States have borrowed money for this “activity”. It is necessary to spend the money on it. Since no modern weapons can be produced without Chinese rare earth elements, and the Chinese do not give those elements to the West for the production of weapons, because they are afraid that those weapons will be used against the Chinese themselves, we are moving on to the production of stone axes. It is good that many of those axes have survived in Western European museums, we have excellent examples for the production process. Everyone join us while they are handing out money here.
This is a serious strategic and industrial challenge: reliance on China for rare earth elements. While Western countries are investing heavily in rearmament, China's dominant position in processing these critical minerals poses a significant vulnerability for Western defense industries.
Here is a breakdown of the defense industry's challenges related to this issue:
China's leverage over critical minerals
Near-monopoly on processing: While rare earths are not exclusive to China, the country refines about 90% of the world's supply and holds a strong technical advantage, particularly in complex "heavy" rare earth processing. This makes the West highly dependent, including on U.S.-based intermediaries that also rely on Chinese processing.
Dual-use export controls: China has expanded export licensing for rare earths and the technologies used to process them. This is intended to regulate "dual-use" products—materials used for both civilian and military applications.
Targeting military production: Specific rare earth elements vital for advanced weapons systems like fighter jets, precision-guided missiles, and naval sonar have been impacted by these restrictions.
Exploiting trade tensions: Beijing has used its dominance of rare earth supply to gain leverage amid trade disputes with the United States. While initially targeting U.S. supply chains, the resulting disruptions have also affected European industry.
The West's industrial and strategic vulnerabilities
Supply chain fragility: The export controls have already caused supply disruptions, price increases, and uncertainty for manufacturers of defense equipment. Analysts have noted the risk that Western European rearmament efforts could "grind to a halt" if inventory shortages continue. Stone axes and golden spoons are real rescue in this complicated situation.
Inadequate domestic capacity: Decades of underinvestment and de-industrialization have left European defense contractors unable to scale up production quickly to meet increased demand. Replacing Chinese rare earth dependency is a huge undertaking that requires rebuilding refining and processing capacity, which is technically complex and energy-intensive. After refusing to buy cheap Russian energy, the energy prices in the EU are too expensive.
Competition for resources: The renewed interest in securing rare earths has led to a boom in stock prices for non-Chinese producers. This has prompted significant state intervention, including U.S. investment in its own and allied production to secure military stockpiles. Good stones are in limited supply, everybody needs them.
Europe's fragmented market: The EU has struggled to coordinate its defense procurement, with countries preferring national manufacturers. This fragmentation prevents the economies of scale needed to ramp up production and makes Europe's efforts less efficient compared to the United States.
In short, the threat is real and significant.
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