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11 January 2015

China Makes a Move in the Resource Wars

January 8, 2015

Washington displays a troubling lack of interest over the intensifying tug-of-war for access to strategic resources.

From Marvel Comics to the Iron Man movies, we all know the role defense technology plays in the science fiction world of action heroes. What goes on in the real-world renditions of Stark Enterprises, however, is usually hidden deep in the shadows of compartmentalized clearances and black budgets.

A recent look into that shadow world is of particular interest. It was delivered during a New Year's Eve speech half a world away by Avinash Chander, the head of India's secretive Defense Research and Development Organization - India's DARPA - and one of the technologists who helped India build a long-range nuclear missile. 

From the dark world of advanced weapons R&D, Chander's message lit up like a signal flare.

"In what could be a strategy to limit India's military capability, China is restricting the supply of rare earths and certain other metals," summarized one of India's leading English-language newspapers. And the cutoff of Chinese supply is not limited to tungsten and heavy rare earths, where China continues to account for 99 percent of global production. As the Indian defense chief noted, "titanium is used in almost all aerospace engines. We are not able to come up with world-class engines just because we don't have a good supply of such a material."

That matters, Chander explained, because "only about 30 [percent] of the materials required for the [Indian] defense industry were being manufactured in the country, and the rest was being imported."

This strategic vulnerability endangers India's renewed emphasis on swadeshi - the doctrine of self-sufficiency that dates back to the country's quest for independence. Seen through this lens, India's metals dependence rises to the level of an existential threat.

Russia-India summit

Chander's alarming speech came several weeks after Indian Prime Minister Narenda Modi welcomed Russian President Vladimir Putin to New Delhi - the latest in a lightning round of summits held by Modi since he took the prime minister post in the spring of 2014.

Some summits begin with a traditional dance and a gift of flowers; for the Russia summit, the Indians prepared a more substantive bouquet. Just three days before Putin's arrival, Modi's government announced that it would oppose the sanctions levied against Moscow for its annexation of Crimea and the destabilization campaign in Ukraine. Putin, in the words of one summit news story, "thanked India for its understanding."

Call it an exercise in resource-politik: With India granting Putin a free hand in Ukraine - and perhaps by extension, other nations of the former Soviet Union - Russia reciprocated with a basket of technical and economic support for Indian development projects in the oil, natural gas, and nuclear energy sectors. And on a subject critical to India's defense technology development, the summit joint statement included this agreement:

"Given the strategic importance of rare earth minerals and their economic and commercial utility, the sides will enhance cooperation in rare earth minerals' mining, technology development and research. They will explore joint development of technologies for processing rare earth materials."

India-Japan summit

Is this new entente a sign of India's return to the close relationship with Russia that it maintained throughout the 20th Century Cold War? Perhaps not - 21st Century India has many options for global partners. During the December summit, Moscow's envoy to New Delhi, Alexander Kadakin, likened India to "a rich fiancee with many bridegrooms." And in fact, despite the professions of affection for Moscow, in the resource sector, India is quite clearly playing the strategic field. Rare earths access is a consistent priority. A September Japan-India Summit in Tokyo culminated with the following statement:

"The two Prime Ministers welcomed substantial agreement on a commercial contract for manufacturing and supply of rare earth chlorides from India to Japan and affirmed their strong resolution for the finalization of commercial contract as well as the commencement of commercial production at the earliest."

India-Australia summit

Two months after the Tokyo summit and just weeks before Putin's visit, Modi's summit with Australian Prime Minister Tony Abbott produced an agreement to expedite approvals for key mining investment projects. The outlines of an Indian ABC approach to metals sourcing - Anywhere But China - are becoming clear.

All of which provides context to the startling strategic vulnerability India's top defense technologist revealed in his New Year's Eve speech: The "good thing is we are at least acknowledging now that these problems exist. A decade ago we were not even doing that."

With India joining Japan and South Korea in seeking counterweights to China, and with Russia pivoting from its pariah status in Europe and the United States to court new allies in Asia with its resource wealth, the boundaries of 21st Century resource wars are taking shape.

Washington's indifference

Only the U.S. government seems to be sitting out the resource scramble. Indeed, when Modi made a landmark late-September visit to Washington, the words Rare Earths were nowhere to be seen on the list of 44 issues of joint concern. 

It's an interesting omission, given that according to the Pentagon's National Defense Stockpile Requirements Report, of the 19 metals and minerals (including 6 heavy rare earths) recommended for stockpiling, China is a Top-3 provider for 17, while Russia controls key supplies of titanium, nickel, and the platinum-group metals. Remember Chander's concern that India was 70 percent-dependent on foreign supply for key metals? The average dependency for the metals on the U.S. shortfall list not covered by the current stockpiles averages more than 85 percent.

Meanwhile, some U.S. policy analysts prefer to ignore the shortfall, arguing that markets will meet the demand for a more diversified metals supply. But when metals dependencies reach 90 percent - or near 100 percent in the case of heavy rare earths - there is no effective market matching demand to supply. There is instead a de facto monopoly - compounded by national security risk.

To be sure, the United States is resource-rich, with known deposits of dozens of strategic metals, but most of these remain in the ground - kept there by a byzantine permitting process that can burn through billions of dollars and average seven to 10 years before a metals deposit is brought into production. In ordinary times, that's a lost opportunity to generate the jobs and economic growth that anchor a robust manufacturing sector. In a time of resource warfare, it's a policy of unilateral disarmament.

Can a nation with vast global interests maintain an indifferent resource policy? With the global population projected to balloon to nearly 10 billion by 2050, and hundreds of millions of Indians and Chinese seeking to access a middle-class lifestyle enabled by all the metals-laden gadgets we've come to know and love, it's hard to see how any major power can be a conscientious objector in the resource wars. As Leon Trotsky once wrote: "You may not be interested in war, but war is interested in you."

Late this month, U.S. President Barack Obama will travel to New Delhi for a summit timed to coincide with India's Republic Day - a sign of the honor India attaches to its relationship with the United States. But if Modi's summit sherpas present a paragraph on Rare Earths for the summit joint statement, will their U.S. counterparts sign on? Or will the U.S. remain AWOL in the resource wars?

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