MINERAL DIPLOMACY: RACE FOR MINERALS AND OPTIONS FOR INDIA

China’s Critical Mineral Hegemony

China’s unparalleled production capacity has made it an inevitable node for accessing stable supply chains. It holds a monopoly over 30 out of 50 minerals that USA has stated as critical in year 2022. According to International Energy Agency (IEA), China holds 90% of rare earth magnet production, 68% of global Nickel, 60% of Lithium and controls over 85% of mineral processing capacities. In addition to domestic prowess, China’s growing BRI outreach has facilitated diversification of its critical mineral avenues. It’s monopoly is a result of punctual appreciations, conducive industrial policies and incremented growth of vertical integration. China has raised export restrictions on products manufactured and exported beyond its border through its own version of the Foreign Direct Product Rule (FDPR). Companies abroad require a dual-use export license before shipping if they use more than 0.1% of Chinese origin rare earth materials and involve Chinese refining technologies. China has emphasized on implementing a policy of ‘counter-containment’. The Xi government has focused on preservation of domestic knowledge & expertise by raising structural barriers on outflow of technical information on production and refinery processes of critical minerals. In the aftermath, USA and other major mineral actors have been confined to domestic and independent refining techniques.

Through BRI, China fuses state-backed finance, logistics infrastructure & long-term offtake agreements to geographically diversify mineral sources while locking partners into Chinese-built transport and processing corridors. These mechanisms are heavily focused on building Chinese supply chain through development of multi-modal transport networks, extracting agencies and downstream sector This eventually consolidates its dominance over global mineral supply chains. China leverages this ascendency through strategic price-flooding and depressing global REE prices below viability thresholds for non Chinese partners. Hence, competition with Chinese supply chains becomes increasingly difficult, increasing their dependency on China. Consequently, global rare earth prices have been driven down which makes domestic mining projects economically unviable for the US and other nations. According to the Centre for Strategic and International Studies (CSIS), prices of Neodymium-praseodymium-oxide have fallen to below 60$ per kilogram. If this continues till 2030, more than half the projected supply outside China will become economically unviable. As a result, India’s & US’s ambitions to de-risk supply chains and build independent resource infrastructure would potentially be slowed.

US Policy Response & Contours of Mineral Tensions

China’s rare earth chokehold has not just triggered a supply crisis, but a strategic strain over global mineral supply chains. This has forced democracies in QUAD (Australia, India, US & Japan) to rewire supply chain and production dependency. Amid internal disruptions, QUAD adopted a more coordinated stance with the QUAD Critical Mineral Initiative in early 2025. This was a collective effort to de-risk supply chains, diversify resource avenues to access markets away from China. Seminally, the initiative had been gaining traction as Japan had expanded lithium cooperation with Australia and India had expedited bilateral agreements in Africa & Central Asia. Still, the path to fully acquiring joint efforts from all QUAD countries would be difficult for the US due to divergent regulatory standards.

The US-Australia Critical Minerals Framework signed in late 2025 holds strategic significance beyond bilateral integration. As part of the framework, US and Australia will invest $1 Billion in financing projects within the two countries to promote swift injection of capital and secure mineral production. US & Australia will encourage transparent investment models to provide a trust based relationship between suppliers and producers. This will help distinguish the contrary Chinese state backed model of mineral supply chains and create an anchor-market of resource rich developing nations in the Indo-Pacific. The deal comes in tandem with additional initiatives in the Indo-Pacific Economic Framework (IPEF), including standardization of norms, focus on clean energy technologies and addressing price volatility. In a broader sense, the IPEF translates the strategic intent of US-Australia critical mineral framework into an interconnected regional architecture. Although none of US led initiatives in the Indo-Pacific overturn Chinese dominance in the coming years, this reconfigures the canvas of Indo-Pacific mineral geopolitics. First, the emergence of US-led anchor markets incentivize selective realignment among resource rich developing nations, who now gain secure opportunity to develop mineral capacity. Secondly, it shifts the node of competition from mining to manufacturing, ultimately changing the landscape of influence. This comes at a time when China’s overseas mining acquisition is surging. A fragile market could easily emerge as China could either restart domestic production or bolster foreign mining activity, inviting economic shocks for both US & India.

Reformations in American domestic policy have rewired Indo-Pacific market and geopolitical ecosystem. Initially, introduced as a climate centric policy, the Inflation Reduction Act (IRA) of 2022 is used as a Strategic Economic Law, signaling broader US adaptability in shaping Indo-Pacific mineral geopolitics. The IRA’s EV tax credits provide substantial financial subsidies to domestic and foreign companies to promote US sourced rare earths. However, companies need to comply to rigid qualification thresholds. According to US Department of Treasury in 2025, 60% of critical minerals must be extracted in the US or an FTA partner country. This percentage is expected to grow to 80% by 2030. The IRA also disqualifies companies that source critical minerals from ‘Foreign Entities of Concern’ (FEOC), including China. This compels companies to completely redirect their supply chains and trade flows away from China to access lucrative US consumer markets which has resulted in shift in investment geographies. Japan, South Korea & Australia have announced multi-billion dollars in US EV and Cathode facilities, beckoning a realignment of capital flows from China-centric value chains to US-led industrial hubs. Thus, the IRA is not a domestic reform alone - it is a geopolitical rerouting mechanism that transforms US strategy from market incentives to hard security prioritization. This shifts Indo-Pacific mineral competition from mere mineral extraction to contest over standards, industry and alliance politics.

Challenges for India

China’s unparalleled dominance in rare earths and an aggravated US shift in the Indo-Pacific has manifested a trend of mineral export restrictions. India’s position amidst conflagrations is of a constrained player affected by radical actions from either US or China. Challenges facing India’s mineral ecosystem are systemic and long-standing. An import analysis of 30 critical minerals spanning 2019 to 2024 unveiled India’s acute vulnerability to Chinese supplies exceeding 40%. Entailed critical minerals such as Lithium, Silicon, Titanium etc used in pharmaceuticals, semiconductors & defense technology face processing bottlenecks despite alternative raw sources, since China controls a large share of global refinery. The primary reason behind India’s frailties is structural in its mining and processing spectrum. Most of the listed minerals are deep seated which require intensive capital and high-risk investments. This causes deterrence over private players due to insufficient incentives and lack of policy support. Therefore, absence of a reliable mining and processing infrastructure domestically amid high vulnerabilities to Chinese export restrictions create a fettered environment for future developments in climate technology, innovation, Artificial Intelligence and defense.

IRA driven incentives have rather polarized the clean energy supply chain of the Indo-Pacific. This follows a stringent incentive based ecosystem that challenges India due to lack of a formal FTA with the US. US FTA or critical mineral partners such as Japan, South Korea and Australia are aligning their supply chains to comply to IRA thresholds for safer access to reliable US EV markets. This has incentivized offtake agreements between corporate partners that provide suppliers and producers with financial security. While IRA-driven offtake agreements provide stability for participating actors, it creates a restricted architecture for non-partners due to reduced availability of high value raw material. This forces India to resort to an economically challenging and turbulent path of creating self-reliant supply chains while navigating Chinese critical mineral dominance.

India is practicing enhanced multilateral cooperation in the MSP with mineral rich nations but with strategic reticence. Yet, its focused participation in the mineral interplay has begun considerably late. The US and China have already expanded their mineral outreach beyond the Indo-Pacific to Central Asia, Africa as well as Latin America for restructuring value chains. The US and EU have cooperated in the Lobito Corridor, a central initiative focused at connecting the Democratic Republic of Congo (DRC) and Zambia to an Atlantic port in Angola, providing alternative westward trade routes to contest their Chinese counterparts. Meanwhile, China augments its physical mining & extraction infrastructure abroad by building railways and ports in countries in exchange of raw material. A key figure in this is the Tanzania-Zambia railway in Africa that locks pertaining partners back to Chinese-build trade routes. On the contrary, despite possessing the world’s fifth-largest mining reserves, India contributes only 1% to global mining and processing due to lack of necessary infrastructure. While domestic Indian reforms such as National Critical Mineral Mission (NCMM) exist, but structural incapacities wouldn’t allow India to further their role in the foreign mineral markets since countries would prefer more reliable US and Chinese models. Thus, India’s space for maneuvering to secure mineral supply chains and avenues could lose credibility.

Way Forward for India

The way forward amid uncertainties is determined by the success of India’s Mineral Diplomacy which requires a multi-pronged approach. The Indian Government has launched the NCMM to bolster mineral exploration and mining in domestic as well as offshore territories within its mandate. Key efforts are to establish a strategic framework for India’s mineral self-reliance. The largest discoveries are merely around 5.9 million tons announced in Jammu & Kashmir, which are insufficient to India’s ambitions in the sector. Hence, a more comprehensive push would be a prerequisite. India’s recent push for Extended Producer Responsibility (EPR) for e-waste and batteries aims to reduce import dependency on Lithium, Cobalt and Nickel. ₹1,500 crore incentive scheme under the NCMM requires domestic producers of Lithium-ion batteries to produce environmentally sound products and meet recycling targets. This allows integration of India’s critical mineral feedstock into a larger circular economy model, establishing enhanced resource recovery and reduction of foreign exchange spent on mineral imports by ₹80,000 crore. Such symmetric approach bridges the gap in India’s domestic mineral industry while hedging against broader US-China revanchism.

US legislation’s counter-models like the IRA forestall expansion of India’s mineral outreach by creating centralised anchor markets. However, India must leverage its market’s demand gravity to provide alternative and more flexible anchor markets to developing producers. Critical Minerals Manufacturing Corridors (CMMC) will provide structural value chain spine by presenting global producers, seeking avoidance of US-China volatility with institutional certainty. Offtake foreclosures in the Indo-Pacific work by leveraging supply scarcity & fragmented demand, pre-committing raw material & processing capacity. CMMC however, provides a second demand pole sufficient to dilute monopsonistic pressures exerted by US buyers. In addition, CMMC models provide demand certainty without alliance conditionality which attracts firms to comply to more flexible contracts rather than political regulations. This weakens IRA-based foreclosures by aggregating domestic demand, converting India into a distributed anchor market. Operationally, CMMCs can be structured under existing industrial corridors and PLI-linked manufacturing clusters, with long-term procurement guarantees provided by Public-Private-Partnerships.

Focusing on Institution Based Capacity Statecraft (IBCS) must be prioritized instead of capital heavy attempts to secure critical mineral supply chains. India’s problem is not access to critical minerals but being forced into exclusive and alliance-based supply chains. The invariable response to the issue has been excessive capital injections or price support mechanisms that deter long-term competitiveness. Capital heavy approaches require large financial injections to operationalise mining projects and amid price volatility, there remains risk of heavy capital losses. Whereas, IBCS focuses on building rule-making first, targeting issue based mineral cooperation, metallurgical intellectual property & traceability, keeping India flexible across blocs. In the long-run, South-South Cooperation is the path to implement this by co-creating mineral rules, share processing networks and build a non-exclusive framework. In the process, India will position itself as an institutional convenor in the fragmented Indo-Pacific mineral ecosystem.

Conclusion

The coming decades will be defined by green energy transitions, climate technologies & defence innovation, with REEs emerging as critical instruments of strategic leverage rather than mere industrial inputs. India’s mineral vulnerabilities are not accidental but structural, unfolding within an international environment shaped by US-China competition, price volatility and securitized supply chains. In such a landscape, only reactive or capital heavy approach is insufficient. India’s horizon lies in combining domestic capacity building with institutional & market-based diplomacy, leveraging demand, policy making and flexibility across blocs. By positioning itself not as a peripheral consumer, but as an anchor market and institutional convenor, India can mitigate coercive dependencies while securing a participative role in a fragmented & innovation driven global order.

(The views expressed by the author are entirely personal)

About the Author

Arnav Singh is a student of Class XI in Army Public School, Pune. He is an avid reader and has keen interest in Geopolitics.