Hosted by Christina Ruffini and Sir Richard Dearlove
Guest
Gracelin Baskaran
Dr. Gracelin Baskaran is the founding director of the Critical Minerals Security Program at CSIS and explains how China built a stranglehold on rare earth production.
Episode Summary
The minerals inside your phone, your car, and U.S. fighter jets almost all pass through one country: China.
Dr. Gracelin Baskaran, founding director of the Critical Minerals Security Program at CSIS, joins Sir Richard Dearlove and Rosanna Lockwood to explain how China built a stranglehold on rare earth production, and what it will actually take to break it. Critical Minerals are this century's defining supply chain vulnerability: it's a demand problem, a democracy problem, and, for the West, a race against a country that isn’t swayed by elections.
Also: Israel's espionage escalation against US officials, Poland's rise as Europe's top defense power, and the fall of Orbán's Hungary.
In this episode:
(00:00) Intro: China's Rare Earth Minerals Takeover
(01:43) World Cup 2026 Preview
(03:50) Middle East Conflict Updates
(06:57) Israel Spying on US Officials?
(08:43) Bill Pulte Named Intelligence Director
(10:27) US APAC Strategy Shifts
(14:41) Poland Becomes Europe's Defense Power
(16:44) Hungary After Orbán's Fall
(19:57) China's Critical Minerals Chokehold
(27:12) Western Mining Supply Chain Crisis
(38:28) Frontier Markets: Africa's Mineral Race
(57:32) Taiwan Crisis and Mineral Shortages
Show Notes:
The New York Times: https://www.nytimes.com/2026/06/06/us/politics/pentagon-sees-growing-espionage-threat-from-israel.html
Hosted by Sir Richard Dearlove (former MI6 Chief) and guest co-host Rosanna Lockwood (International Journalist).
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Transcript
COLD OPEN
Baskaran: People don't realize that until the 1980s, we were the biggest uranium producer in the world and an exporter. Till the 1990s, we were the biggest rare earth producer in the world. And over time, a lot of our technical capabilities from The US and our allies actually shifted over to China.
Lockwood: Whenever we discuss China, it's referred to as the communism problem.
Dearlove: In terms of Trump's attitude to carbon net zero and fossil fuels, you haven't got the administration focusing on electrification.
Baskaran: It's one of the things I lose sleep about the most.
INTRODUCTION
Lockwood: Hello, and welcome to One Decision. I'm your guest cohost, Rosanna Lockwood, and I'm joined by my cohost, as ever, former head of MI6, Sir Richard Dearlove. Hello, Sir Richard.
Dearlove: Hi, Rosanna. I'm back on the other side of the Atlantic now, having been on your side.
Lockwood: But not for long, I understand. You seem to spend more time in The US than anywhere else these days, both for work and and pleasure.
Dearlove: I know. My my wife's complaining. I'm still traveling too much, which I'm beginning to agree with.
Lockwood: It's a funny looking retirement, Sir Richard. You're here with us on One Decision all the time, traveling all the time, and heading stateside all the time. We've got obviously, I'm still here in Los Angeles. We've got the World Cup coming this way in the coming weeks. And I've got to say I haven't booked any tickets. I hear they're extortionately expensive, and I'm not a huge soccer fan as it is. But will you watch anything?
Dearlove: I'll definitely watch some of it on television because you you're you're almost forced culturally here in The UK to watch England play. And if you look at the odds, they're one of the favored teams, but I'm always skeptical as whether in the event they can pull it off. The last time they won the World Cup was 1966, which was a long time ago. They've got I I can't remember. I don't know if they've got further than the semifinal or quarterfinal since then. Anyway, we'll see how it plays out. But the huge row in the press here about the price of tickets, and there'll be a traveling army of supporters, no doubt, following around their matches.
Lockwood: Well, I remember when the World Cup was happening in Qatar, and a lot of the press was about whether or not anybody, especially in England, whether anybody would be able to have a beer during the match. And, you know, there wasn't drinks in the stadiums and things like that. I hear this time, this is going be one of the booziest World Cups ever. All of the drinks manufacturers have primed for billions of, God knows what, sales of beer all through North America throughout this. So it's going be a knees up, I believe.
Dearlove: Yeah. Well, I remember going to baseball matches in The States. You've got people walking around, you know, selling those great big beakers of cold beer, which, of course, in the climate, are very refreshing.
Lockwood: I went to a Dodgers game a few weeks ago with my American husband, and I'd never I'd been to a Mets game in New York before, long time ago. Went to Dodgers game in LA, and I hadn't quite realized how much it was just about having a having a good old time. And I did get one of those, as you say, large beakers of beer. It was a Michelada, which is their you know, it's a Mexican style sort of spicy tomato based beer, and it was about two liters of beer.
Dearlove: It's a good name. I do. I I love to go to soccer games. I don't remember watching much baseball. Yeah. Baseball, it's sort of it's like a like a saga. You know, it's it's drawn out over several hours. So it doesn't have the intensity of soccer games, but it has its points of excitement. I used to love going to baseball games. Look. If you are not already subscribed to One Decision, now is the time to do it. Subscribe to our YouTube channel or wherever you listen so you don't miss out on any of our interviews.
Lockwood: This week, we are joined by Doctor Gracelin Baskaran, one of the world's leading experts on critical mineral security. That discussion coming out just shortly. Now though, it is time for In Brief, where we make sense of some of the biggest geopolitical news of the moment. Well, Sir Richard, as ever, let's talk about things happening in The Middle East. And as ever, we give this disclaimer that things are gonna change a lot between the time we're having this discussion and what's happening by the time this episode airs. But, of course, we had a barrage of kind of exchange of fire on Sunday.
IN BRIEF
Dearlove: Yeah. I think I stick with my original judgment. This is continuation of the conflict by other means. And what I'm skeptical about is the extent of Trump and Netanyahu disagreeing because it must be clear that in that Israeli response to the launching of Iranian missiles, CENTCOM must have been involved and must have been aware of what was going on. And I think it's really about putting more pressure on Iran to agree whatever terms they're being offered because it's quite clear at the moment that some of the fundamental points that the Israelis and the Americans want still being rejected by the Iranian regime. So I'm not expecting any end soon to the conflict, even if that's conflict by, let's say, conflicting narratives and by apparent negotiations. But I think it's very hard to take at face value what political leaders are saying, whether it's Trump, whether it's the Iranians, or whether it's Netanyahu. They've all got their agendas.
Lockwood: And the agenda point so important for my takeaway has been the messaging around this and what has been released or revealed to the press and, by virtue of that, the public. Because hearing that Trump was blasting Netanyahu on a call and then Netanyahu held back bombing because it all seems to be political messaging to me to their local domestic audiences. Trump may be responding to this allegation that he's been under the kind of in on the whims of Israel for too long, both of whom, you know, Israel, The US are looking at political polling advantages and local elections. And then you've got Netanyahu on the other hand sort of saying, well, I held back, but no, I didn't eat it. There's a lot going on in terms of communications as well. As part of this, there's been a really interesting story that's dropped in the New York Times about the Pentagon releasing a report about growing espionage threat from Israel. And obviously, you know this, Sir Richard, very well that there's a mutual understanding of spying on each other throughout this relationship between Israel and The US. But apparently, that level has been raised from high to critical in recent weeks. The Pentagon saying that Israel is really launching quite intense spying activities when it comes to eavesdropping on officials like Steve Witkoff, etcetera. What do you make of that?
Dearlove: Unfortunately, not particularly surprised when it comes to Israel. They are single-minded when it comes to the security of the state of Israel. And although, obviously, those alliances are important to them, there are records of their misbehavior in the past, the most famous case being the one in The United States. The former Israeli spy, Jonathan Pollard, who was arrested and heavily sentenced in The United States for spying for Mossad and had an important position in the Pentagon. They've been caught out misbehaving in The UK, not that aggressively, but in a manner which certainly the government strongly disapproved of. That was some years ago. I just think that that's what you have to expect from Mossad, and maybe a lot of it is technical collection and done in such a way as not to cause offense, if you see what I mean. And I just wonder how secure someone like Steve Witkoff, who's not lived in a national security environment or hitherto before joining the Trump administration. You know, people loosely using mobile phones and things like that. There are long records of collection of intelligence by friends on friends. And let's leave it at that.
Lockwood: Extraordinary, extraordinary stuff. Talking of people who might not have national security experience in the current administration but find themselves in those roles, before we move on and talk about what's happening in Asia, I just wanna touch on there. That brings to mind this appointment that President Donald Trump has made here in The US about putting Bill Pulte as acting director of national intelligence. He was, of course, a real estate entrepreneur, basically, much like Trump himself. And there was a bit of outcry here about this appointment because this man has no national intelligence experience at all. Apparently he's overseeing all the agencies now, but Trump had to come back and say, a fantastic fellow and this is an acting director role, and it's largely going be overseeing cuts, job cuts and the likes. I mean, what did you make of that, Sir Richard?
Dearlove: Well, it follows on from the appointment of Tulsi Gabbard, who seemingly lacked significant experience in this area. The conclusion I draw is that Trump doesn't regard the job as particularly important, director of national intelligence, and it is a relatively recent creation in The United States. What is happening in reality is that the actual heads of agencies in The US, who are now being in office much longer, I gather, you know, head of CIA, head of FBI, are probably the more influential figures. The DNI job is largely being focused on peripherals, as you say, perhaps some sort of administrative cuts in agencies which have overspent or are too big, but not actually being the absolutely point man when it comes to intelligence and intelligence assessment for Trump and for the administration generally.
Lockwood: I think just the image of him going into these rooms with the heads of the national intelligence agencies and trying to command respect to be taken seriously when you haven't got that background. Everyone must know then it's just a sitting duck admin role in order for him to get by. Look, we've got to talk about Asia for a moment because interesting sort of maneuvers happening in APAC. We had the Shangri-La Security Conference recently with that sort of big annual meeting that happens in Singapore. And the takeaways seem to have been one that the Chinese defense minister was not there, which is pretty major for a huge APAC security conference, but also that The US was there. But Pete Hegseth gave a speech in which he spoke about a strong, quiet, and clear United States, which seem to be indicated that they're going to not step back, but The US is now going to take a largely observational role. They're not leaving the APAC region, but some analysts are pointing at whether or not this is creating a space for other actors, US allies specifically, people in the region to come forward and take a strong role, Japan, Australia, countries like that, The Philippines. And Japan seems to be an obvious contender for that. Did you follow what came out of the conference?
Dearlove: Yes. I did. I followed this quite closely. And I'm quite surprised in a way because it shows a degree of, let's say, serious policy thought being given to the area by the Pentagon, by Hegseth. And what he also said is what we want are partners, not protectorates. And in a way, there's a consistency here with what's happened in NATO and in Europe whereby, you know, the Americans are saying, well, we'll be best friends with those of our allies who do their own heavy lifting. And I think what's happening in APAC is they're looking to countries like Japan, for example, which is massively increasing its defense budget to do much more. And I think a good example of this shift is the relationship between The US and The Philippines. I mean, The Philippines really have been something of an American protectorate when it comes to defense issues. And now one is looking at a much closer relationship between Japan and The Philippines, and Japan, as it were, helping The Philippines strategically. It was a very surprising gathering because it gave, as it were, a new sense, a new direction to American policy in the area. And, okay, you mentioned these three adjectives, strong, quiet, and clear. I heard someone say more emphasis on raw power, less emphasis on rhetoric. So less discussion about defense issues. And, okay, what are you prepared to spend? What are you prepared to do?
Lockwood: There is some through line. There is some precedent for this from the prior Trump administration where, you know, we had The US withdrawing from the TPP, the Trans Pacific Partnership. And there was, I remember, sort of concern at the time, is The US kind of admonishing any kind of role or responsibility in the region? But then you did have other regional actors coming forward. And we had later the CPTPP. I love saying that. I used to talk about this a lot when I was in Asia, the CPTPP. But where you had other countries taking the lead, people like Japan and reorganizing that, in between that, when you had in between both Trump administrations, you had the Biden administration sending Kamala Harris through Singapore. I remember that visit very well as sort of trying to show a lot of military and sort of economic might throughout the region. So maybe we are seeing precedent going back to kind of the first Trump administration of, hey. Look. We're focused on the Monroe Doctrine, the Western Hemisphere, this side of the world, and we're gonna leave this up to you guys. But as you say, they're less protectorate, more partnerships. We'll see in due course whether Japan does take the lead on that. And certainly, they're very strong in rhetoric these days when it comes to China as well. We've got so much to talk about. We've got a good interview to get to. Let's talk quickly about what's going on in Europe, Richard, because plenty of maneuvers, especially on the defense side of things. Let's talk about defense spending, both for and less. Because in Poland, we've got the Polish Ministry of National Defense awarding contracts of around $16,500,000,000. These all went to local defense companies in Poland. And we'll talk about The UK in a second. But talk to us about the significance of the Poland decision.
Dearlove: Well, it's huge. Poland is busy becoming the leading defense power in Europe, which is quite extraordinary if you think about this within the historical context. They will be able to field 24 brigades simultaneously, which would be more than Germany, France, and The UK put together. So, I mean, that just gives you an idea of the size and the focus. Okay. It's understandable Poland sit closest to the problem of Russia and an aggressive and dangerous Russia. And historically, that has always been the trickiest of relationships, and they're not leaving anything to chance. So, we see the proof of it. And this announcement of the latest expenditure in contracts is a further expression that they're not gonna hang around. They're doing it now, which is in contrast to The UK that had a defense review eighteen months ago. And we're still waiting for The UK's what's called defense investment plan, which the government keeps putting off. It's super sensitive politically here.
Lockwood: Let's just briefly touch on Hungary as well. It's been two months since we had that stunning election there where we had new prime minister Péter Magyar installed and Viktor Orbán consigned to history, but not quite because he's still got his president. His is still in place. I'm gonna probably butcher this name, Tamás Sulyok. But Péter Magyar, the new prime minister, has promised to get rid of any kind of lasting legacies that Orbán has left behind and kind of restructure the constitution so they restore the, what he's saying, the rule of law in Hungarian democracy. So it's this idea of this kind of illiberal democracy falling away at last and everything being restructured and changed. I mean, have you been following this, and what have you made of it?
Dearlove: Very closely. Okay. The end of Orbán's illiberal democracy, as he called it, and the fact that, you know, this was a very authoritarian democratic regime who played dirty. And what I mean by that is there were accusations of corruption and enrichment around Orbán's circle and then this massive attempt to control the media. And, of course, he had been in office, I think, for sixteen years and has really, as it were, damaged and perverted the political system in Hungary. I mean, interestingly, the election Magyar, the new prime minister, politically, isn't in a very different place except on the issues that people clearly felt were important, the end of the corrupt Orbán regime and, you know, return to proper democracy. So that's where we are at the moment. And I think the problem that Magyar has is cleaning out all the bits and pieces of influence which were injected and sort of cemented into place in various Hungarian institutions, and that's not straightforward. But the other really important issue is the policy consequence of Magyar's government in Brussels because Orbán was seen as Putin's major apologist within the European Union and, in particular, was blocking the release of these Belgian bank funds, which were originally Russian deposits to the tune of €90,000,000,000, which are going to be released if there is agreement, which there will be with Magyar now, to the Ukrainians, basically, to compensate them for the cost of the war. So this is hugely important. But the process, given that it's EU process, is not straightforward. It's not solved yet, but it will be. And it's pretty clear that Magyar said that Hungary will facilitate this now rather than blocking it.
Lockwood: This process of unknitting the legacy of Orbán will be watched closely, of course, by various other opposition leaders and opposition movements in countries like Turkey, Russia as well, how it how it works. But as you said, them being in the EU adds the extra layer of how this happened in the first place and also how they're gonna how they're gonna walk it back. So much to keep an eye on. We'll probably keep checking in on Hungary over the coming weeks and months as well to see how they're getting on. Now it's time for our interview, though. The minerals inside phones, cars, and fighter jets almost all pass through one country. Guess which one? China. China controls 60% of global rare earth mineral production and processes nearly 90% of the world's rare earth magnets. Critical minerals are this century's defining supply chain vulnerability. Doctor Gracelin Baskaran joins us now to break down China's chokehold and how the West can respond. Doctor Baskaran is the founding director of the Critical Mineral Security Program at CSIS. She has spent more than a decade on the front lines of these issues, starting in South Africa's platinum belt. She is a mining economist, a Georgetown professor, and the author of The US Policy Playbook on Critical Minerals. Doctor Gracelin Baskaran, great to have you with us. Thanks so much. And let's just get straight into it. I'm sure we'll kind of get more into the critical minerals, the rare earth minerals throughout this discussion. I know a lot of our listeners are already familiar with them. But one stat that stood out to me the most when thinking about talking to you was that two decades ago, China held 50% of sintered permanent magnet production. And today, that share is 94%. They've doubled that. How how has that been allowed to happen? How did China become so dominant? Why did others let it?
INTERVIEW: DR. GRACELIN BASKARAN ON CRITICAL MINERALS
Baskaran: You know, there's a saying that it's not a problem until it's a problem, and that's kind of the approach we took to rare earths and magnets, which means that over time, The United States and our western allies, we realized that China could do it cheaper. And part of why they could do it cheaper was they were willing to use subsidized capital from the state. They built cheap coal fired power to be able to do it, and they developed the engineers at scale to be able to do that. And over time, a lot of our technical capabilities from The US and our allies actually shifted over to China. So China both expanded its manufacturing at a time when other countries pulled theirs back.
Dearlove: But would it be true to say then that this is a manufacturing issue rather than the question of where the mineral deposits are and that the West could make up ground, but it's got a lot of work to do?
Baskaran: You know, it's a both problem, actually. So China's dominance came from a two part strategy. One was to secure rare earths from around the world, whether it was in Africa or Latin America or until early last year, even from California. And then it paired that aggressive kind of foreign policy with an aggressive domestic industrial strategy. That domestic industrial strategy was building the processing capability so that no matter where the rare earths came from, they had one place to be processed, China. And then they also built the permanent magnet manufacturing and the end goods. Right? The development of the BYD industry was where a lot of those rare earths and permanent magnets went. So what we're looking at when we look at creating an ex-China supply chain is a two part challenge. One is developing new mineral assets and ensuring that those offtake agreements are signed to Western companies. The second part of it is building the processing capabilities and the manufacturing capabilities. And that's the current challenge that we have is it's not an overnight industry. So while we have invested billions of dollars now of state capital into supporting the development of nascent facilities, it does take a few years to bring these online.
Lockwood: Something that we talk about a lot on this podcast and the various subject matter experts we speak to and the topics we cover. And we dance around this, and we seem to come back to this whenever we discuss China. It's something I've put in my notes and sort of refer to it as the communism problem, but please bear with me on that. What I mean by that is what you've touched on here, which is this ecosystem and long term strategy thinking that China's been able to build when it comes to things like state owned enterprises, diplomats acting in concert with private business, quote unquote private. You've got industrial policymakers all sharing this common strategic objective when it comes to things like long term control over these critical mineral mines and supply and everything else in both demand and supply side, which we'll come back to. Is there any way that a singular Western country like The US or a concert of Western countries that aren't communist can compete with that?
Baskaran: You know, you call it a communist problem. I call it the benefits of not having elections. And the new emerging player that we have there is Saudi Arabia. Right? Because Saudi Arabia is also able to take an incredibly long term approach and, in fact, has, what I would argue, become the new emerging dominant force in minerals because they can accelerate permitting and develop a thirty year plan and know they're gonna see it through without the concern that in four years, there might be an electoral outcome that upends whatever they just did. Democracy is a wonderful, wonderful thing, but democracy also has challenges for sectors that require that long term effort. One of the bright shining lights of this situation is actually a story of Japan. So in 2010, Japan got cut off of rare earths from China over a fishing trawler dispute. And in a way, it was D-Day for Japan. And what I mean by that is it's been sixteen years since that happened, but Japan has never taken its eye off the ball when it comes to diversification. They have invested into rare earth mines all over the world. I was wandering around Namibia and ran into Lofdal, which is 50% owned by the Japanese. They've started deep sea mining for heavy rare earths. They were the sole reason that Lynas, an Australian processing facility, could begin separating heavy rare earths outside of China last year was because the Japanese invested patient capital earlier on. They've required stockpiling at both the national level, but also at the company level. So in a way, you know, what you're starting to see is that when it has those first order impacts on national security, economic security, energy security, that countries do start to take a long term view irrespective of political changes. I live in Washington DC, and I can tell you that critical minerals are arguably the only bipartisan, you know, agenda that is shared these days. Both sides agree that if we don't build our mineral security, we're gonna have long term problems. So I do see that while we are vulnerable, of course, to the changes of elections as are Australia, South Korea, Japan, India, we are moving to a shared consensus realizing that our security is at risk.
Dearlove: But Trump made some statements about catching up. I think he might have even said at one point in eighteen months, which clearly is rather an exaggeration. We're we're used to those sorts of Trump exaggerations. So what's the reality for The United States in no longer being dependent on the Chinese supply line?
Baskaran: I think we have to be realistic about what success looks like. So when China's export restrictions went into effect last year, 99% of heavy rare earths were being processed in China. The likelihood that we go to zero in my lifetime or your lifetime is probably relatively unlikely. The question is what percentage is an acceptable number that we are no longer standing on the other end of constant economic coercion? If we get to a point where 30 to 40% of our rare earths are coming from China, that's probably okay. Right? Because our crucial industries will still have supply. We are able to hold stockpile. The answer to when that is is probably a five to ten year agenda. Because number one, we're getting new rare earth mines going. On average, globally, it's eighteen years from the time that we identify a deposit to the time that we have a producing mine. In America, it's twenty nine years. Right? So that's number one is it takes time to get those minerals out of the ground. Second, we are currently building processing capabilities and permanent magnet manufacturing capabilities. Companies like Noveon, MP Materials, Lynas. But, again, the period between when you build it and when you are fully ramped up is several years. So it really is probably a five to ten year period before we are more resilient, but not fully independent.
Lockwood: You touched on California. I believe you're speaking to us from Arizona today, normally based in DC. And as we understand it, a lot of the mines that we're speaking about around the world are in frontier markets, as they're often known. But there is mining possibilities within The US as well, these have been explored. Where are we at with regards to US domestic discovery and production?
Baskaran: Rosanna, when it comes to rare earths, there's two types of rare earths. There's light rare earths, and there's heavy rare earths. Now light rare earths, The US has really good endowments of. In fact, MP Materials Mountain Pass Mine is one of the biggest mines in the world, but it does not have heavy rare earths. And those heavy rare earths are precisely the ones that China weaponized when it imposed export restrictions. They didn't go for the light rare earths. So what we're looking at globally is how do we find new sources of heavy rare earths? And this is where you see Brazil. Right? The US government through the Development Finance Corporation has invested heavily into Serra Verde. You see that we are making early investments into Pensana in Angola. We are investing into a mine in Australia. Those frontier or those new projects are gonna be really important. We're starting to see The US and our allies are taking a new approach to our engagement in frontier markets, something they call commercial diplomacy. Last year, four of the top 10 jurisdictions in the world for rare earth exploration were in Africa. So you're starting to see The US kind of shift with from what was a traditional aid model to one where it's a lot more commercially oriented. And so you do see that we are looking to leverage our diplomatic engagement and our strategic financing in places like Brazil, Namibia, Malawi, Uganda, Angola to secure these because the reality is these are the projects that are gonna yield long term rare earth security.
Dearlove: Listen. I read somewhere recently that taking the next generation of US fighter jets, that the design of some of them was having to be modified because their forward looking radars were dependent on a particular rare earth, which is just not available except embargoed by China. So, I mean, the implication of the article being this had sort of strategic implications when it came to the defense industry. Is that true? Is that an exaggeration, or is that the sort of accurate description of how serious these shortages can be?
Baskaran: You know, it's actually I'd say there's two ways to look at this, but I'm gonna start with reminding us of what happened with the oil embargo in the 1970s. It drove unprecedented innovation in things like energy efficiency and using less oil. And a lot of those energy efficiencies actually are still in our cars and in our homes today. So scarcity is a really powerful driver of innovation. Now that being said, in one way, we are looking to use less materials. Right? BMW created the first motor that doesn't use rare earths last year. It's not commercialized. It's not scaled up, but it is there in a pilot model. So in a way, we are absolutely trying to use less material. However, in many of these instances, you can't use materials. So even though the Chinese exports of rare earths have theoretically resumed to The United States through diplomatic negotiations, they've never resumed to pre-restriction levels. And our aerospace and defense manufacturers recently raised the alarm, one of the rare earths, yttrium in particular, that if yttrium imports don't go up, they will have to stop manufacturing these technologies. So there are instances where you can use less material and get creative. There are others where there's not a viable substitute, and we may actually have to stop manufacturing, which is a much bigger concern.
Lockwood: Yeah. You've also made the argument in sort of previous reports you've done that we shouldn't rather than trying to use less, we should actually be trying to encourage more demand. Is that right? Have I interpreted that correctly, that you've got a demand side lag in The US and in the West, that the Chinese have wrapped up very, very well with things like EV productions, state subsidized EV expansion. So they've not only got the supply side sorted because they're so dominant in mineral rare earth and minerals production, but they've also sorted out where it's all gonna go, how they're gonna sell it, who needs it. Whereas in the West, we haven't quite sort of got that cohesive strategy. Did I understand that correctly?
Baskaran: Rosanna, one of the biggest debates about rare earths and critical minerals at large is the price problem. Right? If prices are really low. So last summer before The US rolled out certain industrial policies, rare earths were sitting at about $54 a kilogram. The reality is if prices stayed below $60, the majority of projects outside of China would have had to close because they were uneconomic. So what the US government did is they put in a price floor at $110. And they said, okay. If it falls below $110 and what the actual price is, the US government will essentially make a quarterly payment for the delta. Right? Which at the time was almost double of the price that it actually was. Why are prices low? This is a structural problem because price support or price floors are a time bound temporary mechanism. The reason we need a price floor is because supply is higher than demand. Right? And as The US and as the West, we can bring more projects online. We can bring more supply online. But if supply continues to outstrip demand, that means that prices will stay low, and these industries are uneconomic without government support. So the only way to restore market equilibrium in a way that these projects can stay economic and stay online and stay long term viable, right, is to increase demand. And there's a variety of ways to increase demand. The first one, which, you know, we struggle with in The US and in the current policy environment, electric vehicles are incredibly important. And it doesn't have to be on the grounds of climate change. But a conventional gasoline powered vehicle uses 32 kilograms of critical minerals. An EV uses 210. That is a sixfold increase in critical minerals, including rare earths. Right? If we increase the demand for EVs, we're gonna use a lot more rare earths. Those prices are gonna go up, and it's gonna give investors the confidence in making that multibillion dollar investment that needs to be made. So we have to increase demand, and that's not gonna be through the defense sector alone because defense is a relatively stable industry from a demand perspective. It's not a huge market. So we're going to have to think about those other industries and how to increase demand if we want to be economic outside of China.
Dearlove: So really, what you're saying is that the electrification of life generally is a really crucial issue and that the consumer aspects of this rather the defense aspects of what will drive the market in the future. Is that a correct conclusion?
Baskaran: Absolutely. If you look at the majority of minerals that we identify as critical beyond rare earths, the defense industry uses less than a half a percent. It is a very small offtaker. Right? We only build so many satellites and a couple of F-35s and, you know, drones are actually not that material intensive because they're so small. That is not the driver of demand. The driver of demand is gonna be energy. Right? Energy resilience. So that's gonna be transmission, which is something like copper. That's gonna be solar panels, wind. I mean, these are drivers. And when you also think about going back to frontier markets, I mean, I've got 600,000,000 people in Africa who don't have access to energy. Right? The amount of electrification that's gonna grow in these jurisdictions is gonna be really critical. So that is gonna be the future of critical mineral demand. So while defense is arguably the most important industry, nobody is gonna build a multibillion dollar mine and processing facility for that half a percent of offtake.
Lockwood: And I wanna come back to talk more about the frontier markets, the great games playing out on those. But just stopping for a moment and kind of digesting what we've been speaking about with regards to timeline, the timeline that US has to catch up to China, the length of time these projects take, but also this interesting supply and demand side equation you've got going on. Because if we were to increase, for example, the electrification of vehicles and encourage more EV usage, just like they've done in China, so that there is more demand side motivation at play to sort out the issue of oversupply. Do we not make ourselves, when I say ourselves, the West, intensely vulnerable then if we've pushed an EV, which are very heavily reliant on these minerals, an EV model that requires all these minerals, we don't have the timeline to catch up quickly. Does that not create more strain and more vulnerability within that oncoming supply chain crisis?
Baskaran: So if you think about what makes the economy of minerals work, the problem, I think, for a long time is that we've thought about mining. Right? And our policy has not actually aligned to what we would call a mine to manufacture good supply chain. Give you example of semiconductors. Several years ago during the Biden administration, we passed a really good piece of legislation called the Chips and Science Act. And it allocated $280,000,000,000 to build a semiconductor industry. So manufacturing, workforce development, packaging. But not a dollar of it was allocated to the minerals that you need for semiconductors, which means that the germanium, the gallium, the palladium, the polysilicon, we actually remain almost entirely reliant on Russia and China for those. So if there was a disruption on the upstream minerals, which there was because China turned around shortly thereafter and cut us off with germanium and gallium, it didn't matter how much we invested into manufacturing the end good. It's not a geopolitical problem. It's an economic problem. It's how do we get projects online to stay online to create long term supply? And that economic problem requires bolstering both supply and demand hand in hand. Right? Under Biden, we passed something called the Inflation Reduction Act. And a core part of that was that there was a $7,500 tax credit that you received if the minerals in that EV came from The US or a country that we had a free trade agreement with. It was an imperfect piece of legislation for many reasons. One, there's only one free trade agreement country in Africa. It's Morocco, and they don't have a lot of minerals. Two is arguably you needed something more industry agnostic. Right? Beyond EVs, you needed semiconductors. You needed defense equipment. Right? Minerals for all of these sectors. But setting that aside, what that sought to do was to give investors a confidence that there was a tax credit that was gonna increase the demand for these goods and therefore encourage you to bring these mineral projects online. And that going hand in hand in a connected integrated policy was important. And right now, globally, 2025 was a year of supply side policy. We haven't actually given a strong enough demand policy intervention.
Dearlove: I'm fascinated by the sort of argument that you've deployed, which is very convincing. But going back to the issue of the price floor, it seems to me that if you look at this from, you know, a market point of view, it makes obviously investment in these mines very questionable unless you've got significant long term capital or government backing. I mean, can I just bring up an example which is probably peripheral? I mean, I'm Cornish by origin. And around where I come from, there's a big initiative at the moment to reopen the South Crofty, the famous South Crofty tin mine. Of course, the main British school of mining is in Camborne. You've got Cornish Lithium now, which is a big deal investment. You've got the reopening of a big tungsten mine near Plymouth. But it seems to me that all of these projects, rather than being viable in themselves, are gonna depend crucially on government subsidy to give them protection against fluctuations in the global price. But I mean, I'd love to hear, just taking that example, I'm sure in terms of overall production, maybe in Europe, they're significant, but they certainly aren't beyond that.
Baskaran: It's a great question. So industrial policy is a complicated word, and it's actually been very icky, at least from an American perspective, to both Republicans and Democrats. But what is industrial policy? It is giving companies support when they are at a nascent stage until they grow to a point that they are economic. People don't always realize that Japan subsidized Honda for decades and that Finland I mean, I know we don't use Nokias anymore, but Finland also backed Nokia for many years. You're looking at a mining industry that's highly nascent. Right? We, today, in The US, we still import uranium from Russia. We never stopped after the invasion because it was really important to keep our lights on. But people don't realize that until the 1980s, we were the biggest uranium producer in the world and an exporter. Till the 1990s, we were the biggest rare earth producer in the world. Right? We sent rare earths to the rest of the world. So in a lot of ways, we allowed in the West from, you know, your roots, a lot of these mines closed. And so we are trying to get these mines back online, and that is going to require that early stage support until they can become economically viable. But now economically viable is two parts. Right? One is maybe the subsidy to get started, right, or the equity investment to get started. The second part of that, and what was really interesting about 2025 coming back to rare earths, is when Apple made an announcement that it was gonna get its rare earths from Mountain Pass, that mine in California. General Motors announced where it was gonna get its lithium and its rare earth from. And what that was doing is it was saying a demand signal. It was saying companies were willing to pay a premium. We can call it a security premium to source their minerals from a place that was not going to threaten their supply. Right? It became cheaper to pay more for that, but then actually have continued access to it. And that's where you're gonna start to bolster demand through industrial policy. So over time, what happens is as demand for that tin or that lithium or those rare earths go up and you're signing those offtake agreements, you actually don't need government support. Right? And so you can ramp it down. And this is why government support so far today, whether it's Australia or Japan or The US, it's time bound. Sometimes it's a four year agreement. Sometimes I haven't seen anything bigger than a ten year agreement. It's saying we're gonna provide that, and we're gonna have to provide that support because we do it for other industries all the time.
Lockwood: And a lot of the support required is it's needed quite rapidly, right, from the moment that a strategic asset is noticed, discovered, or is being negotiated over. Talk to us about how The US and the West falls behind when it comes to China, when it comes to actually getting the financing in place rapidly to acquire an asset needed within that negotiation timeline?
Baskaran: Mining is an industry that requires patient capital because it's so long. I mean, if I had to put my money into an industry, I would not put it into mining. I'd go put it into a tech ETF, right, if I actually wanted to see a return on that in the next few years. So one of the big challenges is that capital markets historically have not operated efficiently when it comes to minerals because it's so patient, because projects hit so many hiccups. Sometimes they pause actually quite often. And so what we're looking at now is to say, number one, how do we identify projects early on? And this is where you're seeing the US government, the Australian government, the Japanese government play much harder to find those assets. A lot of times, they're what were called brownfield mines. Right? They're mines that were open, and then they closed. And within about twelve to eighteen months, I can get that project up and running and get minerals back out of them. The second thing, and we're not very good at this, is we're starting to be more proactive about looking at mines in frontier markets. Right? And those mines often get hoovered up by the Chinese faster than we even know what's going on. And so in that way, we need to play a much more active hand with our diplomatic effort to say, hey. This mine could be up for sale. Is there a way that we can rapidly ensure that a western company is going in? And often, the thing about frontier markets, I spent most of my career working in frontier markets, is that they want to work with diversified partners. Gone are the days where they only want one source of investment and one source of offtake. Right? For a lot of them, the appeal of having not just Chinese partners, but American, British, Australian, Canadian, Saudi Arabian, Emirati investment is very, very appealing because it derisks their own. So in a way, we've gotta get in there early, find these assets, work better with our capital markets, which we're starting to do to play bolder. And, you know, again, we've fallen in the backseat for a very long time.
Dearlove: The frontier markets, generally speaking, and political stability often go hand in hand. And, you know, it's very, very difficult for, let's say, an investor to find that sort of dependable economic and political circumstances that justify a long term plan. I mean, what you seem to be suggesting is it's really necessary for a country like The US and certainly maybe for the European nations to focus much more on the whole package and not just think about the mining aspects on it. I mean, it's very striking what you're saying.
Baskaran: Absolutely. Look. At the end of the day, countries wanna work with companies and countries where everybody is better off. We have an obligation to bring a more mutually beneficial model of mining to these countries. You know, I'll give you an example. The DRC, obviously, there's chaos in the East. Unfortunately, now there's Ebola. But if you go to the Southeastern part of the DRC, Katanga, where the majority of mines are, Katanga used to be really unstable. But now the vast majority of the country's mines are sitting in Katanga. And because it's generated jobs, if you go down, you'll see a lot of the energy infrastructure that's been built there has been done for the mining sector but yielded energy to surrounding communities. And personally, like, I feel okay walking around Katanga at two in the morning. Right? It is because everybody is better off with the mining sector there. It has actually restored a certain amount of stability. So the question is, when we arrive in frontier markets, frontier markets are not okay with us going in mining and taking the resources out and leaving no benefits and not building any infrastructure. That mutually beneficial model of mining is more important than ever. Right? And that's gonna require investments in infrastructure. It's gonna require local capacity building. It's gonna require ensuring that we're paying a fair amount of taxes. And in an ideal world, those taxes will be reinvested into physical capital, human capital, and natural capital. Because mining can be a force for good and not in the way that, you know, mining is so labor intensive because it's not. Mining is heavily automated these days. But it can make investments that actually are very, very positive for development. And you have success stories. Botswana is one of those. Parts of Chile are one of those. And so I think we have to do a better job of bringing that model of mining that does one step more than just a raw extraction that leaves countries feeling quite exploited.
Dearlove: I mean, that's incredibly striking what you said about Katanga. Because if you'd asked someone of my generation about Katanga, given the problems in Congo, you would have regarded it as a sort of epitome of danger and instability in that part of Africa. I mean, you're really saying you know, it's transformed to that extent. I had absolutely no idea.
Baskaran: I mean, the infrastructure, the amount of development, I mean, it is generally a very stable area. Right? And it's right on the other end of the Zambian copper belt as well. So I would feel far more worried in other parts of the DRC than I would there. But, I mean, this is so much investment that's gone in and the jobs that have been generated. I mean, you look at how many dependents are being supported through these jobs with mines, whether they're a Glencore mine or a CMOC mine or an Ivanhoe mine. It's really significant. So it's one of the questions that we have. It was interesting. I had a call from a Congolese government official this morning who said, you know, what is the role of mining in bringing security to some of these other regions in the DRC? And a big part of it is when there are enough economic benefits, it is in everybody's interest to keep it stable. And so while mining can drive instability and a contestation for resources, it can also yield enough positive benefits that it restores a sense of stability.
Lockwood: Yeah. That was gonna be so Rich kind of followed on exactly how I was gonna ask because it's just listening to it being talked about. To use the term, it's like a scramble for Africa, and it's a modern day form of colonialization and resource grabbing that's going on. You see it happening with farmland, water, minerals, all sorts all over the world. And it's basically a case of who is winning out East versus West when they're taking these resources and how they're managing it in country. So talk to us about the way that I've just been interested to know, is there any way that Western countries, Western allied countries sit down and discuss how to consort their efforts to try and acquire these resources and do so in a responsible manner for the best of the people, for example, in Congo or in Tanzania or anywhere else like that, but also to ensure that it remains a kind of stable and secure asset. Does The US sit down with Australia and The UK to discuss this?
Baskaran: Look. I think there's some really good examples. So the first thing I would say is that mining companies from the West generally bring a higher standard of doing business. Mining companies from the West do not operate at the host country standards when they are low. They're not operating to the DRC's labor standards. And a big part of that is that they have fiduciary responsibilities to their shareholders. No western mining company wants to be on the other end of a sweatshop PR disaster. Right? So they operate to a higher set of standards, and they bring those. I spent quite a bit of time in the DRC. And one of the things that I remember the previous mining minister said is we miss the days where BHP and Freeport and Anglo American and First Quantum operated because they did bring that higher set of standards than some of the Chinese companies that are here now. So that's one. We bring better standards. The second thing is if you look at the Lobito Corridor is a really interesting example, right, between the DRC, Zambia, and Angola of regional integration was that was a co-investment through the G7. Right? Because we recognize that not one country could invest the capital required to bring a piece of infrastructure that significant, right, into existence to get minerals moving through the region so that we were going to have to work with our G7 counterparts. When you look generally in frontier markets, the amount of investment capital required is far beyond what a single country can provide. And so there's a lot of room where you're starting to see that collaboration. One thing I thought was really interesting last year was the US-Australia government to government critical minerals framework that was signed. And there was an agreement to basically help prevent Chinese acquisitions in third jurisdictions. So how do we work together to ensure that an Australian mine isn't being sold to a Chinese company in an African or a Latin American country? So you are starting to see kind of those strategic lines of cooperation form.
Dearlove: The problem that you're describing to us is so multifaceted and complex, but so important. Is there any serious move, let's say, within the US government or within the EU to create a policy infrastructure which can coordinate and guide this development? Because it would seem to me that I mean, having a lot of government experience myself, coordination across departments is really, really tricky, you know, because you get conflicting views and people don't talk to each other, even in relatively small and efficient governments. But this almost sounds to me as though, you know, it demands an authoritative and separate department driving an authoritative policy across a whole range of areas. I mean, is there any move in that direction? Has the Trump administration made any move in that direction?
Baskaran: So in 1910, we had a Bureau of Mines that we created in The US, and its job was to do everything that we're talking about. Right? To manage mining processing at home, abroad, our research and development innovation. But we closed it in 1996. And, unfortunately, it was a move that was reflective of the deprioritization of mining following the Cold War. I mean, people don't realize that in 1990, in inflation adjusted terms, we held $25,000,000,000 of minerals in our stockpile. By 2024, we had 900,000,000, meaning we sold 97% of our stockpile off. We closed our Bureau of Mines, and that was the end. Right? That was the end of that dominance that we once had. So we don't have I always laugh, you know, when you go to countries in Africa or Latin America. They have a ministry of mines. We don't have that, actually. We have about 15 US government departments working on minerals. The Trump administration has taken a more coordinated approach, but it's primarily been done through the White House. Right? And I think while I do believe they've done a phenomenal job, one of the larger questions we need to contend with is how to institutionalize this in a longer term way. Because right now, when we find out that an asset may be moving from Australian hands to Chinese hands or Canadian hands to Chinese hands, somebody's picking up the phone and yelling. And that's not a sustainable mechanism. Right? We need a systematic way. There's far too many assets worldwide to be able to do it on an ad hoc basis. So we're going to have to engage with that because China has already launched a coordinated board just last week to basically manage its acquisitions of mines abroad, and we don't have that. So it is an area where I certainly see a gap. And when I was just in Australia meeting with the Department of Foreign Affairs and Trade last week, a conversation we have with our embassies around the world is that we do need a more coordinated mechanism to do that. It's just not there yet.
Lockwood: Let's talk a little bit about what's happening in the world and how that's affecting the world of mines. This is a geopolitics podcast normally, so we talk a lot about Taiwan, Ukraine, Iran. So let's touch on some of those, specifically Taiwan, something we keep coming back to. If a crisis erupted tomorrow, we hope it doesn't, but if it did, what would happen to critical mineral supply chains?
Baskaran: So what we know about China is that they have actually been manufacturing and acquiring weapons at a rate of five to six times what The United States is. My colleague, Seth Jones, always says we are operating on peacetime mentality, and they're operating on wartime mentality. But what we don't realize is not only are they stockpiling weapons, they're also stockpiling the minerals that you need. Right? Things like tungsten and antimony are defense critical. So in the event that you see movement on Taiwan, the first thing China is gonna do is just, like, shut down its mineral exports because it's going to want to be able to surge its own industrial based capabilities in the event of conflict. And we've already seen them do that. What people don't know is that, you know, the majority of China's heavy rare earths come from Myanmar. And in February, before the export restrictions went into effect, there was an 89% year on year drop of heavy rare earth exports from Myanmar to China, and that was owing to the military junta taking over some of the mines. So what China was also doing was stockpiling and holding their own rare earth to surge again those capabilities. So number one is you're gonna see a stop in the export of minerals. And when that happens, it's going to have a material impact on our ability to withstand the long term conflict. And you've already seen it with Iran. Right? One of the reasons tungsten prices have skyrocketed is because you have a concurrent supply demand crisis. Supply? China cut us off. Demand? You're using a lot of tungsten in your munitions in Iran right now. So we are at a crucial shortage. So that's gonna be the big thing that I'm worried about from a minerals perspective is that we actually will not be able to access a lot of the materials that we need to surge our industrial base, which will limit our ability to respond.
Dearlove: In terms of Trump's attitude to carbon net zero and fossil fuels, it seems to me as though, you know, there's an issue which is pulling in opposite directions because you haven't got the administration focusing on electrification, which, let's say, is driving the issue that you're talking about. Is that a real contradiction in practice or is I mean, we're talking now specifically about The US. Are they able to, as it were, accommodate both of those? I wouldn't say competing, but there's certainly a contradiction in those two policies.
Baskaran: You know, it's one of the things I lose sleep about the most. Right? I'll give you an example of this. So lithium was once $85,000 a ton, and it fell to $8,000 a ton. And all of that was because the EV demand signal went away. And then all of a sudden, certain lithium mines that we had commissioned that were supposed to open in The US, like an Albemarle mine in North Carolina actually got paused. Lithium mines around the world started closing. The reality is we will never get back to an $80,000 a ton lithium market until the EV demand goes up. So, you know, we live in two parallel realities that that is a driver of lithium demand, but our EV policy is not conducive. And as a result, I'm from Detroit, love our auto industry, and, man, they are suffering. General Motors, Ford, Stellantis have all cut their EV production forecast. Even Honda, they just recorded their first loss in years owing to the EV situation. So again, I go back to the fact that, you know, I think we've made a lot of phenomenal supply side efforts, but one of the reckonings that we are struggling with is that a lot of getting the demand signal back on track will require the EV industry, but it's politically complicated.
Lockwood: Just following on from Sir Richard's question. I know we keep coming back to this timeline problem because it's certainly a problem when you think about the long timeline that's needed. But what could The US do in, say, the next twelve to twenty four months to kind of shift the dial on this and what remains of this Trump presidency?
Baskaran: I always wonder if we make things too political, to be honest, when I think they needn't be, but maybe that's just me being, like, a fiercely nonpartisan person. I think that you need an incentive for manufacturing, full stop. I don't think it matters whether it's an EV, a missile, a semiconductor. For all of those industries, if we are getting minerals sourced from The US or one of our allied countries, then it should qualify for that same tax incentive. Right? That same tax credit. So rather than, you know, why that demand signal was killed is because it was EV. But think about it as a manufacturing signal. And I think if we were able to kind of step back and go, alright. You know, if it's made not just in The US, but UK, Australia, Japan, Korea, right, one of the challenges of the American market, we have 340,000,000 people. That's actually not enough. I mean, I don't know if you know, but as a country, we use between 15% of the world's rare earths, nickel, cobalt, graphite, gallium. We are a tiny market. But when you think about the aggregated demand of India, Australia, the European Union, The UK, South Korea, Japan, and The US, you get to 2,700,000,000 people. And if we are able to create an incentive for our manufacturing industries, regardless of what they are, to source minerals from these countries, right, which you can do with legislation, like a buyer's club. That offers a long term demand signal. China has succeeded because they have a demand market. They manufacture so much stuff. And so we're gonna have to shift beyond supply mentality to get some demand legislation going to say, hey. If you're manufacturing and our friend, you get the same credit.
Lockwood: Doctor Baskaran, just finally on this One Decision podcast, we always ask our guests what one decision you're looking out for with regards to critical minerals. What is the one decision you're waiting for?
Baskaran: I think we've gotten our supply side policy right over the course of the last year and a half. We have to get our demand side policy, and this administration has started talking a lot about a buyer's club. I am really looking forward to seeing how we create the incentives to build demand for the minerals that we are trying to get out of the ground.
Lockwood: Thank you so much for joining us.
Baskaran: Thank you. That was fascinating. Absolutely excellent. Thanks for having me.
ANALYSIS WITH SIR RICHARD DEARLOVE
Lockwood: Well, Sir Richard, another fascinating conversation. Recent weeks, we've done undersea cables. We're really going deep on certain topics today, critical minerals, rare earths, something I've been aware of, but learned a lot more from today's conversation. What was your takeaway?
Dearlove: Wow. She was impressive, but not just impressive. I think she explained beautifully the complexity of the international market, the problems of production, the reasons why China is ahead, the neglect of policies during a crucial period in the West, particularly in The United States. I think she covered it all. And as you say, I think one's got a far better understanding. The thing I hadn't really appreciated, but she explained so well, was the importance of the consumer market in relation to the defense market. And I had always assumed the defense market was much more influential than that economically, let's say. I can see politically it's important, but economically I thought it had more weight. So a real elucidation of a complex problem. And I think the issue which came out at the end was what mechanisms within government, within this administration in The US, how do they create a coordinated approach in the West? Because you can't do it on a one country basis. Even The United States market isn't big enough. So her concluding comments on a buyer's club, I thought, were very, very revealing.
Lockwood: Yeah. And hopefully, people in Washington will take notice of that. Like you said, it's super complex. There's so many different angles you can approach this from. She covers them all, knits it together very well. It is a vast and complex problem that China is well up the curve on compared to the West. My takeaway was the way she phrased an issue we kind of, again, keep coming back to on the podcast, which was it's not a communism problem. I think she said it's more of a democracy problem or a voting problem in terms of countries that keep changing their government. That's it. And very helpfully pointed out, yeah, of course, you've got these autocratic regimes that are also able to function quite the same way, even though they're not communist Saudi Arabia with its long term strategy and why that gives them the upper hand. It was a very neat way of describing it. That is all we've got time for this episode. Do join us every Thursday for more exciting conversation about world events that goes beyond the usual headlines. Subscribe to One Decision on YouTube so you never miss out on a conversation putting the global news in context. For more conversations with leading decision makers and thinkers, do check out onedecision.com where you'll find additional commentaries, conversations and explainers. I'm Rosanna Lockwood joined as ever by Sir Richard Dearlove. Thank you for listening.
