Soft power needed for hard commodities
Rivalry for access to ‘critical minerals’ and other resources is intensifying, driven by factors including geopolitical insecurity, climate change and decarbonisation policies. As a result, natural resource diplomacy is making a comeback as a tool of international relations. This is a delicate art – but world leaders often practise it clumsily, writes Daniel Litvin.
For centuries, nations’ attempts to secure vital or lucrative natural resources overseas have been an important influence on foreign policy. Resource control has been a contributing factor to many wars. Many states through history have also sought to use their dominance of resource exports to achieve foreign policy goals. After all this time, one might think, the art of natural resource diplomacy would have become better understood and more refined.
It is certainly now back centre-stage, following some years of being less in the spotlight of international affairs. President Trump is among its leading current practitioners. The US recently struck a high-profile ‘critical minerals’ deal with Ukraine, implying this might help avoid a full withdrawal of US support in its war with Russia. Mr Trump’s professed desire to acquire Greenland for the US is likewise partly motivated by his apparent belief in the abundance of that territory’s minerals. In the Democratic Republic of the Congo, meanwhile, US diplomats have been seeking to forge peace in its war-torn east through a potential deal linked to mineral access in the region.
Material weapons
Other world powers, too, have recently shown more willingness to flex control over strategic natural resources as a foreign policy tool. In the recent military blow-up between India and Pakistan, for example, India suspended the Indus Water Treaty in an attempt to punish Pakistan for its alleged support for militant attacks in India-administered Kashmir. This treaty is a vital, decades-old agreement on sharing water between India and Pakistan (which had survived two previous wars between the countries).
China, in April, restricted exports of ‘rare earth’ elements (a set of minerals vital to the defence, electronics and other industries, including in the low-carbon transition) in an attempt to flex its own economic muscles against the US in response to President Trump’s punitive tariffs on the country. And of course, in 2022 Vladimir Putin cut off much of Russia’s gas supplies to Europe, seeking to soften European opposition to his attempted invasion.
This resurgence of natural resource diplomacy and weaponisation is unlikely to be a flash in the plan. It may even intensify in the decades ahead. Growing geopolitical divides and the fragmentation of global business and military supply chains will likely intensify international rivalry for access to all types of natural resources.
Climate change is likely to be another big driver. As water supplies, arable land and food stocks come under pressure in heat-stressed and other vulnerable regions, interstate (and communal) tensions over access to these resources will rise. Decarbonising the energy system will also require vast increases in supplies of metals such as the copper, nickel, cobalt and lithium needed to build electric vehicles, wind turbines, solar farms and electricity grids.
China controls big parts of the supply chain of many of these ‘critical minerals’ (of which rare earths are a subset), dominating refining and processing for a significant proportion. In that respect, geopolitical tensions between China and western nations over ‘critical minerals’ may have only just begun.
Lessons from the ground up
Natural resource diplomacy, then, will be a sought-after skill in the years ahead. But importantly, it needs to be understood as a delicate art. Crude, ill-informed and unthinking approaches tend to backfire sooner or later. Unfortunately, this is how it often has been practised, and still is.
Consider, briefly, four common mistakes made by nations and world leaders in this area (note this is a far-from-exhaustive list: natural resource diplomacy has a rich and complex history).
The first mistake is nations simply being late to the game. Dangerous dependencies on foreign suppliers of commodities are often allowed to creep up over years or decades. By the time action is finally taken, these are often costly or difficult to unravel.
Europe’s dependence on Russian gas in the run-up to the Ukraine war is a case in point. Likewise, the West’s current dependence on Chinese-dominated supply chains of ‘critical minerals’ could have been foreseen and mitigated years ago, before it became so deeply entrenched. China has been carefully nurturing and investing huge sums in building these supply chains since the 2000s. Yet most western governments have only begun to strategise seriously over how to tackle the challenge since the 2020s (and have made minimal progress so far).
The second is nations taking action based on limited expertise in technical and economic factors around natural resources. Striking foreign resource deals or successfully intervening in resource markets requires deep industry expertise (for example, in extraction and processing technologies and the global supply and demand trajectories of different commodities). This is often lacking in government bodies, and certainly among politicians. The temptation is to take action that creates headlines that sound impressive to the layperson, while worrying less about their real-world impact.
The US–Ukraine critical minerals deal may be a prime example here. It is viewed sceptically by many mining executives, who see it as being motivated by hugely inflated assumptions – over the value of the minerals under the ground, the likelihood of attracting commercial investment in them and the likely speed of development. Even if it unlocks major US investment in critical-mineral mining in Ukraine, this will do little to tackle Chinese dominance of global mineral supply chains. The big problem from the West’s perspective in this respect is less mining itself but rather China’ s strong grip on the refining and processing of many critical minerals.
Likewise, many miners believe the economic attractions of Greenland’s minerals are exaggerated in the mind of the US administration (whatever riches lie beneath the ground, Greenland’s lack of transport links, ice coverage and other climate hazards present barriers to their exploitation). In the case of both Ukraine and Greenland, Mr Trump has certainly generated many headlines, but may end up strengthening US mineral security only marginally.
The third common mistake is nations overestimating their ability to secure long-term control over natural resources in other parts of the world. The desire to exert such control is often deep-rooted when national security is seen to be at stake. But, ever since the end of the imperial era (and even during it), exclusive control of strategic resources in foreign lands or control on terms seen to deliver too few benefits to local populations has often ended up being contested and overturned. It triggers either local backlash or competition from international rivals – and sometimes both.
Many in the West were taken aback by the local, nationalist forces that upended western oil firms’ ownership and control of hydrocarbon production throughout the Middle East in the 1960s and ’70s. Likewise, many in the West failed to anticipate the speed at which China has displaced western mining firms over the last few decades as the dominant foreign actor in mineral production in parts of Africa. Interestingly, China is now facing pushback from some African countries who detect strains of neo-colonialism in its approach.
In seeking now to regain their position in African mining (in the DRC, for example), western actors need to tread particularly gently, focusing hard on delivering local and national benefits, lest they reignite the forces of backlash. By the same token, the US needs to ensure its critical minerals deal in Ukraine generates lasting benefits for the country to avoid local anger brewing and the deal unravelling as a result (as I have argued elsewhere). In general, even in a world of growing geopolitical competition, hard-edged, unilateral approaches to resource diplomacy may be less effective over the long term than sensitive alliance-building, whether bilaterial or ‘minilateral’.
The fourth and final common mistake is nations overplaying their hand in weaponising their own resources to achieve foreign policy goals. In a crisis situation, nations are often tempted to pull hard at all levers available. But weaponising resource exports carries a big risk of backfiring as importing nations shift away from the commodity concerned or make other retaliatory moves.
The 1973 Arab oil embargo in response to the then Arab-Israeli war, for example, certainly delivered an economic jolt to western nations, as intended. But its long-term consequences for Middle Eastern oil producers were decidedly mixed: growth in demand for oil slowed down and western nations opened up major new oil provinces of their own (such as Alaska and the North Sea). Similarly, Russia’s weaponisation of its gas supplies to Europe in 2022 put a rocket under European attempts to develop alternative supplies and energy sources. Russia has effectively laid waste to one of its most lucrative export markets.
India’s recent suspension of the Indus Water Treaty carries its own risks of backfiring. One of these is that China, which has close links to Pakistan, could weigh in by threatening to weaponise its own water supplies to India (as climate change continues to make these supplies more erratic). India is upstream of Pakistan on the Indus, but China in turn is upstream of India on the Indus as well as other important rivers. As for China’s recent weaponisation of its rare earth exports, a delicate approach is clearly in China’s interests here, to avoid jolting western nations into even more urgent efforts to build their own critical-mineral supply chains.
The wisdom of soft power
In sum, nations seeking to master the art of natural resource diplomacy should think decades ahead on potential exposures and alliances, build a deep understanding of the technical issues, and adopt a locally-sensitive, nuanced approach that takes account of others’ responses and ripple effects. Put another way, they should understand it as diplomacy in the true sense of the word, rather than the exercise of naked power, which will likely backfire. If all that sounds a tall order, the upside is that there are plentiful lessons from history on the mistakes to avoid.
The views in this commentary are those of the author and do not necessarily represent those of the Grantham Research Institute.