Exploration and exploitation of rare earth elements (REE), though of immense importance to modern science and technology-savvy life of modern times, is both an expensive and time-consuming venture.
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Despite stupendous efforts by the erstwhile Soviet Union to transform Central Asia from medieval backwardness to modern life of scientific and technological advancement, it could not explore and exploit the rich mineral resources of Central Asia in general and of Kazakhstan in particular to lay the foundation of its viable industrialization.
Kazakhstan Forewarned
As early as 2011, the KPMG’s M&A group in Central Asia — one of the largest M&A advisors with professional teams in the CIS providing objective, unbiased advice on every aspect of the full range of financial transactions told investors that “while China possessed 53% of the world’s known deposits and supplied 97% of global demand, in time, Kazakhstan could be in the same league as China in extracting value from such REEs as scandium, yttrium and the fifteen lanthanides used in computers, turbines, and cars”, stated the columnist of Asia Times of March 11.
But the forewarning fell on flat ears. Kazakhstan lacked the requisite funding, expertise, and processing methodology to derive benefit from its mineral wealth. She was also unprepared to collaborate with China or the US in this enterprise.
As such, the mineral wealth remained unexplored. Moreover, governments and investors, who were somewhat excited by China’s advanced technology, failed to evince much interest in Kazakhstan as a major supplier.
China’s Monopoly
According to data from different sources, China controls nearly 70% of the world’s production of rare earth elements (REE), and Western powers have not been able to obstruct this monopolization.
They are investing in non-Chinese sources to prevent potential supply disruptions should China embark on a disruptive policy. They see Kazakhstan as a possible major new source of critically important materials. There could be more sites in other CARs, but these have remained unidentified so far.
It has to be reminded that the erstwhile Soviet Union had found Kazakhstan rich in uranium and had installed nuclear reactors there. After the implosion of the Soviet Union in 1991, the US stepped in and concluded an agreement with the then President Nursultan Nazarbayev of Kazakhstan, by virtue of which the US took away nuclear warheads against agreed payments.
The US Plus & Allies
The question is, should the US and its Western allies remain complacent while China enjoys a monopoly over rare elements that are crucial to developed and developing countries?
Mining REEs is an expensive and risky business “given the high cost of exploration and extraction, low mineral concentration levels and long production horizons—sometimes of up to ten years.” That may account for why the Mountain Pass Rare Earth Facility in California is the only active primary extraction mine in the United States, infers the columnist of the Asia Times of March 11.
But the geostrategic actuality has changed. Given the stakes, it’s high time the United States and Europe got serious about investing in long-term capital-intensive mining projects.
According to the USGS’ 2022 Commodity Report, the United States imports 100% of its consumption of two of the 17 heavy and light REEs—yttrium and scandium—and more than 90% of its consumption of the remaining 15.
US government initiatives since 2016 – see the White House’s Securing a “Made in America” Supply Chain for Critical Minerals (February 22, 2022) and the US Department of State’s Minerals Security Partnership (MSP) – say all the right things about the need to diversify sources of supply, but give short shrift to Central Asia. Incredibly, the MSP fails to mention a single Central Asian country.
China is also the largest exporter of REEs to European countries. To produce magnets, for example, Europe imports 98% of its rare earth minerals from China. Europe’s concern over this situation led it to conclude a Memorandum of Strategic Partnership with Kazakhstan in 2022.
In 2010, US Senator Lisa Murkowski (R-Alaska) introduced the Rare Earths Supply Technology and Resources Transformation Act, and the US House of Representatives passed the Rare Earths and Critical Materials Revitalization Act, yet neither bill was signed into law.
Meanwhile, despite serious attempts, the US Congress does not seem to incentivize investment in the REE sector. It is somewhat inexplicable.
Realization Dawns
Lately, we find some awakening among the actors on the scene. In September 2023, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan, and the United States held the C5+1 Presidential Summit in New York under the auspices of the UN General Assembly. The result was the B5+1 Business Platform and the Critical Minerals Dialogue.
Multilateral initiatives of this sort are laudable, but if, as The Economic Times (India) reports, “Kazakhstan can meet India’s need for rare earth,” why wait for laborious diplomatic processes to play themselves out?
Last month, the Astana Times reported that Yerlan Galiyev, chairman of the National Geological Service, sees ample opportunity for international investors to develop Kazakhstan’s REEs. Thus, the door would seem open to mutually beneficial partnerships.
In a fast-moving strategic environment, countries like India will certainly be tempted to secure REE assets in joint venture arrangements with specific producers, including potentially through so-called “off-take contracts” whereby buyers buy products before they are produced, thereby facilitating the producer’s ability to obtain financing.
Finally, the Asian Times columnist expresses a word of caution for Kazakhstan venturing to take into its hands the extraction and marketing of the REEs.
It says, “It will take working with the Kazakhs and other Central Asians, for example, and convincing them that the old 19th-century mining paradigm of “dig it up, grab it, head for the hills” – leaving the host country stuck with the dregs – is a thing of the past. It just won’t do anymore.
Astana will be wary of diplomats, foreign consultants, and miners with a ’49ers mindset and misplaced geopolitical ambitions. Central Asians will be on guard against efforts to “sneak in through the back door.” Subterfuges of that sort may have worked in the 1990s, but they do not work now.
- OPED By KN Pandita.
- Prof. Pandita (Padma Shri) is the former director of the Center of Central Asian Studies at Kashmir University. Views Personal Of The Author.
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