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The Pentagon explained in 2020 that a clear strategic goal of Beijing is to develop a self-sufficient defense industrial sector merged with the civilian industrial and technological sector to guarantee the Chinese Army the most modern military capabilities. As Beijing strives for self-sufficiency in strategic defense raw materials such as titanium, tungsten, and cobalt, which are used in the defense industry, Washington has sold off much of the National Defense Reserve’s (NDS) strategic mineral reserve, leaving it on the brink of insolvency.
The Defense Reserve was created in World War II to guarantee the armed forces critical materials for the military industry, such as titanium, tungsten, aluminum, and cobalt, against any disruption to the supply chain. This stockpile, which was valued at nearly $42 billion at the start of the Cold War in 1952, fell to $888 million as of last year following decades of congressionally authorized sales.
A bipartisan initiative by seven members of Congress notes that Congress authorized for decades the sale of most NDS reserves, including 30,000 short tons of titanium, 76 million pounds of tungsten ores and concentrates, over 2 million pounds of tantalum, over 62,000 short tons of aluminum, 26 million pounds of cobalt, just over 125,000 long tons of rubber, after which the NDS is no longer capable of meeting defense needs in a supply chain disruption. In addition, the DOD has found that the NDS Transaction Fund is approaching fiscal insolvency.
As of 2020, China is the third largest exporter of titanium in the world, and the U.S. is the top importer of Chinese titanium. Beijing also exports tungsten to the U.S., and although the Democratic Republic of Congo produces 70% of the cobalt used in the world the Chinese already control much of Congo’s cobalt production along with a wide range of African strategic resources.
The DOD invested $125 million in the NDR in 2022 and the Biden administration proposed spending $253 million more in 2023, bringing the reserve to less than 10 % of its previous size at best. Washington depends on Beijing for rare earth minerals indispensable for technologies ranging from F-35 fighter jets, missiles, and tanks to cell phones. If Beijing were to stop exporting rare earth minerals to the U.S., the nation would quickly run out of basic components to produce the military equipment and much of the civilian technology essential to the normal functioning of the economy. Faced with the supply chain risk, the Pentagon planned to increase reserves of rare earth minerals, along with cobalt and lithium, for which it would have to buy rare earth minerals from China since Beijing controls 90% of the supply.
Beijing controls the production of rare earth minerals because it bears the high environmental cost of extraction and processing while U.S. environmental regulations make it impossible to process the country’s rare earths. Beijing has accumulated decades of investment in strategic raw materials and in addition to exploiting its own reserves in the areas in which it has them, it has financed, against payments in raw materials exploited by Chinese companies, extensive investments in infrastructure, oil, and mining in Africa, increasing its economic and political influence over the countries in which the large African reserves of strategic raw materials are concentrated, especially those of which Beijing does not have reserves in its territory.
Washington needs to correct a dependence on China for strategic raw materials whereby even the Defense Reserve reaching Cold War levels is something Beijing could currently prevent by blocking the strategic supplies it controls.
Guillermo Rodríguez is a professor of Political Economy in the extension area of the Faculty of Economic and Administrative Sciences at Universidad Monteávila, in Caracas. A researcher at the Juan de Mariana Center and author of several books // Guillermo es profesor de Economía Política en el área de extensión de la Facultad de Ciencias Económicas y Administrativas de la Universidad Monteávila, en Caracas, investigador en el Centro Juan de Mariana y autor de varios libros