The elements of power in the 21st Century Mining Not Drilling will rewrite geopolitics and world order

The power dynamics in the world of geopolitics is never cast in stone, it keeps changing based on which region has favorable cards in their hands. As Ray Dalio mentions no empire can last forever, they are bound by cycles. A dominant power in one era can become a weak nation in next era as seen with the rise and fall of empires from the Dutch to the British to the American and probably the rise of the Chinese over the coming decades. In the 20th century nations that could claim geopolitical power were the ones who had control over gold reserves, military strength, industrial manufacturing, oil control and reserve currency dominance. It was a century defined by energy extraction, military force and financial dominance. 

Tectonic shift in power dynamics led by critical minerals, AI, Currency- the new axis of global power

In the 21st century power is shifting to nations that have access to critical minerals, rare earth elements, their supply chain control, semiconductor dominance, energy transition leadership, technological ecosystems and cyber and AI capabilities. The 21st century is all about technology systems, energy transition, mineral control and digital infrastructure. There has been a metamorphic shift in the geopolitical world as world view has shifted from oil fields and tankers to battery plants and chip fabs and from gold vaults to data centers. Oil geopolitics was about energy security; mineral geopolitics will be about technological supremacy. The next hegemon will control materials that power AI, defense systems, space tech and electrified infrastructure. 

Critical minerals have become a strategic asset and having ownership of them is of utmost importance for national and economic security and energy infrastructure for any nation. 

 

 Like access to oil was dominated by certain regions (eg: OPEC or OPEC+) access to critical minerals too is geographically concentrated by a handful of regions eg: China, Africa, Latin America and Australia. These new nations will come to center stage in the coming decades as other nations (developed and developing) try to build strategic alliances with these nations to secure access to the critical minerals and their supply chain. In addition nations may try to identify ways to become self-sufficient by building their own critical mineral supply chains (refining, processing etc) or explore their regions for extraction these of critical materials. 

Let’s see how critical minerals are rewriting world power dominance, geopolitics, business dynamics, defense, currency power and AI supremacy? 

Critical minerals are the new oil and new crown jewel- lithium, cobalt, nickel, copper, graphite, rare earth elements. 

Let’s zoom back in time and see what factors characterized strong dominant nations:

Before oil became a dominant strategic source national power was displayed by factors such as land and agriculture, precious metals (gold and silver), access and control of trade routes/ naval power, coal as a dominant resource powering industrialization, military power and strength and population size (manpower/ labour). 

Oil rich nations essentially the OPEC nations rose to power in the 20th century as demand for oil accelerated astronomically. Oil was a major source of power as it fueled automobiles, manufacturing processes in factories, aviation, defense and in turn economic growth. The US created the petrodollars system as a tool to maintain its currency dominance after letting go of the gold standards, to reinforce US financial power, US geopolitical leverage and dollar dominance and hegemony. Countries with large oil reserves or control over oil trade gained enormous leverage.

However as the world gravitates towards electrification and AI adoption; a new recipe for geopolitical leverage has come to light: Critical Minerals and Rare Earth Elements. 

These materials are powering today’s EVs, batteries, AI data centers, renewable energy, semiconductors. Countries that lead in EV manufacturing, AI chips, advanced batteries and nuclear power will shape the next era of power. AI dominance will depend on semiconductors, advanced chips, rare earth magnets, power and data centers. AI supremacy will not be about algorithms but about who will control the materials that build the machines that train the algorithms. 

So, who has been the early winner in the race of the hare and tortoise? 

China had strategic foresight to predict the importance of critical minerals and rare earths. They made strategic, calculated and deliberate policies over the last decades to build a dominant position for itself in the minerals supply chain, a vision extended by Deng Xiaoping in the 90s. China is home to a vast reservoir of critical minerals and rare earth and on top of that it has built a complete manufacturing ecosystem around it including mining, extraction, refining, processing and manufacturing. It dominates in rare earth processing, battery supply chains and solar panel manufacturing. In addition China has had the first mover advantage of securing critical minerals via its belt and road initiative around the world in countries like Latin America and Africa. Today China holds the power to influence trade negotiations and impose export restrictions as a single source supplier for majority of these materials. China boasts a leverage similar to what OPEC nations had from the 1970s, it is a single dominate player. 

Let’s have a look at the nations that have a dominating position in critical minerals and rare earths. 

China controls around 60% of global rare earth mining and 90% of processing and refining especially for magnets. The democratic republic of Congo produces around 70% of worlds cobalt. Australia and Chile are mining producers of lithium, 50% and 25% respectively while China controls refining and processing of 60% of lithium. Indonesia has 42% of global reserves of nickel. China dominates 3/4th of global graphite output followed by smaller players like Brazil, Mozambique and Madagascar. Chile is the leading exporter of copper, followed by China, Peru and DRC. The Lithium triangle, Chile, Bolivia and Argentina is renowned for 75% of global reserves found. According to IEA, China controls processing and refining of 19 out of 20 strategic minerals. These countries will gain geopolitical leverage in the 21st century. Middle East oil economies are diversifying to remain relevant in the new world order. For instance Saudi Arabia is investing in mining, building EV system and partnering with China. The UAE is becoming a logistics and capital hub, investing in African minerals and diversifying into technology and renewables. 

How are geopolitics and alliances slated to change in the coming decades?

It can be argued that having mineral abundance itself will not make a nation gain geopolitical influence. Nations will need a holistic industrial strategy focusing on refining, manufacturing, governance to flex their muscles in the new world order. Furthermore to gain a wining spot countries will need to advance up the minerals supply chain/ value chain by producing components or end products using the minerals. China clearly stands a winner in this space. However the new potential regions of power discussed above have gained relevance as the US, EU, Middle East, India and many more are forging new strategic alliances to reduce their dependence on China as the sole supplier of all the minerals. 

How are business dynamics shaping up in the new minerals geopolitics? 

Corporations are no longer just companies they are becoming players in geopolitics trying to get a slice of access to critical minerals and the supply chain. Companies and governments need to secure critical minerals and rare earths to protect their defense and industrial sectors. The US, Japan, South Korea, India and EU are planning to build their own strategic mineral reserves and stockpiles. 

Let’s look at a few examples of what strategies are countries following to secure critical minerals and rare earth elements: 

US government is making direct investment into mining, refining companies of rare earth materials and critical minerals eg: the US department of defense invested $400 million in MP materials. US is making an investment of $12 billion in Project Vault to build a strategic reserve for critical minerals. The US is investing in domestic mining, rare earth processing, recycling, strategic stockpiling and allied mining projects to build an allied supply network. Japan is focusing on overseas mining investment, building strategic stockpiles, working on advanced processing technology and deep-sea rare earth mining. Australia is focusing on expanding mining, developing domestic processing and building strategic reserves. Countries are cooperating through deals like MSP; Quad Critical Minerals Initiative, bilateral agreements to reduce reliance on a single supplier. Countries are investing in processing expansion capacities-- this is where strategic power lies.

Private and government push in the new rush for minerals dominance 

Hyperscaler’s and governments are directly investing in critical minerals and rare earths via direct equity, loans, joint ventures. Hyperscaler’s like Google, Amazon and Meta are investing indirectly in critical minerals via partnerships, recycling and supply chain agreements and long term contracts than owning mines. In addition companies are investing in recycling firms, battery companies and mineral processors. AWS singed a deal with Rio Tinto to secure copper for its AI data centers. Google acquired Intersect Power a clean energy developer to secure power grid capacity. Tesla is directly involved in critical minerals, it is directly sourcing lithium, cobalt and nickel from mining companies, it has developed its own lithium refining capacity, signed long term mineral supply agreements and built relationships with miners to secure supply of minerals. 

TSMC is directly exposed to scarcity of critical minerals as it requires rare materials and specialty gases for manufacturing chips at extreme precision. They are expanding facilities in US, Europe and Japan to de-risk potential geopolitical issue of annexation of Taiwan by China, diversifying gas suppliers, increasing local stockpiles and expanding geographic manufacturing. ASML’s EUV lithography machines requires rare earth magnets, high precision optics, specialty metals, laser systems using rare gases and thus is building closer long term partnerships with material suppliers.

How are businesses becoming geopolitical actors? 

There are possibilities that hyperscaler’s may become mineral investors in the future as demand for electricity explodes due to AI. AI companies will gradually become industrial infrastructure companies focusing on areas like securing minerals supply, building power infrastructure, securing chips and managing supply chains. They may position themselves as supply chain managers rather than software companies in the future. AI infrastructure will require enormous quantities of minerals such as copper, rare earth elements, gallium and lithium. AI data centers require copper for power systems, rare earths for cooling motors, gallium and germanium for chips and power grid. AI companies aim to utilize AI for mineral exploration. Today global corporations in the industries such as defense, aerospace, electronics, renewable energy are facing major dearth of critical minerals and rare earths that are imperative for manufacturing the goods. 

How will minerals geopolitics impact the future of currency? 

Will the next global reserve currency be backed by data, power and minerals instead of oil? Will mineral trade shift from dollar settlement? Will China trade lithium or rare earth in yuan? Will BRICS build a commodity backed currency? In the future there is a possibility of having a multipolar currency system. In the 21st century, currency strength will come from who has the maximum energy capacity, AI leadership, semiconductor capability, financial depth and stable institutions. The next reserve currency will be backed by technology and energy dominance and financial markets. The dollar will remain dominant though its share may decline, and the system will become multipolar. If mineral trade diversifies settlement currencies, then the foundation of global reserve dominance could slowly erode. The next reserve currency may be backed by supply chain control and AI dominance.

Conclusion 

The new world order will be decided by who controls extraction, who dominates refining, who owns advanced manufacturing, who commands AI infrastructure and who shapes currency settlement systems. The 21st Century will not be shaped by who owns land but who controls the elements beneath it. 

 

(Disclaimer: The opinions expressed within this article are personal opinions of the author. The facts and opinions appearing in the article are views of the author in general and the author does not hold any legal responsibility or liability for the same.)