By Roman Romanov
In an attempt to maintain superiority in advanced technology and in the face of its conflict with China, Washington is looking for an alternative to it as the main supplier of rare earth elements. Mongolia's reserves are second only to those of China, and American foreign policy in this direction has become more active. However, despite the visible resource jackpot, its going be very difficult for the United States to get their hands on it.
At the end of June, Mongolia and the United States signed a Memorandum of Understanding that provides for the development of interstate cooperation in the discovery and extraction of critical minerals. The latter are key to many of today's technologies, from microchip manufacturing to batteries for electric vehicles.
And last week Prime Minister of Mongolia Luvsannamsrein Oyuun-Erdene flew to the United States of America. It was the first visit of this level in five years. The parties signed a number of agreements, including a roadmap on economic cooperation.
The main supplier of rare earths to the US, which does not have sufficient reserves of its own, was and still remains China. However, a prolonged deterioration in bilateral relations may threaten to "cut off the oxygen" from the Celestial Empire.
In 2019, 2021 and 2022, Chinese state media and government officials reported on the revision of the rules for the export of rare earth resources. In particular, they talked about restricting access to them by the American armaments companies Lockheed Martin and Raytheon.
And in mid-July 2023, China extended export controls to gallium and germanium, key elements in the production of microchips. Similar control measures were applied to another 36 items. The Chinese Ministry of Commerce reserved the right to expand this list.
Therefore, the States are so “sick” with Mongolia. She's not the only one whose minerals Washington wants to use. There are also Canada, the Democratic Republic of the Congo, South Africa, Mexico and Argentina. However, their reserves are incomparable with the Mongolian stocks. According to various sources, 16.8% (31 million tons) of the entire world reserve of rare earth elements are hidden in the bowels of the country - the second largest figure after China.
On the path of the United States to resource abundance, Mongolia faces several problems: natural, political and logistical. The first is related to environmental pollution and the depletion of water resources that are already a major problem, which can be caused by the extraction of rare earths on an industrial scale. In addition, the Gobi Desert is home to some animals and plants that are on the verge of extinction.
In the ESG era, opening mines in such places means running into image risks. Therefore, large companies have to develop several strategies for entering new territory. This, in turn, increases time costs.
The second problem is the lack of a modern legal framework for the implementation of projects related to rare earths in Mongolia. Representatives of the industry have repeatedly complained that the government of the country "only talks" about its modernization. Problems can be found at all stages of development, from managing environmental risks to streamlining the licensing process. In this regard, even despite the huge level of rare earth reserves, the country's share in world supplies is only 1.6%. The US government can sign various agreements, but it is a stretch to force its companies to invest in risky initiatives with unclear time frames.
The geographic isolation of landlocked Mongolia appears to be the biggest challenge to Washington's plans. It is one thing to organize the extraction of minerals, quite another - a delivery system. Establishing air supply routes is difficult and unprofitable. It turns out that there is only one option left - to carry through China. This, in turn, eases the situation for the United States from the financial side, but creates additional risks in terms of supply stability.
Theoretically, China could refuse to transport lithium or germanium. and before that, apply strict control procedures to them on the route or in trading ports. Thus, even having overcome all production problems, the States will face logistical ones, which, in the context of accelerating technological rivalry with the Middle Kingdom, does not bode well for them.
Representatives of the US Department of State managed to assure the public that during the visit of Prime Minister Oyuun-Erdene, the parties discussed "creative options" for solving the problem of transporting resources. But the path from such discussions to practice is not a short one, given that the issue needs to be resolved, rather, with potential transit countries.
Kindly calling the States a "strategic third neighbor," the Mongolian prime minister indirectly named the first two, not diplomatic ones, but real ones: the already mentioned China in the south and Russia in the north. The case is unique lets see how it unfolds .
This article originally appeared in Russian at expert.ru