Sometime in the last two years, someone made a chart in a conference room at the Department of Energy in Washington. People who have seen it but haven’t published it publicly have told me about it. Critical mineral supply chains—the routes from ground-level ore to processed material in a battery cell or a jet engine component—were depicted in the graphic, which color-coded the individuals in charge of each step. The chart was primarily one color during the processing phase. By all accounts, the accompanying briefing was depressing.
China has long dominated the processing of key minerals and rare earth elements. It was purposefully constructed over two to three decades through state investment in refining capacity, tolerance for environmental costs that Western facilities were under regulatory pressure to avoid, and a strategic realization—arrived earlier than most Western governments acknowledged—that processing rather than mining was the bottleneck in the crucial mineral supply chain. There are mines in several continents. The rest of the world is currently investing significant financial and political resources in an attempt to emulate China’s concentration of the capacity to convert ore into battery-grade cobalt, processed manganese, or refined nickel on a large scale.
The operational expression of what that concentration makes possible is the export limitations that China started implementing in response to U.S. semiconductor prohibitions on graphite, gallium, germanium, and, more recently, rare earth processing technology. In the conventional sense, they are not sanctions. They don’t focus on particular businesses or activities. They impose costs on technological industries that rely on Chinese-processed components by taking advantage of China’s actual position in the supply chain.
Exports of semiconductor equipment to China may be restricted by the United States. China has the authority to impose restrictions on the refined metals used in defense electronics, electric vehicle batteries, and semiconductor production equipment. There is leverage on both sides. Neither party wants to make full use of it. However, both parties are developing the capacity to provide escalation as a choice.
Rather than through a specific enthusiasm for ocean floor extraction as an aim in and of itself, the deep-sea mineral aspect enters this competition through the logic of the supply chain. The concentrations of cobalt, nickel, copper, and manganese found in polymetallic nodules in the Clarion-Clipperton Zone make them potentially important supplies of the materials whose processed form China now dominates. The leverage that China’s processing domination currently offers would be diminished if the US could remove those nodules and develop or get refining capacity outside of China’s control. The executive steps that have instructed NOAA to create licensing regimes for American businesses operating in international seabed areas outside the ISA’s jurisdiction are motivated by this strategic reasoning.
China is using a dual strategy after realizing the same reasoning from the opposite side. It operates in the institutional setting that offers international legitimacy and has several exploration licenses in Pacific and Indian Ocean seabed tracts under the ISA framework, which it has ratified and which grants it ISA contractor status. At the same time, it is pursuing bilateral agreements with Pacific island states whose surrounding oceans and exclusive economic zones are located in ocean regions rich in nodules. In order to establish Chinese presence and preferential arrangements in ocean areas before the competitive dynamics of deep-sea extraction clarify whose terms will govern, talks with the Cook Islands and other Pacific states are partially about resource positioning and partly about economic development.
The ISA finds itself in an awkward position in the midst of this competition. The Authority was established to guaranty that seabed resources outside of national borders would be handled as humanity’s shared heritage, accessible to all countries and with profits distributed fairly. In addition to undermining the credibility of the ISA framework by operating outside of it since it has not ratified UNCLOS, the U.S. stance complains that the ISA’s commercial mining code process is too sluggish and susceptible to Chinese manipulation. China’s stance, which involves both operating within the ISA and negotiating bilateral Pacific agreements, respects the framework in a procedural sense but may strategically get around it. The “common heritage” concept that the ISA was designed to safeguard is not entirely consistent with either strategy.
