The green energy transition from fossil fuels to clean energy has contributed to the rising global demand for critical minerals and their increasing significance in driving economic growth. The fundamental differences between fossil fuels and critical minerals present a new set of challenges in the design of domestic and foreign policies and strategies. While essential for the modern economy and clean energy technology, the supply of critical minerals and materials is often vulnerable to disruption. These vulnerabilities, paired with the essential role of these minerals and materials in manufacturing vital clean energy products, highlight their critical status and expose challenges, particularly for materials in which a country is import-reliant or does not produce domestically. This article explores the implications of these challenges, examining how governments and organizations strive to secure reliable access to critical minerals through foreign investments and foreign aid while advocating for tactful governance and the strategic use of resources.
The role of diplomacy in securing access to resources
Access to critical minerals is an essential driver of economic growth and geopolitical power. Distinct from fossil fuels, critical minerals are particularly concentrated geographically and are mined in lower quantities, generating smaller profits.1 The establishment of reliable production channels requires significant input and, considering the long-lead times required to develop the necessary mining and processing infrastructure, the centralization of supply chains is likely to continue until more progress is made. This has created a situation of high demand for materials that require significant time and resources to locate, extract, process, and use, with limited opportunities to diversify supply chains as infrastructure develops. The above reality has resulted in a global race to secure access to mineral supply chains to reduce vulnerabilities, mitigate risks, and avoid over-reliance on single sources.
Several governments and multilateral organizations have stepped up to support the development of new energy sources while minimizing geopolitical risks, particularly through foreign assistance and foreign investment. Such diplomacy can advance strategic interests, influencing and shaping alliances, trade agreements, supply chains, and even policies to secure favorable deals for resource extraction and export. Foreign aid focused on bringing stakeholders together for dialogue and capacity building not only strengthens resource management but can more closely align the priorities of donor and recipient countries. Similarly, financing infrastructure projects, such as mining and transportation networks, directly facilitates resource extraction and export, further solidifying access to critical minerals and geopolitical relevance. The rising importance of critical minerals has attracted a surge of foreign capital into mineral-rich nations. For example, the People’s Republic of China’s (PRC) has taken an aggressive approach through its Belt and Road Initiative (BRI), investing over one trillion USD to secure its dominant position in processing. 2;3 Ultimately, strategic investments and diplomacy will be crucial in defining geopolitical influence as the race for critical minerals intensifies.
The importance of strategic resource management
The rise of foreign presence within mineral-rich nations highlights the need to strategically manage natural, human, and capital resources to ensure resource wealth is responsibly distributed across all population groups and supports sustainable democratic governance. Natural resources are an economic asset within mineral-rich nations. Resource extraction boosts domestic economies by providing local jobs, increasing government tax revenues, and developing infrastructure and technologies, among other benefits. Nonetheless, several critical minerals are concentrated in regions with long-standing geopolitical and domestic challenges. While foreign direct investment (FDI) can serve as a strategic tool for building up a country’s mining and extractive industries, limited or corrupted governance can leave key departments responsible for resource management underfunded or disempowered. The imprudent use of resources can threaten not only the conservation and conscious use of critical minerals, but also the escalation of pre-existing or emerging geopolitical risks. In several cases, the influx of foreign capital has led to growth within the mining sector that outpaces regulatory frameworks and governance capacities.
The role of governance, public financial management, and supply chain integration
Strategic and transparent governance and effective public financial management are essential to foster a conducive environment for responsible resource development. This reality is captured by DevTech’s recent involvement within the critical minerals space of Latin America and the Caribbean (LAC) and Southeast Asia: two regions that are uniquely positioned to influence the future direction of critical mineral supply chains. DevTech’s recent landscape analysis within Southeast Asia highlights economic governance challenges such as policy misalignment that leads to opaque ownership structures and legal and fiscal uncertainty as well as limited local capacity. Together, these challenges generate a risk of exploitation by foreign investors due to weak local demand and limited local job growth.4 DevTech’s evaluation of the Energy and Mineral Governance Program (EMGP) program in Argentina, which received $4.3 billion in lithium investments between 2020 and 2022,5 found that the primary challenge for provincial authorities was implementing regulations, largely due to limited human and financial resources. Ultimately, the evaluation found that the usefulness and sustainability of technical capacity improvements meant to enhance data collection, hydrogeological modeling, monitoring, and regulation of lithium resources largely depend on access to resources.
The landscape analysis of Southeast Asia and the lessons gleaned from the EMGP evaluation highlight the importance of effective public financial management, enhanced local capacity, and multistakeholder collaboration to foster sustainable economic development and strengthen democratic institutions. In response to the challenges presented in both initiatives, DevTech offered tailored recommendations to the resource-constrained regions. These recommendations emphasized the need for a coordinated regional approach to policies and data sharing with a focus on knowledge exchange and multistakeholder collaboration to align mining visions between and within nations.
DevTech’s initiatives within the critical mineral space (see also https://www.linkedin.com/posts/devtech-systems-inc_today-we-officially-launched-the-critical-activity-7247280564792176640-k1On?utm_source=share&utm_medium=member_desktop, https://cmforum.org/) and related areas emphasize the importance of facilitating integration and fostering collaboration across stakeholder groups. It is imperative to engage and integrate the entire supply chain — from mining communities to end-users — into governance frameworks and diplomatic efforts, including foreign aid and investment, to ensure the responsible development of critical mineral industries. Through collaboration, resource-rich nations can attract and leverage foreign investment that generates a healthy competitive playing field, maintaining sovereignty and control over resources, while guaranteeing sound public financial management practices that improve service delivery, transparency, and accountability and foster fiscal sustainability. Similarly, a systems-approach to diplomacy and resource procurement can encourage the diversification of supply chains to mitigate risks such as overreliance on the PRC, political instability or social unrest, market manipulations, or export restrictions.
In conclusion, the competition for critical minerals has become a defining aspect of modern geopolitics, prompting both governments and industries to seek secure, sustainable supply chains. As evidenced by initiatives in LAC and Southeast Asia, countries are working to build regulatory and financial frameworks that not only attract foreign investment but also ensure responsible resource management. Strategic governance, transparent public financial management, and multistakeholder collaboration are essential to leveraging these valuable assets without compromising long-term economic stability or democratic governance. By fostering partnerships and diversifying supply chains, resource-rich nations can support sustainable development and strengthen their position in a rapidly evolving global economy.
References:
1 Source: https://www.irena.org/Digital-Report/Geopolitics-of-the-Energy-Transition-Critical-Materials
2 Source: https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative
3 China’s leads over 50% of processing efforts for four of the “big six” critical minerals. The big 6 include: copper, lithium, graphite, nickel, cobalt and rare earths.
Source: https://www3.weforum.org/docs/WEF_Energy_Transition_and_Geopolitics_2024.pdf
4 To read the full ASEAN Landscape Analysis visit: https://dec.usaid.gov/dec/content/Detail_Presto.aspx?vID=47&ctID=ODVhZjk4NWQtM2YyMi00YjRmLTkxNjktZTcxMjM2NDBmY2Uy&rID=NjM2MDcw
5 Source: https://www.argentina.gob.ar/sites/default/files/estado_del_sector_minero_secmin_mayo_2022_1.pdf
