In the triangular UK-US-China relationship, don't overlook energy
Dependence on the People's Republic of China for critical and rare earth metals and minerals is a major energy and national security risk for the US, the United Kingdom and other nations.
Beijing not only controls a massive component of the upstream value chain and production of raw critical minerals, but also – more importantly – it controls nearly all of the downstream refining and processing for most critical metals and minerals. Britain, America and most advanced nations do not refine and process the vast majority of rare earth metals and minerals.
The UK and US are almost entirely dependent on the PRC for gallium. Gallium was placed under export restrictions by the PRC in August 2023. It is used in semiconductors, photovoltaics for solar panels, and batteries, among other uses.
Some politicians and business leaders in the free and open nations are working on initiatives to reduce their dependency on the PRC for these materials. The Minerals Security Partnership is an example of this, but significantly greater efforts are needed to tackle this unbalanced global metals and minerals problem.
An immediate and proactive approach, which includes not just sourcing the raw metals and minerals but refining and processing them, is essential to start rebalancing the market and take away the PRC's control of metals, minerals and the finished products (such as batteries). The impact of this is far-reaching, and extends to auto manufacturing and military hardware.
Refining these metals is energy intensive. Energy – power generation specifically – is needed to refine and process these metals and minerals. The PRC has abundant, reliable and cheap coal-fired power generation, which underpins its ability to process and refine metals and minerals.
In the recent US-PRC talks hosted in London, Beijing used its rare earths exports as leverage, claiming 'difficulties' in processing. America has realized that the PRC aims to dominate science and technology in its race to become the global hegemon, utilizing unfair business practices as necessary. This is why the US is trying to curb the PRC's access to sensitive technologies, including computer chips.
The desire of nations and politicians to have low-priced batteries and refined rare earth metals from the PRC is a short-term destructive trap which must be ended.
Unless Britain, America and other liberal democracies begin producing and refining these metals and minerals in significant quantities, Beijing will maintain control of both production (refining and end products) and pricing.
This was observed in 2010 and 2011, when prices of the heavy rare earth element dysprosium increased 26-fold. This was triggered by a territorial dispute between the PRC and Japan, where Beijing used its export controls as geopolitical leverage.
London recently hosted trade talks between Beijing and Washington. His Majesty's Government presented it as a 'diplomatic win' for the UK, believing that Trump's advisers chose London because it is 'geopolitically in the right place right now to act as bridge and facilitator.' The notion of Britain acting as a bridge between the two rival powers is a theory that Whitehall may wish to propagate.
The talks in London restored rare earth and magnet supplies for civilian US industries with a fast-track system, valid for six months. It included neodymium, praseodymium and dysprosium – all vital to electric vehicles, wind turbines and electronics.
Military-grade materials, such as titanium sponge, nuclear-grade isotropic graphite, germanium and gallium, remain off the table. The PRC is using this as leverage to pressure America on chips, artificial intelligence (AI) and export restrictions.
As the PRC continues to wield its rare earth leverage to gain advantage in critical areas, the UK and US must get serious about the real long-term threat of the PRC, especially as it pertains to energy. After all, energy underpins AI. The PRC's coal-fired power generation is what powers its AI, manufacturing centres, and refining and processing of rare earth metals and minerals.
The UK government's recent nationalization of British Steel from Chinese ownership is one example of a very positive move by democratic governments in reclaiming the most critical sectors of their industrial manufacturing base. The same measures need to be applied to energy, specifically traditional fuels such as oil and gas.
Britain's special relationship with America, as the largest oil and gas producer in the world, needs to be utilized. The UK can increase domestic energy security and economic security by increasing purchases of US natural gas and oil.
Natural gas is an extremely reliable and energy-dense fuel that provides stable and distributable power. With access to more liquified natural gas from America, Britain could build out its power generation, lower electricity and energy prices for UK consumers, increase energy security and begin to rebuild its manufacturing base.
The US exports over four million barrels of crude oil per day. Britain could be taking more of this oil. As well as this, America exports about 14 billion cubic feet of natural gas per day in the form of LNG, with ambitions to export far more.
The UK could dramatically increase imports of US LNG, strengthening the trading relationship with America as well as the implicit security relationship that comes from increased energy shipments. Increased access to US LNG alone could allow Britain to reduce domestic energy costs and stem the decline of the industrial base, directly supporting defense.
This is the type of win-win which both the UK and US need to look for in long-term competition with Beijing.
Trisha Curtis is a macroeconomist with expertise in US shale markets, geopolitics and China. She is the CEO of PetroNerds, host of the PetroNerds podcast, and an economist for the American Energy Institute. Grace Theodoulou is the policy fellow at the China Observatory at the Council on Geostrategy.
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