WRITTEN BY ANSEL BAYLY
Ansel is a Research Assistant at the Centre for Science and Security Studies in the Department of War Studies at King's College London. He is currently studying for a Liberal Arts BA majoring in Politics at King’s. His research interests include US-China strategic competition and the geopolitics of the green transition.
When the AUKUS security pact was announced in September 2021, President Joe Biden hailed it a “historic step”, emphasising that the trilateral pact was seeking to address “rapidly evolving threats” through “modern capabilities”. From Canberra, Prime Minister Scott Morrison called it a “next-generation partnership”, echoing this future-facing outlook. In London, Prime Minister Boris Johnson called it “one of the most complex and technically demanding projects in the world, lasting for decades and requiring the most advanced technology.” The big-ticket item in AUKUS is the fleet of conventionally armed nuclear-powered submarines that Australia is acquiring under Pillar I. Yet, in an era of strategic competition, the advanced military-relevant technologies being developed under Pillar II are just as significant; if not more so, given that they will be ready sooner, and indeed be more consequential in strengthening and diversifying the three nations’ military defences.
Vital to the Pillar II project is the availability of critical minerals (CMs), the building blocks of almost all advanced technologies. In the past decade, there has been a tectonic shift in global demand for CMs amid the expansion of technologies that underpin three areas of economic demand: the green transition, advanced consumer goods, and, as reflected in AUKUS, military modernisation. Specifically in Pillar II, there are six ‘workstreams’ of advanced capabilities that have CM inputs: undersea capabilities; quantum technologies; artificial intelligence and autonomy; advanced cyber; hypersonics/counter-hypersonics; and electronic warfare. This article reflects on the centrality of CMs to AUKUS. Although there are number of inputs essential to operationalising the pact – including nuclear technology, military hardware, and, even on a basic level, the availability of skilled labour – Pillar II will not get off the ground without a steady and sustainable supply of CMs. This is where a key obstacle lies: China’s almost complete monopoly of global CM supply chains.
China’s leverage over a critical AUKUS input
Although most often associated with rapidly proliferating green technologies, CMs are essential to the capabilities that will come to define the future of war. This ranges from CMs in the advanced semiconductors needed for AI and quantum computing to the magnets used in missile guidance systems. Yet China, with its significant deposits of CMs, including valuable rare earth elements, and particularly its stranglehold on global CM processing and refining, has a near monopoly across the value chain. China produces 98% of the world’s supply of raw gallium, a vital mineral for advanced semiconductors, and processes 90% of the world’s rare earth elements, including neodymium, vital for high-powered magnets.
The US is profoundly reliant on Chinese CMs. In 2023, the US was dependent on China for 12 out of 50 mineral commodities where there was 100% net import reliance, according to US Geological Survey data – and an additional 29 where there was a 50% or more net import reliance. EU dependency on Chinese CM imports is even greater. Beijing has proved willing to leverage this asymmetry. In December 2023, China announced a ban on exports of rare earth processing technologies. This followed restrictions in July 2023 on exports of gallium and germanium, widely seen as a response to the US’s own restrictions on technology transfer. In December 2024, restrictions were escalated to an outright ban on its exports. Although the US is still receiving supply – China has not yet targeted those buyers who subsequently sell on to the US market – the US Geological Survey estimated a total ban would result in a US $3.4 billion loss for the US economy.
Critical mineral supply chains as a target of coercion
In the past two decades, great powers have increasingly resorted to coercive strategies, working in the space that falls beneath the threshold of kinetic military action but above that of regular economic competition or diplomacy. At its simplest, a coercive strategy is an expedient tactical means of influencing the behaviour of other states through use of threats. As Thomas Schelling observes, it is the “power to hurt” that confers one’s “bargaining power”. In today’s increasingly crowded international system, states’ competition for power has driven a proliferation in the use of coercive economic weapons including embargoes, trade tariffs, divestment orders, licensing denials, visa bans, and other coercive actions.
AUKUS is both uniquely vulnerable to, and uniquely capable of countering, this supply chain threat. It is clear to Beijing that the US and its partners are reliant on CMs for developing the technologies of future warfare for projects like AUKUS; at the same time, AUKUS is a manifestation of US-led initiatives to restore the balance of power in the Indo-Pacific amid China’s rapid geopolitical ascendancy. Thus, AUKUS is both an ideal target of coercion as well as a highly effective vehicle for US-centric deterrence vis-à-vis China.
Pillar II is AUKUS’s primary point of vulnerability to coercion over CM supply chains. Yet the vulnerability also extends to Pillar I. Although the US classifies defence requirements for CMs in wartime scenarios, by way of example a Virginia-class submarine alone requires 4,170 kilograms of rare earths. Meanwhile, state-of-the-art radar systems, such as those equipped to Patriot missile defence units and F-35 fighters, are powered by several thousand gallium-enabled chips. Even for minerals where defence only accounts for a small share of global end-use, the cascading effects of supply disruption could have a major impact on defence production. Many defence suppliers of gallium semiconductors also rely heavily on civilian revenues which, if interrupted, might limit their ability to meet defence sector demand.
AUKUS as a vehicle for cultivating supply chain security
Despite its vulnerability to coercion, AUKUS in fact provides an expedient framework for resolving the issue of CM supply chain vulnerability. Recognising the strategic significance of CMs, in 2017 President Trump enacted Executive Order 13817 (requesting “A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals”), followed three years later by Executive Order 13953 (addressing the “Threat to the Domestic Supply Chain from Reliance on Critical Minerals from Foreign Adversaries”). Under Biden, this strategy of supply chain securitisation accelerated. Terms like “decoupling”, “derisking”, and “friendshoring” began entering the Washington lexicon, as the US developed a concerted national strategy to reorientate supply chains away from China. In just a few years, CM supply chain security became a highly active – and importantly bipartisan – sphere of US policymaking, evidenced by the creation in 2021 of the Bipartisan Infrastructure Law (BIL) and, in 2022, both the Inflation Reduction Act (IRA) and CHIPS and Science Act.
With Trump back in the White House, America’s CM strategy is currently in flux. Day one of the administration saw all IRA spending paused amid a sweeping executive rollback of the Biden administration’s climate policy. Reflecting his well-known penchant for tariffs, Trump is also considering a proposed blanket 10% tariff on Chinese goods from February 2025. Such actions make it increasingly likely that a second trade war with China is on the cards. Nevertheless, uncertainty is the only certainty under Trump. And given the vital strategic role that CMs play in US national security, it seems unlikely that Washington will diverge significantly from the broad strokes of the previous administration’s emphasis on pursuing supply chain security.
Although global mineral supplies are globally geographically diffuse, all three AUKUS partners are active members of the Mineral Security Partnership (MSP), a network developed by Washington in 2022 to develop sustainable and secure supply chains. Notably, Australia possesses significant CM reserves, including the second-largest reserves of bauxite (from which gallium is extracted). It also supplies 52% of the world’s lithium. Although the US possesses substantial reserves, for a number of minerals, these reserves fall short of the levels required for self-reliance. Nonetheless, the US has access to substantial private and government finance, enabling large-scale investment into CM projects globally. The UK’s mineral reserves are far more limited, but mining behemoths Glencore, Rio Tinto, and Anglo American are all listed on the London Stock Exchange. All three countries possess extensive mining expertise and have experience in meeting the higher ESG standards increasingly expected by Western buyers.
Strides in trilateral supply chain integration
Since AUKUS was launched in 2021, a raft of new bilateral agreements, trade deals and legislative amendments have been enacted to operationalise supply chain resilience between the partners, part of wider efforts by Washington to ensure that supply chains and technology transfer remain secure from geopolitical influence. Three notable initiatives stand out. First is the Climate, Critical Minerals, and Clean Energy Transformation Compact, signed by Australian Prime Minister Albanese and US President Biden in May 2023. This established climate and clean energy as a “central pillar” of US-Australia relations and set out joint efforts to “promote responsible, sustainable, and stable supply of critical minerals”, among other aspects related to green technologies. The Compact also established a Taskforce on Critical Minerals to engage bilaterally and with industry, acknowledging CMs as “vital to clean energy as well as defence”.
Despite Washington and Canberra sharing incentives to secure supply chains, cooperation will not be without its challenges. China is a significant source of investment for the Australian mining industry, meaning that many mines and refineries will be unable to comply with Foreign Entity of Concern (FEOC) regulations that govern access to subsidies under the IRA. The Greenbushes lithium mine in Western Australia, which produced 45% of Australia’s lithium output in 2022, is 26% owned by Chengdu-based mining company Tianqi Lithium. Tianqi also owns a 51% stake in the Kwinana refinery, which processes ore from Greenbushes. Another significant lithium mine, Mount Marion, is 50% owned by Ganfeng Lithium, headquartered in Jiangxi Province.
Australian scholars like Brendon O’Connor and Clinton Fernandes have drawn attention to how AUKUS is consolidating Canberra’s alignment with US interests. This strategic shift is also having an impact on Australia’s domestic CM industry. Although the fate of IRA is currently unclear with Trump’s arrival, efforts to capitalise on its subsidies could potentially see Australian companies rearrange and bifurcate their supply chains, to match up China-free mines with China-free refineries and avoid FEOC restrictions. Chinese involvement in Australian rare earth mining has also come under increased scrutiny. In June 2024, Canberra ordered Chinese funds to cut their stakes in Northern Minerals, a rare earths developer based in Western Australia, citing protection of “national interest”.
Second is the Atlantic Declaration, established between the US and the UK a month after the US-Australia Compact was signed. The Declaration’s provisions are wide-ranging but many synergise closely with AUKUS Pillar II workstreams, including on innovation for emerging technologies, data-sharing, AI, and defence-industrial cooperation. Regarding CMs, the Declaration announced a one-year Joint Energy Supply Chain Action Plan, as well as the launch of negotiations for a US-UK Critical Minerals Agreement (CMA). Covering five CMs important to EVs – cobalt, graphite, lithium, manganese, and nickel – the proposed CMA would ensure that CMs processed or extracted in the UK count towards the sourcing requirements of the 30D IRA consumer EV tax credit. Such an agreement is necessary because, unlike Australia, the UK does not have an FTA with the US. In October 2023, negotiators stated they were making “significant progress” towards an agreement but, as of the time of writing, no agreement has been reached.
Meanwhile, the UK has forged closer ties with Australia in recent years, in part the corollary of its post-Brexit “Global Britain” outlook, and subsequent “Indo-Pacific tilt” as outlined in the 2021 Integrated Review. In December 2021, shortly after AUKUS was launched, London and Canberra signed a Free Trade Agreement, removing almost all tariffs on trade between the two countries. In April 2023, they signed a joint statement of intent on collaboration on CMs, emphasising the buildout of resilient supply chains through investment, policy coordination, data sharing, R&D collaboration, and skills exchange. At COP29 in November, they announced the Australia-UK Climate and Energy Partnership, including enhanced bilateral cooperation on climate change and energy, including opportunities on “green metals”. Although tripartite rhetoric certainly seems to be indicating closer engagement over CMs, without a concrete outcome (such as the US-UK CMA), supply chain coordination remains elusive.
Third – arguably the most significant development for CM supply chain strategy under AUKUS, and certainly its most concrete – is the designation of the UK and Australia as “domestic sources” under Title III of the Defense Production Act (DPA), enacted in December 2023 under the National Defense Authorization Act for Fiscal Year 2024. In broad terms, the DPA equips the Presidency with a range of powers aimed at ensuring national defence requirements can be met by domestic industry. Title III of the Act allows the use of various financial incentives, including government loans and loan guarantees, purchase commitments, purchases of equipment, and direct subsidies – which Australian and British companies will now have access to.
The DPA is designed for focused, time-limited interventions on the supply side, such as filling supply chain gaps and ensuring that industry can meet national needs at speed. Although it is unlikely to serve as an effective replacement for long-term market shifts, the DPA could be potentially relevant to Pillar II. In March 2022, Biden invoked the DPA for strategic and critical minerals. The action was apparently necessary to prevent a shortfall that would significantly impair security, thereby waiving the requirement for Congressional approval of actions costing over US$50 million. This followed a similar determination by his predecessor Trump in 2019 over the production of rare earth elements used in permanent magnets; here however the US$50 million cap was not waived.
In May and August 2024, cobalt/bismuth and graphite projects based in Canada, which has been a US “domestic source” since 1992, were announced. These examples serve as a useful barometer for the depth of cooperation and integration we might expect from joint US-UK or US-Australia CM projects going forward. An important proviso is that Canberra and London can only access DPA powers for purposes that “cannot be fully addressed” in the US or Canada. Such wording is sufficiently vague that it seems plausible to argue that the US DoD would be unlikely to place major limits on investment in a time of crisis. Given the implications for Australian and British sovereignty, such a caveat is understandable; nonetheless, the extension of the DPA represents a significant boost to CM collaboration within AUKUS.
Mitigating supply chain vulnerability through AUKUS’ integrative strengths
At this juncture, there is a huge uncertainty around Trump’s CM strategy – indeed, if CMs will be a focus of policymaking at all. Still, looking at the previous administration, CM initiatives within AUKUS have principally taken the form of bilateral initiatives, focused on green technologies and economic partnership – with the notable exception of the DPA. Agreements between the AUKUS partners signalled intent for further cooperation but have two principal weaknesses. First, the initiatives are yet to yield significant concrete outcomes. The DPA shows the most promise as a vehicle for substantial investment in CM extraction and processing, but nothing has yet met the scale of the challenge posed. Second, initiatives have largely focused on CMs as necessary for economic security and the green economy, rather than as a direct requirement for defence technologies. Such prioritisation risks obscuring the specific needs of defence industry. This is not solely an AUKUS phenomenon. Subsidies in IRA – the US’s principal vehicle for CM investment – were limited to metals required for EV batteries. The CHIPS and Science Act did not include similar funding for semiconductor-related CMs, despite the vulnerabilities in such supply chains.
Kim Beazley, a former Australian Defence Minister and US Ambassador, has called for CMs to be established as a “third pillar” of AUKUS. Beazley is correct to emphasise Australia’s potential for CM production and that official integration of CMs into AUKUS would, as he phrased it, “put some teeth” into ongoing efforts towards supply chain securitisation. But such a move would have further benefits. First, integration into AUKUS would ensure that defence industrial requirements retain a priority within CM policymaking. Where defence requirements for CMs differ from those of the green transition, it is important that these are not blurred or overlooked. Second, with Trump’s return to the White House, the drawing of explicit links between CMs and US-China competition through AUKUS may help mitigate against Trump’s instinctive dislike for green policy and isolationist tendencies.
Trump’s previous administration made bold first steps on rare earths and CMs. However, his isolationism and rejection of green technologies must not be allowed to undo the valuable gains of the past four years. As geopolitical temperatures rise, CMs must not fall off the US policy agenda. Within AUKUS, the challenge is particularly acute, with CMs the building blocks of most of the Pillar II technologies. Such technologies are certain to reshape the face of war, one way or another; and, in the global technology race, China is fast catching up to the West. The stakes for the AUKUS partners maintaining their lead in these crucial Pillar II technologies could not be higher. China has already proved willing to weaponise its dominance in the CM supply chains vital to these technologies but is far from exerting the full extent of its control. AUKUS has made valuable steps in responding to this challenge, but not yet at the scale that is needed.
Featured image © Kym Smith/Defence Department. Caption: Australian Defence Minister, Richard Marles, during a visit to the United Kingdom in November last year
