Our minerals are ripe for the plucking by the US

Aug 9, 2023
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US-driven fast-track negotiations to develop secure strategic critical minerals supply chains from Australia risk jeopardising our mining industry links with China, and locking down our own industrial development based on our critical minerals.

First, necessary context. The Global South is enthusiastically engaging with multipolarity, through BRICS, SCO, Belt and Road, new reserve currency systems etc. More and more, centuries of US/UK hegemonic control over global resources is being challenged, especially in Africa. More countries are abandoning exploitative Western resource deals, preferring China as a trading partner. The US, haunted by fear that China might lock up access to critical minerals essential to US military power, is searching for politically reliable supply chains at least risk of political disruption. Canada and Australia are top of the US wish list. Australia is one of the world’s foremost producers of critical minerals such as copper, lithium, nickel, cobalt, and rare earths.

On 20 May in Tokyo, Biden and Albanese announced a new ‘Australia – United States Climate, Critical Minerals and Clean Energy Transformation Compact’. In a Joint Statement, the two leaders proclaimed climate and clean energy as ‘the third pillar of the Alliance’, alongside US-Australian defence and economic cooperation. (It is not clear which particular ’Alliance’ was being referred to here).

Under the sub-heading ‘Building Our Defence Capability’, the Joint Statement said:

‘The President plans to ask the United States Congress to add Australia as a “domestic source” [i.e., alongside Canada] within the meaning of Title III of the Defence Production Act. Doing so would streamline technological and industrial base collaboration, accelerate and strengthen AUKUS implementation, and build new opportunities for United States investment in the production and purchase of Australian critical minerals, critical technologies, and other strategic sectors.’

Australian mainstream media welcomed the Compact, highlighting its electorally popular climate and clean energy aspects. The strategic critical minerals content went almost unnoticed in the general Australian business community euphoria about truckloads of anticipated US investment.

But in Washington briefings and commentary, the Compact’s significance for US critical minerals supply chain concerns about China figured highly. The White House Briefing Room noted that both countries are determined to, within 12 months, identify concrete actions toward the Compact’s objectives. ‘Underscoring the central role of critical minerals’, Australia and the US are to establish a ministerial-level Australia-United States Taskforce on Critical Minerals, to be led by principals from the U.S. National Security Council and Australia’s Department of Industry, Science and Resources, with engagement from key stakeholders across industry and relevant government agencies. The Taskforce is intended to work with industry leaders to … promote responsible, sustainable, and stable supply of critical minerals. The leaders intend to … identify risks and market distortions that impact on critical minerals markets and consider mitigation options. 

Just six days later in Detroit, Australia’s Minister for Trade Don Farrell met with US Secretary of Commerce Gina Raimondo for the second annual Australia-US Strategic Commercial Dialogue. Their Joint Statement welcomed the Dialogue ‘as a key bilateral mechanism to advance shared geoeconomic and commercial interests across the nexus of economic, foreign, and national security policy. They agreed to convene Australian and U.S. companies from across the critical minerals supply chain, including miners, processors, manufacturers, and investors at an event later in 2023.

To get behind the veiled language and understand what the US might be really pushing for here – to cut China out of the Australian critical minerals mining industry, and to lock up this vital strategic resource for exploitation by the US strategic defence sector as and when it wishes – an invaluable source is this commentary article by two Washington researchers that appeared in Australia on 24 July in ‘The Strategist’, an ASPI publication. This article sets out what look to be US ambit claims in the forthcoming fast-track discussions.

They are quite horrifying, in my view. The US aim is ‘to reduce US dependence on China, where various links in the critical mineral supply chain are heavily concentrated’. To do this, the US will invest heavily under the Compact in Australian critical minerals resources mining, but only under certain conditions:

The US should only fund Australian mines: not refineries. All refining beyond the minimum level of crude refining in order to economically ship minerals to US should be done in US.

The US should only fund Australian mines that produce minerals that are lacking in US and Canada, because ‘US critical-mineral supply chains are most secure when they are in or near the US and under friendly control. US taxpayer dollars should not be expended on distant mines when nearby mines are available’. This provision could make the proposal for funding Australian mines more palatable to Congress.

The US should allow companies to partner in a US-funded mine only if they are not owned in any way by foreign entities of concern, including all Chinese entities. The US should not fund Australian mines where Chinese entities can benefit financially or influence the project at the expense of US taxpayers. ‘To protect US national security, if an Australian company is seeking to participate in a US-funded mine in Australia, it should have to first divest any shares held by entities of concern’.

‘American companies should have a controlling interest in US-funded mines, so that the US government can enforce compliance with US regulations, such as blocking Chinese companies’ involvement or investment in the mine’. [Tony Kevin – and also to control decisions whether to mine or to lock the Australian resource up as a US strategic military reserve for the future]

‘Partnering with experienced Australian partners will also enable less experienced US companies to build valuable mining skills.’

‘The US should require that mined materials from Australia be refined by American companies in the US. The US should also require that the mined material have an end use in a strategic US sector like aerospace or transportation, not consumer electronics like televisions and mobile phones.’

‘The US should also require all companies participating in the mine to stop operating in China and selling their products to Chinese entities. Nor should the US allow companies to use earnings from a US-funded mine to support their operations in China or sales to Chinese entities.’

These are huge ambit claims, probably put up through ASPI to test the climate of opinion in Australia.

The authors conclude that the Compact is ‘a satisfactory starting framework for strengthening critical-mineral supply chains between the US and Australia. The stipulations attached to such an arrangement would help to ensure that US–Australia supply chains are diversified, protected from Chinese influence, and forged by a workforce in both countries.’

A leading Washington law firm endorsed the Compact as a ‘huge step forward ‘in expanding US proactive measures to secure supply of critical minerals and ‘hold out competitors’.

So – we will provide the critical minerals deposits and drive the trucks: the US will control and benefit from almost everything else in the supply chain, when and if the US chooses to develop it. And China will be kept out .

The two big risks to Australia here are, firstly, jeopardising whatever is left of our mining sector’s historic relationships of trust with our major mining market in China. Any Australian mining company currently selling to China could have its relationships and operations there crippled if it went into business with US mining companies on this basis. It is pure mercantilism, to put it bluntly – aimed at cutting out Chinese competition in a fair marketplace.

Secondly, the proposals set out in the ASPI paper for US-majority-owned mining companies to dictate and determine development of industry processing of critical minerals in Australia contradict Australian aspirations for economic sovereignty. They would put Australia firmly back in our place as a raw materials supplier to the Metropolis, and nothing more – as we were in British Empire days. This cries out for Paul Keating’s acerbic pen.

I have no confidence in the ability of the present Australian Government, dazzled by the US alliance, to manage these negotiations in our national interest – either commercially or strategically. I fear we will once again be exploited and entrapped by our great and powerful – and clever – friend.

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