on Chinese supplies. According to Reuters, “The EU directly imports 350 million euros worth of rare earths from China each year…The damage done to European manufacturing runs into billions of euros, the official said, because it was nearly impossible to diversify away from Chinese supply.”

Yesterday I had the honor of testifying to the House Foreign Affairs Subcommittee on Asia and the Pacific on rare earth elements. Other than the Chairman misstating that I attended Ohio University (rather than THE Ohio State University), I think it went well.

Minerals are becoming a hot topic these days. The New York Times had yet another big piece on China’s rare earth exports last week. To boot, this subcommittee’s Chairman, Don Manzullo of Illinois, has someone from the State Department detailed to his committee working hard on the rare earths issue, and he has been seeking information and dialogue with key players from around the government on this topic for months. This is important work, and you’ve got to commend Rep. Manzullo for taking it up. We need to improve relations with China, and what should be working level issues like minerals supply chains should not be standing in the way.