The geopolitics of minerals has changed in the last five years, driven largely by the global focus on electric cars. The demand for minerals used in batteries, like lithium, cobalt, and copper, will quadruple by 2040. Among top consumers is the US military; its drone fleets, reconnaissance robots, and directed energy weapons will run on batteries. Unlike internal combustion engines, electric vehicles operate silently and without a heat signature. The US Army plans to field these vehicles by 2027 in a non-tactical fleet that will run entirely on energy-dense nickel-based battery chemistries.
Thus sourcing critical minerals must be treated as a US national security priority. China currently dominates critical mineral supply chains, refining 68 percent of nickel, 40 percent of copper, 59 percent of lithium, and 73 percent of cobalt globally. China also commands global battery cell production. Chinese supplies are vertically integrated, with battery manufacturers and smelters like CATL and Huyaou gobbling up mines across Asia, Latin America, and Africa at an unprecedented rate. This national security could be endangered.
The answer could partly lie in Pakistan. It has increasingly gone to China for loans, falling deeper into Chinese pockets, while the Biden administration chose to downgrade the US – Pakistan relationship. Now, the incoming Trump administration can work to counter China’s control of the global critical mineral supply, by encouraging investments in Pakistani critical minerals while also reviving traditional security interests in the area.
Pakistan has vast critical mineral reserves. With the fifth largest reserves of copper in the world, it could become the “Saudi Arabia of copper” within the next 20 years. In the Balochistan region, the embattled Reko Dik mine, which underwent a long international arbitration process and only recently went under new contract, is home to one of the largest untapped copper and gold resources in the world, with an estimated 400 million tons of gold valued at over $1 trillion. There are also copper-gold deposits in less agitated regions like Gilgit-Baltistan, an isolated mountainous region at the intersection of the Himalayas, Karakorum, and Hindukush ranges
The Trump administration is arriving at an opportune time. On November 18, speaking at a USAID event, Pakistan’s Minister for Planning and Development, Ahsan Iqbal, expressed optimism about rekindling US-Pakistan relations based on “mutual respect and constructive engagement” under the incoming presidential administration.
Much of the U.S.-Pakistan relationship in recent decades has been mired in security and counterterrorism concerns. Baluchistan straddles Pakistan, Afghanistan, and Iran, and so a mineral-based US investment in Baluchistan could quickly develop into deepened US engagement with the Pakistani army, a group that has increasingly viewed normalized relations with the US as a way to distance itself from China. Through investments to develop regions like the one surrounding the Reko Dik mine, the US may simultaneously advance its interests in counterinsurgency and critical minerals.
Another obstacle in the supply chain of critical minerals is processing. There is little benefit to mining critical minerals domestically or from friendly countries if we then have to ship them off to be processed by countries like China, which dominates the processing stage. Today, China accounts for 44 percent of global copper smelting. Providing an American alternative is important. Baluchistan is home to the world’s largest deep seaport, Gwadar, which is operated by a state-run Chinese firm. If there was more investment to support increasing processing capacity in Pakistan itself, one could feasibly guarantee supply from mine to processor and then to market.
Control of mineral processing also strengthens the ability of end users to guarantee provenance. Legislation like the Uyghur Forced Labor Prevention Act requires American companies to ensure that minerals like copper, gold, nickel, lithium, and aluminum are not sourced from the Xinjiang Uyghur Autonomous Region of China. Having a U.S. answer to mineral processing better enables brands to demonstrate compliance with US human rights laws.
Outside the security realm, other challenges remain: lack of infrastructure, reliable energy, and water security. Pakistan is one of the most water-stressed countries in the world, a major concern specifically for its mining industry. In areas where water is already scarce, minerals processing applies further stress, requiring at least 40 percent of the water supply to meet demands. Water diverted to support critical mineral processing in turn intensifies the competition among agricultural, domestic, and industrial users to access fresh water. Investing in Pakistan’s water security would also serve long-term development goals. Large-scale sourcing, to the extent needed to compete with China, will also require Pakistan to provide the requisite trained workforce and proper infrastructure to move the minerals. It is possible that a first-class Western mining consortium that promises jobs and offers an appropriate slice of the returns to Baluchistan would be welcome.
All of this—building out critical mineral infrastructure, reskilling the labor force, and tackling water insecurity—will have powerful effects on the country. Pakistan has anemic economic growth, and its foreign debt has reached staggering levels. At the end of 2023, Pakistan’s debt totaled more than $250 billion, or 74 percent of its gross domestic product; roughly 40 percent is owed to external creditors. Pakistan is also the fifth-largest debtor country to the International Monetary Fund. Developing its critical minerals offers an avenue for Pakistan to achieve sustainable growth.
Recommendations
Senators Marco Rubio (Republican of Florida) and Mark Warner (Democrat of Virginia) are sponsoring the Rubio-Warner Global Strategy for Securing Critical Minerals Act of 2024. It will provide incentives for US private investment but more needs to be done to support Western companies who, unlike Chinese companies, are not part of the state. The Trump administration should consider a few starting points:
- Prioritize US diplomatic support for securing critical minerals. If Pakistan wants American companies to be in Baluchistan, a US consulate must be built in the region.
- Deploy official development assistance to support projects around Western-aligned mining projects in Pakistan. A Chinese parastatal has operated the Duddar mine in Baluchistan since 2014. Unfortunately, China’s largess does not extend to the people living in this impoverished community. In ten years of operation, the company has not built a single school or hospital. America, Korea, Japan, and Europe should combine forces to augment development assistance in areas where their companies operate.
- Transform the Mineral Security Partnership (MSP) into a global sovereign wealth fund that can rapidly deploy capital into early and mid-stage mining projects. Connect MSP with projects under the Partnership for Global Infrastructure and Investment.
- Extend long-term senior debt to qualified Western producers and invite friendly, resource-rich countries like Pakistan to join the MSP Producer’s Forum. Risk-tolerant capital is expensive, yet Chinese firms have access to seemingly limitless capital, mostly in the form of long-term concessional loans. To compete with China, resource-rich countries must be welcomed into the fold.
- Sharpen the US government’s existing financial tools. The Export-Import Bank does not touch mining and the Development Finance Corporation (DFC) is slow and bureaucratic. DFC’s two percent default rate cap equals lower risk tolerance for mining projects in jurisdictions like Pakistan.
- Expand allied partnerships to secure critical minerals.
Mining projects in Pakistan will take at least a decade to develop, but this timeline should not deter the United States from asserting leadership. A deeper US partnership could be a powerful stabilizing force, as recent political unrest holds the potential to disrupt the country’s economy and national security. Given the accelerated global land rush for minerals, Pakistan should focus intently on its mineral assets. Doing so could not only help change Pakistan’s global “brand” but also fundamentally change the dynamics in its relationship with the United States and other Western countries. Under the right circumstances, Pakistan’s friends could come to look upon Islamabad with fresh eyes— through the lens of copper-rimmed glasses.
