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Introduction: The New Geopolitical Chessboard
As the world accelerates toward a clean energy future, a new zero-sum game is unfolding beneath the surface of global politics. Critical minerals—lithium, cobalt, rare earths, copper, and graphite—have become the strategic commodities of the 21st century, redrawing alliances, fueling resource nationalism, and triggering a race between the United States, the European Union, and China. According to the International Energy Agency (IEA), demand for lithium alone could quintuple by 2040, while cobalt and rare earth demand is set to surge. Yet price collapses and long project lead times are strangling new supply, creating a systemic risk of trading one energy dependency—fossil fuels—for another: critical minerals.
In early 2026, the Overseas Development Institute (ODI) and multiple strategic assessments highlighted an intensifying contest. China is projected to control over 60% of refined lithium and cobalt by 2035, alongside roughly 80% of battery-grade graphite and rare earth elements. The US and EU, meanwhile, are scrambling to counter this dominance through industrial policy, bilateral deals, and massive investment frameworks—but face significant hurdles in scaling up fast enough.
The China Factor: Dominance by Design
China's grip on critical mineral supply chains is not accidental—it is the result of decades of strategic industrial planning. The country currently controls 65% of global lithium processing, over 75% of cobalt processing, and 90% of battery-grade graphite supply. Its upcoming 15th Five-Year Plan is expected to further cement this dominance, with projections showing China supplying over 60% of refined lithium and cobalt by 2035.
This concentration poses a profound vulnerability for Western economies. As Olena Borodyna, ODI Senior Geopolitical Risks Advisor, notes: "China's dominance in refining means that even if mining occurs elsewhere, the value addition and strategic leverage remain in Beijing's hands." The energy transition supply chain risks are compounded by China's use of export controls—a tactic it has already deployed on gallium, germanium, and graphite—raising fears that critical minerals could become a geopolitical weapon.
US and EU: Racing to Catch Up
In response, the United States and European Union have launched ambitious initiatives. Under the second Trump administration, the US has prioritized domestic production through the FORGE initiative (the successor to the Minerals Security Partnership), chaired by the Republic of Korea. The US government has mobilized over $30 billion in letters of interest, loans, and investments for critical mineral supply chains, including the $10 billion Project Vault by EXIM to establish a domestic strategic reserve. Bilateral partnership agreements have been signed with Australia, the Democratic Republic of Congo (DRC), Japan, Malaysia, Thailand, Ukraine, and others.
The EU, meanwhile, has selected 60 Strategic Projects under its Critical Raw Materials Act, but financing remains a bottleneck. Current investment volumes fall short of what is needed, and competition for capital is fierce—not just from China, but also from new entrants like Saudi Arabia and the UAE. The EU critical raw materials strategy aims to diversify sources, but analysts warn that without a massive scaling of public and private finance, the bloc will remain dependent on Chinese processing.
Price Collapse and Investment Chill
A critical paradox is undermining these efforts: while long-term demand projections are bullish, short-term price collapses are deterring investment. Lithium prices, for instance, fell sharply in 2024-2025 after a supply glut, reducing appetite for new mining and processing projects. The IEA warns that recent price drops are threatening future deficits, as project lead times for mines and refineries can stretch 10-15 years. This creates a dangerous gap between current underinvestment and future demand spikes.
As Tim Bajarin writes in Forbes (May 2026): "Countries and companies underestimating this shift as merely 'oil problems in a new jacket' are dangerously unprepared." The critical minerals investment gap 2026 is a ticking time bomb for energy security.
New Players: Saudi Arabia, UAE, and the Resource Nationalism Wave
The geopolitical landscape is further complicated by the emergence of new actors. Saudi Arabia and the UAE are aggressively entering the critical minerals space, leveraging their petro-state wealth to secure upstream assets and processing capacity. The UAE, for example, signed multiple MOUs at the 2026 Critical Minerals Ministerial hosted by the US State Department, signaling its intent to become a hub for mineral trade and processing.
Producer countries—from Chile to Indonesia to the DRC—are also gaining leverage, demanding value addition, technology transfer, and better terms. Resource nationalism is on the rise, with governments imposing export bans, renegotiating contracts, and demanding domestic processing. This trend mirrors the oil era but with a crucial difference: there is no multilateral framework like OPEC to stabilize markets or resolve disputes. The resource nationalism critical minerals 2026 wave is reshaping investment risk profiles globally.
Systemic Risk: Trading One Dependency for Another
The core warning from analysts is that the clean energy transition, if mismanaged, could simply replace fossil fuel dependence with critical mineral dependence. Unlike oil, which had a relatively diversified supply base and established institutions, critical mineral supply chains are hyper-concentrated in a handful of countries—China for processing, the DRC for cobalt, Chile for lithium, Indonesia for nickel.
This concentration creates systemic risk. A disruption in any one node—whether due to geopolitical conflict, trade war, or domestic instability—could cripple global battery production, electric vehicle manufacturing, and renewable energy deployment. The critical minerals supply chain vulnerability is a national security issue for both the US and EU.
Expert Perspectives
At the 2026 Critical Minerals Ministerial, US Secretary of State Marco Rubio declared: "We are determined to reshape the global market for critical minerals and rare earths, which are essential for AI, robotics, batteries, and autonomous devices." The event brought together 54 countries and the European Commission, resulting in 11 new bilateral frameworks.
Yet skepticism remains. Borodyna cautions: "Strategic competitors like China may undermine commercial project viability elsewhere through aggressive pricing and state-backed financing. The US and EU need to move faster and think bigger."
FAQ
What are critical minerals?
Critical minerals are metals and materials essential for clean energy technologies, defense, and advanced manufacturing. Key examples include lithium, cobalt, nickel, graphite, rare earth elements, and copper.
Why is China dominant in critical minerals?
China has invested heavily in refining and processing capacity over the past two decades, supported by state industrial policy, cheap energy, and strategic stockpiling. It now controls the majority of global processing for lithium, cobalt, graphite, and rare earths.
What is the US doing to reduce dependence on China?
The US has launched FORGE (the successor to the Minerals Security Partnership), Project Vault ($10 billion strategic reserve), and bilateral agreements with over a dozen countries. It has mobilized $30 billion in loans and investments for critical mineral supply chains.
How are Saudi Arabia and the UAE involved?
Both Gulf states are investing heavily in critical mineral assets globally, using sovereign wealth funds to secure supplies and build domestic processing capacity. They signed multiple MOUs at the 2026 Critical Minerals Ministerial.
What are the risks of critical mineral dependency?
Hyper-concentration of supply in a few countries creates vulnerability to geopolitical disruption, export controls, and price manipulation. Without diversification, the clean energy transition could replace oil dependence with critical mineral dependence.
Conclusion: A Race Against Time
The critical minerals race is not a future problem—it is unfolding now. With China's dominance entrenched, US-EU efforts scaling slowly, and new players entering the fray, the window for action is narrowing. The systemic risk of trading one dependency for another demands urgent, coordinated policy responses, massive investment, and a new multilateral framework for mineral governance. As the ODI report concludes, the zero-sum game is real—and the stakes have never been higher.
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