America Is Losing the Resource Wars

By Daniel McGroarty

"Any sufficiently advanced technology is indistinguishable from magic." - Arthur C. Clarke

Clarke's Third Law, coined by the late Sci-Fi master himself, Arthur C., captures perfectly the world we live in today - where the way we phone a friend, fire off a memo or a missile all owe to technologies whose inner-workings most of us understand no better than the ape-men in the opening scene of Clarke's classic, 2001, A Space Odyssey.

And for the vast majority of us who wouldn't know a line of software code from an Egyptian hieroglyph, we're quite comfortable living lives touched by magic. But our virtual world has real roots in a range of arcane minerals, metals and elements found on the Periodic Chart, and distributed unevenly under the Earth's crust.

Technology's modern magic rides on these materials. Sometimes it's a few flecks and bits, like the specialty metals and minerals in the typical cell phone - Nokia "mines" old cells for metal scrap - looming large only when multiplied across many millions of devices. Other times, it's measured in millions of tons, like the rare earth elements required to build electric car batteries or wind turbines or guidance systems for smart bombs.

But for all the wonder in our technology, there's very little magic in the way the world extracts the primary resources necessary for our new gadgets, which involve pulling them out of the ground and teasing them out of the waste rock in which they're encased.

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In fact, the only magic is our belief that global markets will deliver the right resources to the right manufacturers just in time to deliver us the next-gen technology we didn't know we'd need.

The logical response at this point is to plead exigency; after all, if you don't have the resources here at home, you've got to get them somewhere. That's what the global economy is for.

True enough - if a nation in fact lacks a resource base to draw on. But that's not the case for some metals and minerals the U.S. presently imports.

As cases-in-point, consider these critical materials:

Rare earths. The U.S. is currently 100 percent dependent on foreign supply, while the People's Republic of China - which accounts for 97 percent of all current global rare earths production - announced new limits on rare earths exports. Yet the U.S. hosts 13 percent of the world's known reserves, and was the world's dominant rare earths provider from the 1950s through the 1980s. A few companies are seeking to revive rare earths mining in the U.S. As they work their way through the bureaucratic maze, will U.S. policy lend them a hand, or merely wish them good luck?

Rhenium (critical to high performance commercial and military jet engines). U.S. producers presently account for 12 percent of the world's supply, despite the fact that the U.S. is home to 45 percent of the world's known reserves.

Cobalt (used widely by systems developers serving U.S. space, air, land and sea forces). We presently produce zero in the U.S.. Content to recover and refine scrap, we import more than 80 percent of the cobalt we consume each year. This summer, the U.S. Congress passed an amendment identifying cobalt produced in DRC Congo as a Conflict Mineral, requiring publicly-traded U.S. companies to demonstrate that their purchase of cobalt does not fund the war chests of Congolese military factions. Yet the U.S. hosts a larger known cobalt reserve than any of the countries from which we import, including Russia and China.

Zinc (of which Pentagon contractors consume more than 50,000 tons each year, in systems ranging from missile telemetry to torpedo propulsion). While the U.S. presently imports 73 percent of the zinc we use, we possess more known zinc reserves than the three countries from whom we import, combined.

None of this is to sidestep the critical calculations that determine the economic viability of extracting and refining these metals and materials. But we're not factoring at all for the national security implications of extended resource dependence. Put simply: If as a matter of policy we choose not to incentivize resource extraction of U.S. reserves, are we comfortable with the "price" paid in terms of a skewed foreign policy toward our supplier countries - or the risk of a sudden supply disruption?

To be sure, the U.S. can't provide 100 percent of domestic demand for any of the resources mentioned above. But why would we be content being 80 to 100 percent dependent on foreign sources of supply? Can we do so indefinitely?

Other countries understand the consequences of resource access and are taking action. Russian miners bought the U.S.'s only active precious metals mine in 2003, and Moscow has made resource control a critical lever in Russian foreign policy. China is actively buying into metal and mineral companies in Africa, Australia and North America, even as it restricts reciprocal investment in its own resource sector. On the demand side, South Korea is stockpiling more than a dozen strategic metals and minerals while Japan is quietly doing the same, as its metals-dependent companies pursue partnerships with foreign providers.

Meanwhile, back in the U.S., aside from a few members of Congress and Pentagon officials, few policymakers would put strategic resource access on their list of concerns.

A quick look at the headlines - a double-dip recession, Iran's ongoing nuclear quest, tricky end-games in Iraq and Afghanistan - suggests we don't have an appetite for one more crisis or source of conflict. But as long as we have an appetite for the gadgets of 21st Century comfort and communications - and as long as our 21st Century military has a need for Killer Apps fashioned from scarce strategic resources - we'll need to take an interest in this mysterious stuff our modern dreams are made from, and the steps necessary to secure their supply.

Believing in magic won't be enough.

Daniel McGroarty, principal of Carmot Strategic Group, an issues management firm in Washington, D.C., served in senior positions in the White House and at the Department of Defense.

 

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