WASHINGTON — For decades, a group of the world’s biggest oil producers has held huge sway over the American economy and the popularity of US presidents through its control of the global oil supply, with decisions by OPEC determining what US consumers pay at the pump.
As the world shifts to cleaner sources of energy, control over the materials needed to power that transition is still up for grabs.
China dominates global processing of the critical minerals that are now in high demand to make batteries for electric vehicles and renewable energy storage. In an attempt to gain more power over that supply chain, US officials have begun negotiating a series of agreements with other countries to expand America’s access to important minerals like lithium, cobalt, nickel, and graphite.
But it remains unclear which of these partnerships will succeed, or if they will be able to generate anything close to the supply of minerals the United States is projected to need for a wide array of products, including electric cars and batteries for storing solar power.
Leaders of Japan, Europe, and other advanced nations, who were meeting in Hiroshima, agree that the world’s reliance on China for more than 80 percent of processing of minerals leaves their nations vulnerable to political pressure from Beijing, which has a history of weaponizing supply chains in times of conflict.
On Saturday, the leaders of the Group of 7 countries reaffirmed the need to manage the risks caused by vulnerable mineral supply chains and build more resilient sources. The United States and Australia announced a partnership to share information and coordinate standards and investment to create more responsible and sustainable supply chains.
“This is a huge step, from our perspective — a huge step forward in our fight against the climate crisis,” President Biden said Saturday as he signed the agreement with Australia.
But figuring out how to access all of the minerals the United States will need will still be a challenge. Many mineral-rich nations have poor environmental and labor standards. And although speeches at the G-7 emphasized alliances and partnerships, rich countries are still essentially competing for scarce resources.
Japan has signed a critical minerals deal with the United States, and Europe is in the midst of negotiating one. But like the United States, those regions have substantially greater demand for critical minerals to feed their own factories than supply to spare.
Kirsten Hillman, Canada’s ambassador to the United States, said in an interview that the allied countries had an important partnership in the industry, but that they were also, to some extent, commercial competitors. “It is a partnership, but it’s a partnership with certain levels of tension,” she said.
“It’s a complicated economic geopolitical moment,” Hillman added. “And we are all committed to getting to the same place and we’re going to work together to do it, but we’re going to work together to do it in a way that’s also good for our businesses.”
“We have to create a market for the products that are produced and created in a way that is consistent with our values,” she said.
The State Department has been pushing forward with a “minerals security partnership,” with 13 governments trying to promote public and private investment in their critical mineral supply chains. And European officials have been advocating a “buyers’ club” for critical minerals with the G-7 countries, which could establish certain common labor and environmental standards for suppliers.
Indonesia, which is the world’s biggest nickel producer, has floated the idea of joining with other resource-rich countries to make an OPEC-style producers cartel, an arrangement that would try to shift the power to mineral suppliers.
Indonesia has also approached the United States in recent months seeking a deal similar to that of Japan and the European Union. Biden administration officials are weighing whether to give Indonesia some kind of preferential access, either through an independent deal or as part of a trade framework the United States is negotiating in the Indo-Pacific.
But some US officials have warned that Indonesia’s lagging environmental and labor standards could allow materials into the United States that undercut the country’s nascent mines, as well as its values. Such a deal is also likely to trigger stiff opposition in Congress, where some lawmakers criticized the Biden administration’s deal with Japan.
Jake Sullivan, the national security adviser, hinted at these trade-offs in a speech last month, saying that carrying out negotiations with critical mineral-producing states would be necessary, but would raise “hard questions” about labor practices in those countries and America’s broader environmental goals.
While innovations in batteries could reduce the need for certain minerals, for now, the world is facing dramatic long-term shortages by any estimate. And many officials say Europe’s reliance on Russian energy after the invasion of Ukraine has helped to illustrate the danger of foreign dependencies.
The global demand for these materials is triggering a wave of resource nationalism that could intensify. Outside of the United States, the EU, Canada and other governments have also introduced subsidy programs to better compete for new mines and battery factories.
Indonesia has progressively stepped up restrictions on exporting raw nickel ore, requiring it to first be processed in the country. Chile, a major producer of lithium, nationalized its lithium industry in a bid to better control how the resources are developed and deployed, as have Bolivia and Mexico.
And Chinese companies are still investing heavily in acquiring mines and refinery capacity globally.
For now, the Biden administration has appeared wary of cutting deals with countries with more mixed labor and environmental records. Officials are exploring changes needed to develop US capacity, like faster permitting processes for mines, as well as closer partnerships with mineral-rich allies, like Canada, Australia, and Chile.
On Saturday, the White House said it planned to ask Congress to add Australia to a list of countries where the Pentagon can fund critical mineral projects, criteria that currently only applies to Canada.
The G-7 nations, together with the countries with which the United States has free trade agreements, produce 30 percent of the world’s lithium chemicals and about 20 percent of its refined cobalt and nickel, but only 1 percent of its natural flake graphite, according to estimates by Adam Megginson, a price analyst at Benchmark Mineral Intelligence.
Jennifer Harris, a former Biden White House official who worked on critical mineral strategy, argued that the country should move more quickly to develop and permit domestic mines, but that the United States also needs a new framework for multinational negotiations that include countries that are major mineral exporters.
The government could also set up a program to stockpile minerals like lithium when prices swing low, which would give miners more assurance they will find destinations for their products, she said.
“There’s so much that needs doing that this is very much a ‘both/and’ world,” she said. “The challenge is that we need to responsibly pull up a whole lot more rocks out of the ground yesterday.”