Time To Reinvent U.S. Critical Minerals Strategy

For the Trump administration, critical minerals are a global policy priority. President Donald J. Trump is trying to get China to relax bans on rare earth minerals desperately needed for American industries, including defense and tech. From Greenland to Ukraine, the U.S. is signaling interest and engagement, be it intent to acquire or a comprehensive energy and minerals agreement. In Africa, the U.S. brokered a peace agreement between the Democratic Republic of the Congo and Rwanda, amid conflict over critical minerals on the border of the two countries. This presents opportunities for American investment, driven by a global security strategy by from a president who has notably scaled back from U.S. engagement abroad.

This is because critical minerals are key inputs into advanced technologies, healthcare, defense, energy, and other sectors, and have become a cornerstone of U.S. foreign policy (what oil used to be in the 20^th century). President Trump has made the development of a critical mineral supply chain to decrease dependence on China for these materials a priority, taking significant steps toward this goal through a March executive order. While mineral agreements have become a key tool of American diplomacy in the modern era, unclear and inconsistently enforced legislation has limited their effectiveness.

The Inflation Reduction Act’s Limits to Mineral Investment

These self-limiting policies predate the current administration and are a bipartisan policy failure. The Inflation Reduction Act, which aimed to build a clean energy supply chain through ‘friendshoring’ associated materials by offering tax credits for clean energy products manufactured with components sourced from countries with a free trade agreement with the U.S. This excludes several key producers of critical minerals, like the Democratic Republic of the Congo, Indonesia, Kazakhstan, South Africa, Vietnam, and the that do not have FTAs. Although several waivers have been signed to make exceptions to this provision, this is insufficient to create a reliable investment landscape in these countries. Unsurprisingly, investors are hesitant about investing in a place that requires yearly congressional action.

Another aspect of the IRA that limits opportunities for critical mineral investment is its overly broad definition of “Foreign Entities of Concern”, which includes organizations considered “an entity owned by, controlled by, or subject to the jurisdiction or direction of a foreign government” or “an entity that is engaged in conduct detrimental to U.S. national security or foreign policy.” While these definitions may seem reasonable at first glance, they can preclude companies with even a tiny stake of Chinese ownership, or doing business in Russia, from receiving American investment. Considering the history and location of Central Asia, clearly that may affect many U.S. partners there. This prevents companies looking to diversify and receive American investment from doing so, pushing them further into the orbit of competitors. It also enables China to weaponize our own laws against us by strategically investing in locales or companies Beijing has no interest in but wants to keep Western counterparts out.

Opportunities for Critical Mineral Partnerships

Despite these investment-stifling measures, there are several willing partners prepared to build a lucrative relationship in the minerals sphere. One partner that has displayed significant interest is Kazakhstan, which holds reserves of several critical minerals and is already pursuing several avenues of cooperation.

In a recent meeting with U.S. Secretary of State Marco Rubio, Kazakh Deputy Prime Minister and Foreign Minister Murat Nurtleu emphasized critical minerals as a key avenue of cooperation between the two countries. American educational institutions are also growing their presence in the country, with the Colorado School of the Mines partnering with a local university to train a skilled workforce for Western mining companies.

This demonstrates a new dimension of cooperation with the U.S., fostering relations while producing tangible results and expanding the workforce eligible to work in the specialized mining industry. Such a model can also be applied outside of Kazakhstan, both in Central Asia and beyond.

The Risks of Opaque Legislation

While these steps are promising, they do not offset the skepticism towards American investment prompted by regulations that exclude too many countries from productive engagement in the mining and refining of the rare earth elements. For example, secondary sanctions against companies or economies dealing with Russia, while not imposed on Kazakh mineral producers, remain a looming threat, having been levied against other entities in Central Asia, a region that was a part of the USSR and now has close ties with its former colonial master.

In addition, Astana has been subject to scrutiny by Washington before, having been investigated under Section 232 of the Trade Expansion Act regarding the national security implications of its uranium exports to the U.S. The first Trump Administration ruled that no quotas or other trade measures were to be placed on Kazakhstan as a result of the investigation, yet it sent signals to investors that they may incur political risk by investing in Kazakhstan. Now, a global Section 232 investigation is ongoing, despite the dire need for the U.S. to secure sources of uranium imports. Kazakhstan is the number one exporter of uranium in the world.

The United States has made clear its appetite for partnerships in the critical minerals sector and is keen to compete with China and create a supply chain that Beijing does not control. Washington’s actions stretching back through multiple administrations, however, create a difficult environment for mineral-rich countries that seek investment but are not amongst the partners of the U.S. with a free trade agreement.

Even as the country pursues a secure mineral supply chain, establishing trust and clarity with potential partners must be a top priority. The current state of affairs, where the United States keeps a close circle of trade partners, keeps many potential partners out, and issues random exemptions for others, is untenable. The U.S. cannot afford legislative and policy uncertainties, delays, and confusion when America’s national security is on the line.